Current Situation:
Barnes & Noble experienced a 15% drop in its fiscal 2nd quarter as sales slid 1.6% to $1.22 billion.  Same-store sales declined 4.7%, and without the Harry Potter final installment last year it still would have declined 1.5%.  These figures are symptomatic of the assaults retailers face on many fronts.  The U.S. is in the midst of a weak economy and a significant economic downturn which is exacerbated by record high gas prices.  As a result, consumers have a lot less disposable income, and more importantly, less confidence in their economic well-being.  However, all was not gloom and doom for Barnes & Noble, as it did beat Wall Street expectations through lowering expenses - this led them to improve margins.

Choose Best Elements of Related Players and Occupy A Unique Space:
While this was a silver lining in their profit reduction, the health of the business must be focused on growth.  Barnes & Noble must address the competitive pressures and forces facing their business.  They must create a Blue Ocean line of businesses.  They have the resources and current substantial brand equity to be known in the marketplace as an “intellectual entertainment” provider.  This would offer the opportunity to create, develop, and brand customer and business service lines along related themes.  They have the opportunity to occupy a space among Blockbuster, Netflix, Amazon, and Borders.  Barnes & Noble can leverage elements of the best features and benefits of all these players to create an independent and unique space with a higher utility value proposition to consumers.  They can also leverage their brick-and-mortar operations with a strategy that allows them to point online customers to their stores, and store customers to their website.

Flank Amazon with “Smart Entertainment” Spacing:
Barnes & Noble should also not look to compete head-on with Amazon.com as an “everything to everybody” online seller, but should choose an alternative theme with a strong appeal to a substantial niche of consumers.  They should pick a fairly significant and lucrative arena of the market where Amazon’s presence recedes. To actualize gaining market share in this area, Barnes & Noble needs to provide features and benefits to consumers that Amazon does not provide or that utilize B&N’s physical locations.  Barnes & Noble’s growth depends on realizing a broader vision and branding beyond books – it can own a place in the “smart entertainment” space, and “go beyond books.”