1. THE NEXT
CHAPTER
Value growth strategy for
Barnes and Noble
BY: KHRIS JORE, HUNTER GILLEZEAU, ELIZABETH MANAPSAL, KALI NOONEY, ANNA WIINBERG

2. INTRODUCTION
Barnes & Noble is faced with
declining revenues due to
changes in the book industry
where value has migrated
away from traditional brick and
mortar stores to mainly online
retailers and e-books. Despite
its attempts to adapt to these
changes through the creation
of its own e-reader, e-book
content and e-commerce site,
Barnes and Noble still faces
declining profits.
Mar ’06
$46.25
Feb ‘16
$9.07
This decline can be
seen as a result of
value migrating
away from B&N’s
offerings over the
past 10 years,
towards rivals such
as Amazon.

3. About Barnes & Noble Today…
• Mission statement: “To operate the
best omni-channel specialty retail
business in America, helping both
our customers and booksellers
reach their aspirations, while being a
credit to the communities we serve”
• Approximately $6B in sales as of
2015 annual report, fortune 500
company, listed on NYSE
• Business segments: Retail stores,
internet, digital and publishing
• Entered e-book market in 2009
• Recently spun off its college
business
Online Only
Credit: Association of American Publishers
High Cost
Brick and Mortar
Low Cost
Independent
Retailers

4. What’s the current marketspace?
• Consists of: online retailers, large retailers like
Barnes & Noble and small specialty retailers
• Major players: Amazon, Google, Apple, Barnes &
Noble and Books-A-Million
• Smaller retail bookstores appear to be making
a come-back after the decline of large retailers
• Has experienced major technological disruption
in the past 5 years due to e-books, e-readers
and an explosion of online retailers
• Bookstores have been closing e.g. Borders in
2011: begs the question are brick and morter
bookstores are dying?
• When e-books first came out, they captured
significant market share and experienced triple-
digit growth, but this has since stagnated
• In February 2016, bookstores experienced the
first rise in sales since 2007, but not at B&N
Publisher Revenue for Different Trade Formats
Jan. - Sept. 2011-2015
Credit: Association of American Publishers

5. Value is migrating out of the large book store model and into e-commerce sites. If B&N
continues on its current trajectory, B&N will become obsolete like Borders.
• Continued revenue decline and
decrease in shareholder value
• Loss of market share to online
retailers (Amazon) and other discount
stores (Wal-Mart)
• Brand equity erosion – from
antiquated & expensive to obsolete
• Failure to capture growth in e-book
market
• Amazon overtakes B&N as the
primary book retailer and remains
B&N’s toughest rival
Value is migrating
away from B&N…
(In Millions)

6. CUSTOMER SELECTION AND VALUE PROPOSITION
STRATEGIC CONTROL OPERATIONAL SCOPE
VALUE CAPTURE / PROFIT MODEL
• Value Proposition: Best omni-channel retailer
providing extensive book selection and service
• Internet: Extension of brick and mortar stores,
doesn’t have its own personality
• Nook: Color version geared mainly towards
women who love to read; black and white
geared towards older readers
• 640 stores with an average of 26,000
square fleet in top locations across US
• Only large book retailer left
• Key partnerships e.g. Samsung with the
Nook
• Extensive inventory: 16 million titles in
retail, $30 million online and $4 million
digital book titles
Nook: Selling e-books through the Nook line of
e-readers
• Selling Nook devices and accessories
Retail: Selling Paper books,
games, hobby and entertainment products
• Small amounts of food/drinks sales in
stores
Online: Selling books via the Barnes and Noble
website
• 4 Segments: Retail stores, internet,
digital and publishing
• Widespread across verticals due to
omni-channel approach
• Much of operations centered around
retail stores
• Extensive inventory management system
“Product Master”
• Partnerships with Starbucks for in-store
refreshments
ORGANIZATIONAL
SYSTEMS
• Retail workers are generally book
enthusiasts themselves. Retail
work culture is relaxed, offers
good work/life balance and
structure. Online seems to be a
bit more unstructured.
• Corporate is described as
“dynamic and team-oriented.”
• New CEO may lead to some
organizational unrest.
• Books are the core of the store, but
there are games, movies, music, etc
to cater to a wide range of people
STRATEGY TODAY

