Barnes & Noble announced Thursday that sales of Nook products plunged 61% this holiday season. The company blamed its poor sales on competition from Apple's iPad and its own failure to release a new tablet.
We asked Brian Sozzi, chief equities strategist at Belus Capital Advisors, to explain why the Nook tablet failed so spectacularly.
1. Barnes & Noble's reputation as a bookseller got in the way. "Shoppers couldn't get beyond Barnes & Noble being a destination for something they no longer want or generally care about, books," Sozzi said. "Barnes & Noble management perpetuated that by not investing aggressively enough in marketing to alter perception."
2. The company didn't illustrate the Nook's full value. While Apple and Amazon advertised their tablets as devices for reading books, streaming television shows and movies, and reading the news, Barnes & Noble only played up the book aspect of the business, Sozzi said.
3. The Nook didn't have a place. The Kindle was seen as a cheaper alternative to an iPad. Meanwhile, the Nook "had no foundation to stand on to speak to consumers," Sozzi told us.
4. Barnes & Noble dropped prices at the worst possible time. Because Nook tablets weren't selling, Barnes & Noble dropped prices as they were investing tons of money into the product. "This is a lethal recipe for an entire division going up in smoke as the Nook has," Sozzi said.
Despite these challenges, it's possible Barnes & Noble could go through a period of transformation soon.
Barnes & Noble announced Wednesday its chief financial officer would be taking over as CEO.