Why the Barnes & Noble shopping experience won't cut it in the future

The need to shift from being product-centric to experience-centric

In my last newsletter edition sharing some initial thoughts on innovation, I ended by stating that while a few companies are shaping the future, all companies must adapt to it. One concept that I often share with firms and audiences in my presentations on the insurance sector is that competitive advantage really boils down to two major factors: algorithms and experiences. This is particularly true in insurance, which does not have the same level of physical capital or infrastructure and relies less on goods and logistics than manufacturing or other sectors.

There are opportunities for efficiency and cost savings in the insurance sector, but the key competitive advantages are 1) superior data and predictive statistical models, and 2) outstanding customer experiences. It’s well known that customers shop on price for insurance initially, until they experience a loss - and then their resulting claims experience (good or bad) becomes the predominant factor in determining whether they remain a loyal customer or leave. You can win a customer for life by providing great claims experience or lose one in a hurry with a poor claims experience, no matter how competitive your price or product features.

In our digital age, customer expectations are rising. Particularly during the pandemic, many people adapted by going online for goods and services that they previously shopped in person for. Amazon became even more of a primary option for retail, delivery services became the primary method for eating restaurant food, more people had groceries delivered, streaming services became the primary way to watch movies, etc. While the impact of COVID has receded in most locations around the world (China being a notable exception), a major question remains: which goods and services will customers continue to purchase online and which will revert back to an in-person experience?

The Barnes & Noble customer experience test

I have a passion for books and have always loved to read. For years, I used to enjoy browsing for hours in local bookstores and the Borders bookstore chain. Over time, as my bookshelves filled and I found myself traveling more, I made the switch over to primarily purchasing Kindle digital books about a decade ago. While I do miss the tactile aspects of feeling a book’s spine and turning its pages, I enjoy the portability of having books loaded on my tablet and phone and being able to read snippets while waiting in line. I also find that highlighting and taking notes is easier done in e-books. Amazon has done a nice job in my view of working hard to replicate the experience of physical books, allowing readers to sample pages for free, share Kindle books with friends and colleagues, rent books for classes, etc.

I’m thrilled to have passed along my love of reading to my daughter, Sienna, who is in middle school. She is a voracious reader and recently she and my wife Dani have begun a routine of going to Barnes & Noble after school on certain days to study and work. Barnes & Noble has certain advantages over shopping on Amazon: it allows for easier browsing of titles, especially finding books that you didn’t know you were looking for. It also offers a wide selection of books and music, sells children's books and toys, and has a cafe that serves coffee and snacks. Occasionally, stores even has a special event such as a book signing with a local author.

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However, the Barnes & Noble experience isn’t as good as it could be in my view. The biggest draw is the tactile experience: the ability to physically interact with a wide selection of books. Having access to the physical inventory is a product-based experience. I do enjoy the ability to physically look around the store and discover new books at Barnes & Noble. I also do this virtually on Amazon, but it’s not quite the same experience: I can’t physically see or touch the hardcover and paperback books. Amazon is great when I know what book I am looking for; it’s not as great for looking when I don’t know what I want. However, this advantage in the Barnes & Noble experience of reviewing book options isn’t much of a competitive advantage compared with the multiple advantages of Amazon: lower prices, the availability to purchase Kindle and audiobooks through Audible, and user ratings and reviews which are quite helpful in making a decision on which books to purchase.

I’ll make a confession: while I enjoy the browsing experience at Barnes & Noble, I never buy books there. Why? I take a picture of the books I’m interested in and put them on my Amazon wish list. Then I monitor daily by sorting on price; whenever one of the books on my Wish List goes on sale, I buy it online. This outcome is good for me and good for Amazon, but bad for Barnes & Noble. Barnes & Noble incurs almost all of the expenses in educating me about book options and none of the revenue in making a sale. Additionally, Amazon not only gets the revenue from my purchase but Amazon collects my sales data as a by-product, helping them to improve their algorithms to make better recommendations to me in the future. In this respect, Amazon “knows” me better over time as a customer; Barnes & Noble doesn’t. The employees aren’t friendlier to me the more I go visit; they don’t make better suggestions of what I’d be interested in based on what I bought in the past from them.