7. KEY ISSUES
• Changing market landscape
• Customer base prioritize convenience of delivery vs.
brick & mortar retail experience
• E-tailers are dominating the book market
• Competition for “screen time” with internet browsing
and other forms of personal entertainment
• Underdeveloped digital reading product compared to
competition
• Alternative products occupy both the high-quality
and low-price zones
• Unclear who is the target market for the product
• Devoted too many resources to supporting Nook and
cannibalized other parts of the business
• Let other parts of the business deteriorate
• Unprofitable, asset intensive business
• Poor utilization of brick & mortar stores to drive
sales e.g. large square-footage and poorly allocated
floor space
• Most storefronts are leased
• Eroding brand equity
• Consumers associate B&N with being more
expensive than Amazon
• Disastrous launch and execution of Nook
accelerating erosion
• Identify how to deliver value to consumers in changing marketplace
• What matters most to target consumers: in-store vs. online
retail experience, product variation & availability
• Identify and leverage unique assets
• Barnes and Noble has several strategic assets relative to its
competitors. How do we apply them effectively?
• Other companies (eg. Netflix) have self-produced content to
compete in tough markets. Can B&N do the same?
• Focus on value capture
• Selling books in a market where buying books is easy may not
deliver high value by itself. How can we capture more value?
• Align organizations and operation to support new value proposition
• The current approach is ‘scattered’ to say the least. B&N is
fighting on many fronts, few succesfully.
• Focused strategy must be built in throughout the organization
• Improve asset utilization
• The big-box store model may not be pulling enough foot traffic
to justify its cost. But what is the alternative?
• What partnerships can be created to deliver value while
Barnes and Noble focuses on its own core activities?
• The cafes in Barnes and Noble stores currently see high
utilization. Can the concept be extended?
STRATEGY IMPLICATIONS
Where are we and what does it mean moving forward?

8. Strengths
➔ Large book inventory both online and in stores
➔ Only large retail bookstore left in US
➔ Has diversified into publishing segment
➔ Partnership with Samsung
➔ Global footprint
➔ Nook as an asset
➔ Solid niche with kids’ and women’s romance books
➔ The store experience
➔ Household brand associated with books
➔ Print-On-Demand pilot for publishing at B&N
Weaknesses
➔ Loss of capital investment from Liberty Media which injected $204M in
investments. The company has since decided to slash its stake
➔ Held on firmly on a failed digital strategy too long, bleeding money and
scaring investors away
➔ Loss of touch with the market and how it should reposition itself
➔ Stores are too big given demand and changing customer behavior
towards online shopping
➔ Weak website user experience (UX)
➔ Prices not competitive
➔ Currently, no unique value proposition
➔ About a $10M severance pay for former CEO
Opportunities
➔ Improve website user experience
➔ Optimize cafe
➔ E-Book sales expected to reach $67M by 2016, and tablet sales $253M
by the same time
➔ Developing existing marketshare - pursue bigger share of wallet for avid
readers
➔ Enhance publishing arm to create exclusive content
➔ Publishers willing to work with company - without B&N there is no future
for publishers
➔ Gain customers by providing them with an above par experience
Threats
➔ Uncertain market for physical books
➔ Reduced interest in shopping at brick & mortar stores
➔ B&N recognizes market is changing but its strategy to adapt has not
worked very well
➔ Publishers no longer want to rely on B&N for business, and flock to
independent book stores
➔ Amazon decides to venture into physical stores
➔ New entrant providing a business model that disrupts the industry, and
eats up B&N’s market and wallet share
S W
O T

9. SO WHERE DO WE
WANT TO BE?
The objective of our proposed strategies is to reframe Barnes and Noble to
make its model economically viable moving forward. The two proposed
strategies both involve making bold commitments, albeit in opposite directions.
Proposal 1 can be summarized as ‘if you cant beat them, join them’ and centers
around a concerted new effort in digital sales; the direction of the overall
market. Proposal 2 is to step away from the overall trend of the market and
focus on a niche segment, one we believe Barnes and Noble has a valuable
connection to and the potential to dominate, given a radical restructuring to
focus on its existing strengths.
Strategic
Objectives

10. #1: “If you can’t beat them, join them” #2: “Trailblazer”
• Online-centric strategy, consistent with the overall
direction of value migration
• Revamp online book sales portals, recommendations,
and marketing
• Invest heavily in app development for mobile sales
• Diversify product mix and add general merchandise to
capture Amazon’s customers
• Adopt very robust omni-channel marketing efforts to
sell books and general merchandise
• Bring Nook manufacturing back in-house as tighter
controls needed
• Nook R&D develop a similar product to Kindle, which
is cheaper and scaled back technically
• Close stores to focus on competing online
• Focus on dominating a smaller, more heterogeneous
market.
• Devise a different business model than the current
one (and different from Amazon’s), focused on that
market.
• Invest in the capabilities that make B&N valuable to
consumers, not in areas that make Amazon valuable
• Streamline processes to make the book-buying and
browsing experience more efficient
• Partner with big publishers to create added value to
invigorate the brand - exclusive content
• Commit to building brand equity by killing sectors of
business not aligned with new model
• Commence value engineering of B&N that matches
new business model
• Invest in services that capture the new direction and
add customer value
Two Proposed Strategy Options

11. We segmented the market primarily using NEEDS…
Reads books/mags
about a particular
interest (gardening,
cooking, etc)
Hobbyists
Media Buyers
No particular
interest in books.
Currently coming to
B&N for DVDs/CDs.
Parents buying
books for their
children.
K-12 Buyers
Mostly think about
buying books as
convenient presents.
Gift Buyers
Avid Readers
Reads books
frequently and
recreationally. 10+
books per year.
Casual
Readers
Reads periodically.
Behavior is more driven by
interest in particular
books/ series than
reading in general.
Mostly reads
publications or books
related to their field.
Professionals
Reads assigned
textbooks out of
necessity.
Students
…because people use books for many different reasons. Understanding these helps us
decide how we can uniquely serve some of these segments.

12. Offering analysis of key buying factors, buyer segments, and providers
reveals Avid Readers and Casual Readers are best targets.
• Amazon is intensely dominant in
certain areas and as such, beats
B&N for most segments.
• For some of these it will be
nearly impossible to out-do
them.
• Local Bookstores are superior in
some regards (e.g. Sense of
community) but overall do not
beat B&N for any group.
• Their market share may be
possible to capture.
• Two segments are more closely
aligned with B&N than any other :
Avid Readers and Casual
Readers.
Am
azon
Barnes&
Noble
LocalBookstores
Hobbyists
K-12ReadersGiftBuyersStudents
ProfessionalsCasualReaders
AvidReadersM
ediaBuyers
Food and Drinks 0 6 6 1 1 1 4 1 6 6 2
Space to Read 0 8 4 2 1 1 6 1 7 8 0
Sense of Community 1 6 7 7 2 1 3 2 5 7 0
People to Talk to About Books 1 6 8 5 6 5 3 2 7 8 0
Try-Before-Buy 2 9 7 4 1 2 3 2 6 7 0
Brand Associated with Reading 3 9 6 2 2 1 1 2 7 9 0
Fun to Browse 3 8 7 3 3 3 4 2 7 9 0
Convenient to Buy From 8 4 3 7 7 8 7 8 6 5 9
Customer Reviews 9 4 0 7 7 7 6 7 7 6 4
Large, Accessible Selection 9 7 4 4 4 6 3 2 6 8 0
Lowest Prices 9 7 5 5 5 7 7 6 4 3 0
Online Accesibility 10 6 0 7 5 7 6 7 4 3 7
Availability of Other Products 10 6 2 6 3 8 6 2 2 2 9
E-Reader Capability 10 7 0 5 1 1 7 7 5 3 0
Books in a Particular Field 10 7 4 10 8 2 8 8 4 1 0
Amazon Affinity 515 395 446 497 459 417 366 268
Barnes and Noble Affinity 474 343 363 475 365 558 585 160
Local Bookstores 278 212 205 260 178 370 417 57
COMPETITORS CUSTOMER SEGMENTS
KEYBUYINGFACTORS

13. Professionals
Media
Buyers Gift Buyers Hobbyists K-12
Readers
Students
Avid Book
Readers
Casual
Readers
Currently Barnes and Noble is set up to cater to as broad an array of
book buyers as possible, but most groups know what they want and
can get it more conveniently from Amazon.
Frequent book readers however are comparatively underserved.
Barnes and Noble can tailor their strategy to deliver unique value to
these readers.
These readers appreciate space to read, being able to try
a book before buying, a sense of community, and the joy of
browsing through many books before making a choice –
things that Amazon’s model does not currently provide.

14. STRATEGY STATEMENT
BARNES AND NOBLE
succeeds by focusing on
PEOPLE WHO ENJOY
READING
The casual and avid reader groups are those who
read often and for personal enjoyment. It’s difficult to
size a group like that, but research suggests:
WHO ARE THEY?
• They skew female
• They’re mid-20s all the
way to 65+
• They’re more educated
• They make higher
incomes
• They live in urban areas
• There are more than 90
million of them in the US
reading 10 plus books
every year (Pew 2014)
These are the people who read because they enjoy
books and because they enjoy reading.
(Part 1)

15. Why doesn’t Barnes and Noble dominate these groups now?
We believe it’s a factor of the “convenience gap.”
Estimated convenience scores
(slide 8)
8
4
• Every customer segment is at least somewhat
sensitive to convenience.
• Amazon’s level of convenience is so staggering
that it outweighs many of the advantages B&N
has in other areas.
• Barnes and NOBLES current one-big-box-store-
per-city model (college stores excluded)
detracts tremendously from its convenience
while only minimally strengthening a few other
value areas.
A new model is necessary that will make B&N more accessible, and more convenient…. BUT…
It must also extend B&N’s dominance in the areas where casual and avid readers are sensitive!

16. ·
How can B&N capture value for our target segment?
Less Important
Secondary
Importance
Critically
Important
Distinctive
Competitive
Weak
Customer Importance/Value
B&N
Capabilities
Takeaway:
In order to
succeed, our
selected strategy
will need to build
on what our
targeted segment
loves; reading,
browsing, and
buying books.

17. Which strategy should B&N adopt going forward and why?i.
• B&N’s new digital-centric value
proposition would offer nothing
different from Amazon. Why
would customers buy from us?
• Amazon is nigh-unbeatable
with technology/web.
• Following this strategy would
mean the atrophy of B&N’s
physical assets.
• Retooling B&N to match
Amazon’s business model
would require significant
capital expenditure.
• This model doesn’t add enough
value in the eyes of our target
market, relative to the field.
SOLUTION- Refocus our value proposition
Old: That Big Bookstore…
• One store per region – minimally
accessible.
• Typical “big box” store with rows
and rows of books, difficult to
navigate.
• Generic décor and interiors;
nothing memorable or worth
coming back to.
• Can’t easily browse for books or
find space to read them to see if
they’re worth buying.
• Book prices are not competitive
with Amazon; no reason to buy
them from B&N.
New: The Local Book Haven
• Close down big box stores in key
cities and open up smaller stores.
• Reinvent the store to become a
part of the neighborhood and not
just a generic book store.
• Reorganize store layout to make
books more accessible, with plenty
of space to browse and read.
• Reduce books in unpopular genres
and categories.
• Host activities and workshops to
foster a sense of community
between book lovers and readers.
• Create value-adds for readers.
What book lovers want is a space where they can experience books… not just buy or order them.
Our proposed strategy will aim to deliver that.
The Problem With ‘If you cant
beat them, join them’

