With Borders shutting down stores and facing declining profits, Barnes & Noble remains the only strong brick and mortar bookstore. While it faces strong competition from discounters like Amazon, WalMart and Costco, its new threat comes from the change in consumer preference from paper books to eBooks. While there were other eBook formats and readers, the threat was not credible until Amazon entered the market with its own Kindle eBook reader.
The real threat is not from the device but from Amazon’s strategy to own the distribution through its Kindle store. Amazon is more than a bookseller, it is a Platform company (Mr. Jeff Bezos once described Amazon as the Ideas company). It has the wherewithal to develop a home grown distribution platform, build an ecosystem around it and quickly gain control of the ecosystem. But B&N does not have the technology and a strong R&D team.
Clearly B&N knows this weakness and sees the threat posed by Amazon’s Kindle store. It however can acquire the technology to fast-track its eBook strategy and it did exactly that. B&N is set to answer Amazon with its own eBook store with its acquisition of FictionWise an eBook retailer.
Stated in the same report is that B&N is going to develop its own eBook reader, a competitor to Kindle if you will. This is not the right strategy for B&N. As I stated in my previous article the Kindle device is not the main focus of Amazon and it will gladly give that market to control the distribution value chain. B&N should not be distracted by the success of Kindle device. The war is about the control of distribution platform not handheld devices. It cannot dilute its scare resources by focusing on both the eBook distribution platform market and the devices market as this would only enable Amazon strengthen its platform leadership position.
Strategy is about making choices and allocating limited resources and not straddling. So forget going after Kindle device, it is a red herring. B&N’s strategy should be to become another platform option for publishers and authors who would not want to see just one strong player in the eBook market.