Friday Musings: Should Buy Barnes & Noble and Partner with a Direct Bank

image One of the best things to happen in 20 years of living in northeast Seattle was the opening of Barnes & Noble in our local shopping center, replacing the tired old department store, Lamonts

For this family of readers, the massive, two-store B&N has continued to be a cherished destination for more than a decade. When the boys were young, it was Tuesday night story time (with free fresh-baked chocolate-chip cookies). Later, it was a place to spend their birthday money on new books, music and DVDs. And I’ve personally bought at least a couple hundred items there over the years. 

But I’m also an fanatic and buy most everything I can there nowadays. My wife and I (though not the boys yet) are ebook addicts, reading on our iThings via the Kindle app (note 1).  So, I’m more than a little concerned about our neighborhood Barnes & Noble. Printed books and other media, along with CDs/DVDs, are on their way out, so is there any hope of keeping the neighborhood B&N in business?  

Musing 1: B&N Rescued by
Here’s my dream: Amazon buys Barnes & Noble, perhaps partnering with a major financial services brand (note 2), and turns it into a fully online/mobile channel-integrated super store. Amazon’s major online departments could be recreated within the massive B&N footprint: the book store, of course, electronics, music, movies/TV, toys, home and garden, shoes, and so on.

High-volume goods would be stocked and available for purchase. Consumers could also pick up goods ordered via online/mobile enabling same-day delivery for many items. But the main focus of the store would be self-service online shopping. Shoppers in the shoe department, for example, could see and hold various styles, but would place an order through a mobile app or online kiosk, to get their specific size delivered to the store or their home. The concept would be to showcase a wide variety of items without incurring the costs of holding massive inventory within the store.

Musing 2: Amazon Financial Centers Installed within the Super Stores
Though I’m not a huge fan of branches, they still have their place. Amazon could turn a corner of the store into a financial services center. The center would feature deposit-taking ATMs to handle those pesky checks and would have a financial specialist or two on hand to help customers with mortgages and other high-touch financial needs (no transaction activity, however).

Financial center staffers could also be incented to help drive users to co-branded Amazon loyalty programs with online and in-store sales diverted from credit cards to ACH/debit, saving the company tens of millions in annual interchange. Financing big-ticket items could also create a massive new revenue stream for the retailer.   

While the financial operations could be private-branded under the Amazon name (e.g., Sears), it would probably make more sense to partner with a major direct financial services company such as ING Direct, Citibank, or Schwab, or an international giant such as Standard Chartered, Barclays, or OCBC which would gain a major footprint in the United States with 700+ strategically located mini-branches (notes 3, 4).

It’s not going to happen, Amazon is a Wall St. darling as a pure-play ecommerce company, but for the sake of the neighborhood, I wish it would.


Notes on the the business case (see huge caveat, note 5): 
In this simplistic proposal, I’m ignoring a zillion issues which are beyond the scope of this blog. For example, would existing B&N leases even support Amazon’s product mix? But to an outsider, it looks enticing for the following reasons.

  • B&N is currently valued at less than $900 million and change after a recent run-up after it announced that it was for sale (note 6). In comparison, Amazon’s is worth $62 billion today. As a matter of fact, its market cap has grown $7 bil since I started this post a couple weeks ago, enough to buy seven Barnes & Nobles. Clearly, Amazon could afford it, though whether shareholders would support it is another matter.
  • Merging with B&N would take out one of Amazon’s major competitors, theoretically allowing the company to boost prices. With $25 billion in revenues, a quarter-percent (25-basis point) price increase at Amazon would add $60 million to the bottom line.
  • In-store pickups could help reduce Amazon’s massive shipping expense. 
  • And while B&N isn’t currently generating a profit, it was operating cash-flow positive during the past 12 months (+$120 million).
  • Amazon could partner with other direct commerce companies to spread the risk. The financial services mini-stores alone could bring in $100 million annually assuming a $10,000 per month rent/rev share per location (note 3). And other retailers might also be interested in mini-stores within the big Amazon box: Microsoft, Dell, Sony, HP,, and so on.   

Other notes:
1. While I consume almost all fiction digitally, I still like to buy printed business books to keep on the reference shelf. I find it easier to remember they exist that way. Even my semi-Luddite brother has jumped on the Kindle bandwagon at the new $139 price point.  
2. I mostly added this to justify posting it here. Ironically, this strategy is almost the polar opposite of our Online Banking Report: Creating the of Financial Services originally published in 1998 then updated in 2000 (more recent summary here). 
3. I’m not including another 600+ B&N locations on college campuses, because many of those would not be a good fit for financial services and/or the schools would not allow a competing financial provider on campus.
4. Adding financial stores to Barnes & Noble retail locations could be problematic if the leases prohibit banking operations due to exclusive deals with other banks in the shopping center.
5. Caveat: Although I do have an MBA, my balance-sheet reading skills are quite rusty. And I don’t have an ounce of retailing experience (outside banking), so please realize this is primarily conjecture on my part. 
6. There’s also another billion in long-term debt and other obligations.

A Year’s Worth of Fake ATM Receipts for $15

Fake ATM receipt example CLICK TO ENLARGEFor something completely off-topic, here's a niche service that couldn't have existed prior to the Internet.

Four-year-old Custom (screenshot below, link here) will create a year's worth of personalized fake ATM receipts. For $15 + $1.50 shipping, with payment via PayPal, you receive 52 ATM slips printed on thermal paper and dated every Friday for a year. 

The receipt includes your name, the last four digits of your account number, a withdrawal amount and closing balance of your choosing. The example shown on its homepage shows a balance of $629,112.23 with a paltry withdrawal of $60 (see inset above). They ought to up that to at least 3 Benjamins for credibility.

At $15 per order, the site operator won't get rich, but it's a clever idea and hopefully all in good fun. In an email exchange with the owner, who prefers to remain anonymous, he said that he previously offered to produce any personalized receipt. Intended to be used as a joke, he shut down the service after receiving numerous requests for items obviously intended to defraud employers or insurance companies. 

Custom Receipts fake ATM generator