18. OUR PROPOSAL: STRATEGY #2
NOBLES: Bookstore and Reading Lounge

19. NOBLES: A Home for Readers
We propose moving away from the current big-box store model and opening small-to-
medium sized stores scattered throughout major cities. These stores would maximize
space by using nearly all wall-space for books, and a significant amount of floor space for
comfortable seating. For these new stores, we propose the name NOBLES.
STRATEGY TRADEOFFS
• These smaller stores will not be able to
carry the same huge selection.
• Online sales must exist, but cannot be
a major investment focus; we cannot
beat Amazon here.
• Customers accustomed to the big-box
store model may be confused or lost
• These stores will narrow marginal sales
from products such as CDs, DVDs,
board games etc., in order to focus on
books and light food/drinks.
• Logistics will be much more challenging
with many small stores vs one or two
large ones.
• There are many options for people to
buy books, but very few urban spaces
optimized for people to actually read.
• NOBLES creates book havens, offering
both books to browse and places to
read, in multiple locations throughout a
city – extending our advantages where
they exist and building convenience.
• Light food and drinks will be sold to
capture value through an additional
complementary avenue.
• NOBLES will aim to become the brand
with which people who enjoy reading
books identify.
B&N will always lose to Amazon in broad technology. Amazon owns
technology. B&N owns reading and luckily… people still love reading.
STRATEGY STATEMENT
BARNES AND NOBLE
succeeds by focusing on
people who enjoy reading and
PROVIDING THEM
CONVENIENT AND
COMFORTABLE PLACES TO
BUY AND ENJOY THEM
(Part 2)

20. PERFORMANCE TIME ENVIRONMENT BRIDGE FABRIC THERAPY IDENTITY
PUSHING VALUE LEVERS…
In some areas, B&N cannot ever deliver more value than Amazon due to their proficiency with technology;
however, in some areas we can develop a niche solution that appeals to deeper values for our target market.
Better
perceived
performance
Save user
time and
effort
Provide
enhances
atmosphere
or context
Integrate
pieces of a
solution or
solve conflict
Foster
user/buyer
community
Satisfy
emotions or
soothe
stresses
Reinforce self
image, aid in
self-
expression
VALUE CAPTURE
EASY TO COPY HARD TO COPY
Being an avid reader is still a deeply held part of a person’s identity… Amazon’s brand has very limited
potential to appeal to this group. The NOBLES strategy will aim to capture deeper levels of value over time.
Amazon’s
technology
cannot be beaten
with our
resources
It’s easier to find
a book on
Amazon and it
can often be
delivered that day
or the next.
NOBLES will
provide the
optimal
atmosphere for
browsing and
reading books.
Coordinates
end-to-end
logistics
between tens of
thousands of
vendors.
NOBLES will
provide a space
where readers
can meet as a
community.
NOBLES will
aim to provide
the most
relaxing reading
locations in the
busiest cities.
Ultimately
Noble will be
the brand
people
associate with
book lovers.

21. BARNES AND NOBLE
succeeds by focusing on
people who enjoy reading
and providing them the best
book buying and reading
experience, which we
achieve through STORES,
SERVICES, AND
TECHNOLOGY FOCUSED ON
THE EXPERIENCE OF
READING.
STRATEGY STATEMENT
HOW DO WE CAPTURE VALUE?
BOOK
SALES
IN-STORE
FOOD AND DRINK
SALES IN-STORE
MONTHLY ‘BOOK
BOXES’ FOR
INTERESTED
MEMBERS
NOBLES
HOSTED
LOCAL
COMMUNITY
EVENTS
PRODUCING
SELF-
BRANDED/
MARKETED
BOOK SERIES
DIRECT-TO-PHONE/TABLET
BOOK SALES
The foundation of NOBLES is a network of small
bookstores/reading lounges, but the brand can capture value from
several complementary streams, both leveraging and building its
brand affinity to its target market: lovers of reading.
BOOK RENTALS IN-
STORE

