Nero fiddled while Rome burned

While that story may not be precisely true, the metaphor remains relevant. Back in 2002 we wrote a paper entitled: “Is Your Business Model Right For Tomorrow’s Market?” As the title suggests, this paper asked a critical question, which many companies are still not willing to answer. In truth, they ignore the question.

Brett Arends wrote a story today for MarketWatch, “Get ready for the bookstore massacre.” In this story he discusses the pending demise of Borders and Barnes & Noble. That potential outcome has been postulated by other pundits over time. However, according to Arends, B&N is now for sale and Borders’ stock has dropped 95% from its peak.

To be fair both of these “brick and mortar” retailers recognized the need for an online presence fairly early in the game. They just did it in a half-assed way. Almost as if trying to prove that online book sales were not a good idea. If your website is bad enough you can drive sales away.

The next business model change affecting this market is the shift to downloadable books (so-called ebooks which are read on an electronic book reader such as the Kindle, Nook, Kobo or iPad). Both B&N and Borders jumped on this trend a bit earlier and with better products than their initial web efforts responded to the first shift. Probably timely since Amazon reports selling substantially more ebooks than physical books in the last quarter. (You could argue that Borders and B&N are book stores so people shopping in their stores are most likely looking for a physical book. I agree and more on that later in this post.)

However, Kindle is now a materially better product than either Nook or Kobo and less expensive, so B&N and Borders will need to address that … if they can. But even if they do, they will just be an online e-book seller with, based on past experience, a less desirable buying experience. And their bookstores are having trouble sustaining themselves.

Which leads to another business model change and opportunity. I believe there may be a rise and revival in local bookstores. There are still a lot of people who prefer to own a physical book. Additionally, many people like to shop in book stores and/or spend time in a bookstore. Many specialty/local bookstores have survived on this model. If the big chain bookstores fold, then the local bookstores may be able to thrive again because they will have less competition. Time will tell.

Are you making sure your business model is right for tomorrow’s market … or even today’s?

Mitch

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