While Barnes & Noble may be struggling right now as a company, it's mostly the Nook digital media division that's dragging down earnings - both B&N's chain of retail stores and college bookstores are showing relatively healthy revenues and profits, despite the intense competition from Amazon and other booksellers.
Now, Amazon, perhaps not content to best Barnes & Noble on the ebook battlefield, is going after the retailer in one of its strongholds: the college campus. Amazon has formed a partnership with University of California, Davis to create an online storefront geared specifically toward the university's students.
Barnes & Noble does the same thing in the physical world, operating nearly 700 college bookstores across the country, including at Ivy League schools like Harvard and Yale, state schools like Indiana University, and community and technical college systems. Through the first half of the company's fiscal 2014, its college division had sales of $963 million. In fiscal 2013, it had nearly $1.8 billion in sales.
For the Amazon deal, UC Davis Stores, the company that operates the university's retail network, will get about 2% of revenues from purchases through the new online storefront. A scholarship has also been established that will use store revenues.
"The collaboration is a win-win for the university and its students," UC Davis Stores director Jason Lorgan said in a statement. "The site complements the existing UC Davis retail operations and provides additional items that we're unable to provide. We expect it will generate significant revenue for the university and do not believe it will harm our in-store sales."
Whether deals like this harm UC Davis Stores sales is an open question and, now, an ongoing experiment. Less immediately clear is if such a deal will put a dent in one of Barnes & Noble's healthiest businesses. In 2013, the college bookstore segment showed modest 1.1% growth while both the company's other divisions shrank. The retail segment, which is roughly three times the size of the college business, shrank by about 6% and the beleaguered Nook digital business shrank by nearly 17% in 2013. Losses at the retail stores seem to have stemmed somewhat in 2014 while the bleeding at Nook has intensified.Requests for comment from Amazon on its college strategy were not responded to before press time.
"The new program is a way for Amazon to better serve our university student customers," an Amazon spokesperson said in an email to me. "By collaborating with the college bookstore, we're able to complement the on-campus selection, offering students millions of items at great prices with free two-day shipping through Amazon Student. And when students shop with Amazon through this program, they support their university. We think it's a win-win."
The spokesperson went on to confirm that the program is a pilot and Amazon hopes to roll it out to other college campuses.
Barnes & Noble as a whole is struggling on many fronts. A disastrous holiday quarter exposed massive losses at Nook. The company is being sued by shareholders and a class action complaint was recently filed. And the appointment of Michael Huseby as the new CEO has signaled to investors, employees and observers that the break up and sale of the company may be imminent.
Observers have predicted that Nook will be sold or shuttered and at least one investing industry observer cheered that notion. One industry analyst speculated that Wal-Mart could buy Barnes & