13 Sep

BNED’s Digital Transformation: Too Little, Too Late?

WRITTEN BY Sybil Prowse

Earlier this month, we discussed how Barnes & Noble Education’s (BNED) financial struggle doesn’t seem likely to resolve soon. Management has recently started highlighting its increased focus on a digital transformation. However, the company’s efforts don’t appear to be yielding any notable success for BNED. Let’s take a closer look.

Barnes & Noble’s digital strategy

Barnes & Noble’s business took a turn towards digital transformation in 2015 with its listing on the New York Stock Exchange. Since then, the company has acquired many companies in the segment to expand its digital presence. These companies include Promoversity, LoudCloud, MBS, Paper Rater, and Student Brands. Student Brands already owned Bartleby.com at the time of acquisition in 2017, which helped the company grow its direct-to-student digital solutions business.

But take a look at BNED’s recent hiring data. Recruitment doesn’t seem to reflect the company’s focus on digital efforts. For example, of the company’s 726 jobs listed on LinkedIn over the past year, only one focused on its digital transformation. Here’s a summary of these job postings:

  • temporary jobs: 506
  • part-time jobs: 153
  • full-time jobs: 64
  • internship jobs: 3

Moreover, most of these jobs are low-level and operational or focused on community outreach. Where’s the focus on Barnes & Noble’s digital transformation?

Digital presence

The one digital-focused position, however, was higher-level. Here’s how Barnes & Noble recently advertised a director-level position on LinkedIn:

“The Director of Digital Marketing is responsible for establishing and executing the vision of Barnes & Noble’s digital presence, guiding the development of all digital marketing programs. This role collaborates with the senior management team to develop and execute marketing strategies, tactics, and plans for the business and ensures they are consistent with the overarching corporate strategy.”

  • This position is only one in 12,884 employees on LinkedIn, and it’s the only one explicitly tied to the company’s digital transformation. The company received 284 applications for this one middle management position.
  • BNED’s planning process, with one director-level position to take on the herculean task of building a new strategy for its digital transformation, may be a response to Bay Capital’s acquisition bid. However, this move doesn’t seem like enough in itself to respond to Bay Capital’s concerns with the struggling company.

Tough times for publishers and BNED

In the last few years, more than 200 stories have been published about Barnes & Noble in the popular media. However, you’d be hard-pressed to find a positive prognosis for the company’s digital transformation strategy at this point. In contrast, many of these reports point out flaws in BNED’s plans in the digital segment. Let’s take a quick look at some of the comments.

  • A report published by Harvard Business School’s alumna Kathryn R. in September 2015 suggested that BNED is playing the digital game all wrong. “Barnes & Noble was able only to offer a small fraction of the content, making their devices less appealing to consumers, which in turn made their platform less appealing to developers,” Kathryn argued.
  • In March 2017, Total Retail—the Philadelphia-based retail industry news portal—published BNED’s VP and chief digital officer Fred Argir’s comments from a keynote session. In the session, Argir talked about the company’s digital transformation efforts. But even after two and a half years, there’s little to show.
  • Interestingly, though it hasn’t been unable to get the success Amazon has seen for its Kindle devices, Barnes & Noble continues to sell its NOOK e-readers. In January 2018, a CNN Business report mentioned killing NOOK as one of the five things Barnes & Noble could do to save itself.
  • The Guardian in May 2018 highlighted factors including BNED’s sliding sales, diminishing value, and store closures to suggest that the company “is in trouble.”
  • In August 2018, the New York Times emphasized Barnes & Noble’s survival struggle.
  • During the same month, an article by Forbes discussed BNED management’s lack of efforts to save the company.

BNED’s options

Barnes & Noble Education started restructuring its digital operations in fiscal 2016. The company seemed to recognize a need to restructure its digital operations years after companies like Amazon (AMZN) and Apple took a big leap in the segment. So BNED’s focus on digital transformation may have come in too late.

Despite a recent rise in its digital student solutions sales, the company’s efforts aren’t yet paying off. These sales are a small portion of BNED’s total revenues. In its fiscal 2019 (which ended on April 27, 2019), BNED’s direct student solutions sales stood at $21.3 million, just 1.0% of its total revenues. Meanwhile, its adjusted EBITDA from the segment fell sharply by 18.4% to just $6.2 million.

According to the company’s fiscal 2019 annual report, BNED CEO Michael Huseby believes the digital student solutions segment has “the greatest upside potential.” In the report, he said BNED is “continuing to leverage our expansive footprint and demonstrate our ability to grow and scale delivery of Bartleby.” So far, though, the financial data don’t reflect “continued subscriber acquisition growth.” We have yet to see signs of a turnaround.

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