I’m surprised that Barnes & Noble is still around, as many others have predicted their downfall over the years. In fact, the pandemic has helped Barnes & Noble and now independent booksellers are cheering what they once perceived as a villain. I’m glad B&N still exists, but what’s remarkable to me is that Barnes & Noble hasn’t fully embraced the experience of browsing in a bookstore in my view. This is their competitive advantage over an online retailer like Amazon. It’s nice that they have a cafe, but why do they have so few seating options outside of hard tables and chairs? Why don’t they have more sofas and comfy chairs? And why don’t they have more electrical outlets available to charge your phone or laptop? Barnes & Noble stores are huge. I would suggest that they should remove some of their large inventory of books in favor of more lounge room to encourage customers to stick around and spend time there. (Note the single hardback chair with lack of a wall outlet nearby in the picture above.) I don’t have any data on this but I’d guess that the more time customers spent in a Barnes & Noble, they more likely they are to buy something. And the better the in-person experience, the more likely customers are to come back - over and over. Even Capital One is making the in-person banking experience more attractive to sit and read than Barnes & Noble!

Product-centric vs. experience-centric

Is your company product-centric or experience-centric? And if your firm is product-centric, how long can you compete using that model? Which is more important to your customers? Not all products have to come with experiences, but it’s important to reconsider the role that experiences play in your organization. The insurance sector is famously product-centric: each coverage line or form is a product and most conversations with prospective customers essentially boil down to “which of our existing products do you need?” rather than “how can I personalize a solution to you that meets 100% of your needs?”.

Over the past few years, insurers has been more focus placed on the idea of “value-added services”: firms looking to package products and services together to where the core value proposition isn’t just an insurance policy. However, finding the right balance is tricky: for example, earlier this year J.D. Power released findings from their 2022 U.S. Property Claims Satisfaction Survey which found that an increase in online capabilities for claims sometimes led to a decrease in customer satisfaction. Why? Because customer expectations are such that when they submit photos and documentation online, the claims process will continue online - not proceed at the same pace as other methods and require a physical in-person inspection. To state the obvious, if you’re making investments to improve your experiences, they must be perceived as improvements by your customers.

Is Apple selling technology or lifestyle?

This question of being product-centric or experience-centric isn’t new. Perhaps the best example is Apple, famously born as a technology company that continues to sell technology hardware and accompanying software but that is considered to be more of a lifestyle company than a “pure” technology firm such as Google or Samsung. People like me have continuously shown the inclination to spend more on Apple technology products that many gear heads consider inferior at a premium price. Why? Apple’s famous attention to beauty and design are part of the reason, and the interoperability of their devices is also convenient (although getting my AirPods paired correctly to either my MacBook Air or iPhone given the right context can be infuriating). Apple’s elegant retail stores, packaging, and branding all contribute to the whole value proposition to be as much about lifestyle as technology - which both critics and devotees seem to agree upon.

Can an insurance firm become a lifestyle brand? What about other industries that are traditionally product-focused? Certainly Starbucks has made this leap as well, going from simply a coffee shop to a lifestyle brand. Perhaps Barnes & Noble can make this leap as well, but I’m not optimistic long-term. If they do, the first order of business is to focus on the experiences, not the products. If your firm conducts part or all of your transactions in person that could be performed online, then that experience must be outstanding to make the in-person component worthwhile to your customers. The bar has been raised for any face-to-face transactions for the foreseeable future.

Do you enjoy shopping at Barnes & Noble? Why or why not? How could they improve the experience for you - or is this a lost cause? I’d love your thoughts in the comments below.