22. BOOK SALES IN-STORE FOOD AND DRINK SALES IN-STORE
MONTHLY ‘BOOK BOXES’ FOR
INTERESTED MEMBERS
NOBLES HOSTED LOCAL
COMMUNITY EVENTS
PRODUCING SELF-BRANDED/
MARKETED BOOK SERIES
DIRECT-TO-PHONE/TABLET
BOOK SALES
ASSETS AND OPERATIONS
“Conceiving is easy, delivering is hard work”...or “Don’t waste money on things customers wont pay for”
• Medium-sized stores in metropolitan
areas; ideally with high foot traffic
• Warehouses and delivery trucks set up to
rapidly ship deliveries to stores on a
routine basis
• Store staff who are passionate book lovers
• Furniture likely to be a high expenditure as
comfort is key for this model
• Minimal additional needs not
already covered by store supply
chain
• City sales and events manager
to plan events and/or partner
with community groups
• Partnership with Etsy and
similar marketplaces to provide
weekly pop-ups for previously
online-exclusive crafts.
• Apps to allow customers to
read their Nobles books via
phone/tablet
• Apps should be a portal for
book discovery and
suggestions as well as for
in-store sales
BOOK RENTALS
IN-STORE
• Minimal additional
needs not already
covered by store
supply chain
• Re-invest in Sterling Publishing
(B&N owned) to revamp self-
published title efforts
• Content selection team created to
review submissions and select
works with mass-market potential
• Promotional supplies to highlight
these books in NOBLES stores
• Partnerships with small local coffee
shops (emphasizes NOBLES as a part of
the community) for food and drinks
• Will build bookstore locations adjoined to
coffee shops to keep store space
devoted to reading
• App-based food/drink order system
developed to allow patrons to order
without getting up from reading

23. Strategic
Controls
Organizational
Systems
NOBLES CLUB
• Customers using the
NOBLES app will
automatically have
access to store deals,
updates,
suggestions, and
event access –
decreasing likelihood
of switching.
BRAND LEVERAGE
• If NOBLES is able to
successfully
associate its brand
with a love of
reading, it will be
hard for Amazon (a
‘jack of all trades’) to
capture the market
that self-identifies as
passionate readers.
EXCLUSIVE CONTENT
• NOBLES will invest in its
own self-branded series,
as Netflix does. These will
be available only through
NOBLES. As a result,
once readers are
invested, they will need to
keep coming back to
NOBLES.
Once we have it… how do we keep it?
DATA ANALYTICS
• By tracking data on
books and users,
NOBLES will be able
to make smart
recommendations
and stock its stores
intelligently for
optimal sales.
LOGISTICS
• The smaller store
sizes will necessitate
lower stock levels of
popular books. B&N
will have to develop
systems to rapidly
and intelligently
predict stock-outs
and deliver
resupplies.
Once we have it… how do we keep it
running smoothly?
STAFF CULTURE
• NOBLES is a store for
passionate readers. Its
staff needs to be
comprised of the same.
Applicants should be
assessed accordingly,
and employees should
have a portion of their
time allocated for
discussions with patrons.

24. CUSTOMER SELECTION AND VALUE PROPOSITION
STRATEGIC CONTROL OPERATIONAL SCOPE
VALUE CAPTURE / PROFIT MODEL
• B&N will engineer its value around the
creation of NOBLES, a chain of smaller
bookstores that caters towards avid readers,
and has the coziness and community feeling
of independent bookstores.
• The target of this strategy will be the
segment of the population that considers
themselves avid readers and casual readers.
• Books are the stars of the show and other
services serve to enhance the reading
experience.
• NOBLES Club membership perks to
incentivize a continuing relationship
• Leveraging the Barnes and Noble brand
to create the NOBLES brand, which will
appeal to the personal identity of book
lovers
• Exclusive series released through
NOBLES, ensuring that fans will be
continued NOBLES members into the
future
NOBLES capture value from readers through:
• Multiple NOBLES stores per large city, laid out to
maximize comfortable reading space
• Food and drink sales in-store for readers
• Applications for mobile book purchase and
consumption
• NOBLES branded book series
• Book rental services
• Hosted community events in stores
• Monthly ‘book boxes’
• Rental of mid-sized storefronts in
downtown city areas
• Warehouses and shipping trucks
• Partnerships with printing presses and
small, local coffee companies
• App design and implementation
• Event managers to arrange in-store
community events
ORGANIZATIONAL
SYSTEMS
• Data analytics leveraged to facilitate
intelligent interactions with
customers and smarter stocking
• Book-lover culture must be evident in
every store employee and HR
systems must feed that culture.
• Advanced logistics will be essential
to balance book variety needs and
supply need in the new medium
sized stores.
PROPOSED
STRATEGY

