The hedge fund Elliott Advisors has bought Barnes & Noble for $638 million. Generally, when financial investors buy large retail chains, it usually means the end is near. Just ask Toys 'R' Us. But this time is different. In fact, the acquisition is actually the best thing that could possibly have happened for the chain's millions of customers. If you've shopped at Barnes & Noble stores, you know they're all pretty much the same, with similar selections, coffee shops, notebooks and incidentals. They are all about to become much more individual stores, and much, much nicer.

Although it's the largest bookstore chain in the nation, Barnes & Noble has been on the ropes for a while, recording losses of more than $125 million for fiscal 2018. It's not hard to see why. Barnes & Noble built its empire by using it size and market clout to offer a much wider selection of books at lower prices than independent bookstores ever could, and it wiped out legions of them in the process. Then Amazon came along and trampled B&N, by offering an even greater selection and even lower prices than bricks-and-mortar stores ever could. B&N tried to fight back, by selling books online, offering its own e-reader in a failed attempt to compete with Amazon's Kindle, but that effort failed.

B&N tried hard to find a suitor other than Elliott Advisors, but that effort also failed. And so, with no alternate offers appearing, the hedge fund walked off with the prize. 

It worked for Waterstones.

But this is no ordinary hedge fund. Last year, it acquired another bookstore chain, Waterstones, in Britain. That chain had also been struggling under pressure from Amazon--until James Daunt became CEO in 2011. His approach to competing with Amazon was basically to transform the chain into something that didn't look much like a chain. Instead, Daunt, a former independent bookstore owner, gave the stores' managers the authority to operate their stores almost as independent bookstores, tailoring their offerings, atmosphere, and decor to their particular customer base. There are 283 Waterstones stores, and they look very different from one another. Some aren't even named Waterstones. The chain also gives out literary prizes, sends its booksellers to a special certification program, and has its own cafe chain within the stores (B&N relies on Starbucks). It also pays close attention to what customers want in different locations--including a Russian language bookstore within its Piccadilly store, staffed entirely with Russian speakers.

Daunt will be taking control of Barnes & Noble stores as well as Waterstones, and he plans to use a similar approach. "The main thing is that there isn't a template; there's not some magic ingredient," he told the New York Times. "The Birmingham, Alabama bookshop, I imagine, will be very different from the one in downtown Boston. They don't need to be told how to sell the exact same things in the exact same way."

Of course, B&N has 627 retail stores, which is more than twice as many as Waterstones. And the United States is both much larger and much more diverse in cultures and climates than the U.K. is. So Daunt may have a challenging task ahead of him. Still, I'm excited to see what my own local B&N will be like once his changes take hold. 

Published on: Jun 18, 2019
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