25. Risks of Strategy Implementation
RISKS MITIGATION STRATEGIES
• Moving away from big box stores, which has been
defined as an strength for many years
• Focusing on books means that they are reducing
product mix -> what happens if people stop buying
books?
• Even if B&N tries to create stores that mimic
independent stores, consumers may still see them
as a big box retailer and prefer “real” independent
bookstores
• Financial investment of breaking leases and
investing in new spaces
• Proposed strategy still does not provide level of
convenience that Amazon offers
• Roll out the strategy in phases, starting with 3 core
cities such as Washington, Denver and Austin
• By closely monitoring consumer behavior through
improvement data management, B&N should be
able to more closely match demand with supply
• Offer food and drink promotions to entice
customers to try out the new Nobles stores
• Rolling out in phases will limit up front investment
and allow B&N to test if the strategy works before
investing in more stores
• While we cannot offer the same level of
convenience as Amazon, the coziness of the stores
and better accessibility can narrow the
‘convenience gap’
The risks in an extreme strategy cannot be entirely erased, but a dramatic problem must be faced
with an equally dramatic solution, because not to do so is to risk ceasing to exist altogether.

26. Required Actions
1.
2.
3.
4.
5.
6.
Physical store structural changes:
• End current leases
• Identify smaller retail spaces
• Move extra inventory to warehouses
• Source local food and beverage
providers
• End contract with Starbucks
• Reconfigure kitchen space to
accommodate new vendor
• Implement/improve data
management in pilot cities
• Define feedback loops – identify
best-selling products/food/bev and
carry additional inventory
• Establish pilot store performance
metrics to measure success
• Retrain existing staff to embody new
ethos and hire new employees to staff
pilot stores
• Develop local marketing campaigns in
pilot cities
• Generate word of mouth buzz by
hosting cultural events (e.g. wine &
cheese nights, game nights)
• Cultivate exclusive content through
independent authors and re-
investment in Sterling Publishing
• Develop best-in-class reader app (will
be outsourced)

27. Financial Analysis
Total Profit: $8,058,411
ROI: 65.6% (after 2 years)
(In detail)
We built a financial model for our proposed strategy
(Appendix i) and conducted a sensitivity analysis to
show areas where our assumptions might be risky
(Tornado graph below). This analysis revealed high
sensitivity to Total book Club Sales and Average Book
price. As the former was entirely an assumption, we
revised it down by 50%. The latter, being based on
B&N data, was revised down by 17%. The analysis at
right represents the more conservative assumptions.
Revenue
Total Revenue $17,759,800.00
Book Club $4,600,000.00
Café/Bar revenue $540,000.00
Book Box Membership $5,850,000.00
Events revenue $114,000.00
Content exclusivity $80,000.00
Nook Sales $263,800.00
Print-On-Demand $102,000.00
Store Book sales $6,210,000.00
Costs Assumptions
New store costs
Building lease costs $3,300,000
Events cost $15,000
Food&Drinks $50,000
Staffing costs $686,400
Total new store costs $4,051,400
Publishing Costs
# of books 440,000
Avg. self publication costs $112,388.89
Avg. non self pub cost $400,000
Self-pub mix 20%
Total publishing cost $512,389
Logistics costs
Warehouse costs 2,700,000.00$
Book Box 100,500.00$
Losses due to damage/shortage $360,000
Biweekly delivery costs $3,000
Total logistics costs $3,163,500
Design & Furnishing
Renovation Cost $90,000
Furniture $25,500
Interior Redesign Cost $210,000
Total Design & Furnishing Cost $325,500
Other
Nook costs $4,300,000
Exclusive Content with Publishers $1,200,000
Total Other $5,500,000
SGA Costs (exc. Staff salaries) $200,000
Total Costs $9,701,389
Profit $8,058,411.11
Data
Retail sales $4,100,000,000
# of Stores 648
Sales per store $6,327,160
Average store size 26,000
Retail sales per sq foot $243.35
Content publishing revenue $119,000,000
Assumptions
% Book Revenue 90%
New store sq foot 5500
Number of pilot stores 3
Cost / sq foot $200
Hourly wage $10
Staff members / store 5
Total # of books from Book Club 200,000
Book Box Members 150,000
Number of events/mo 5
Average book price $23.00
Total # of books sold in store 90,000

28. Financial Analysis
(Key Takeaways)
To test the impact of potential variations in our
financial model, we built a simulation model to
incorporate fluctuations in our assumptions.
We built distributions for each variable and
ran 10,000 simulations using the @RISK tool
(results snapshot at right).
• The average profit in the 10,000 simulations was
$8.14 Million, slightly higher than our static
estimate of $8.05.
• 90% of simulations returned between $5.65 and
$10.73 Million in profit.
• The worst scenario returned a $2.8 Million profit
and the best returned $14.6 Million.
Given these results, we believe that the NOBLE initial campaign will show strong profits for
Barnes and Noble within two years of implementation.

29. 1
B&N currently lacks a compelling and clear value proposition, and a
radical overhaul of strategy is needed to move the company forward. Value
is migrating away from the ‘big box’ store model towards online retailers
but B&N cannot compete effectively here. B&N needs to shy away from
emulating Amazon as they lack the strategic assets to present a threat to
their model of offering consumers unmatched convenience and selection.
Conclusions
2
We propose moving away from the big-box store model and opening small-
to-medium sized stores scattered throughout major cities. These stores
maximize space by using nearly all wall-space for books, and a significant
amount of floor space for comfortable seating. They will also function as
neighborhood hubs for community activities. They should emphasize
comfort and a love of reading and draw revenue from multiple sources.
3
Pilot smaller stores in 3 cities with a high concentration of our targeted
customers (Washington, DC; Austin, TX; Denver, CO) before wasting
additional resources on the plummeting performance of the Nook. We
estimate a $10M investment in these three cities and assume leveraging
of existing logistics, warehouses, and publishing capabilities, resulting in
increased sales per sq/ft, and brand value to book enthusiasts.
If you cant beat them
at their game, beat
them at your game.
To readers, coming to
NOBLES should feel
like coming home.
Don’t go big…
go small, in a big way.

30. One final word…
The book market is shifting, and Barnes and Noble cannot continue to
try to be all things to all segments of book purchasers. It can succeed
however by being something special to people who value most what
B&N does best: books.
NOBLES is a home for people who love books.
“It is no use saying ‘We are doing what we can’. We must succeed in
doing what is necessary.”
-Winston Churchill

31. THANK YOU!
BY: KHRIS JORE, HUNTER GILLEZEAU, ELIZABETH MANAPSAL KALI NOONEY, ANNA WIINBERG

32. Profit
Revenue
Cost Store Costs
Design &
Furnishing
Building
Lease Costs
# of Stores
Gross costs
(Books, etc)
Cost/ Sq Ft
Avg Sq Ft
Logistics
Costs
Publishing
Costs
Staffing
Costs
Warehouse
Costs
Delivery
Costs
Staffing
Costs
Gross Costs
(Printing)
# of Books
# of
Books
Avg Self
Pub
Cost
Avg
Non/Self
Pub Cost
Self-Pub
Mix
Avg book
Price
Book Rev
Food/Drink
Profit
Monthly
Book Sub
Profit
Monthly
Book Sub
Profit
Events Profit
Rental Profit
Digital Profit
AUXILLARY PROFITS
MKT
size
MKT
capture
Marketing
Costs
Appendix i:
Profit Model for NOBLES Strategy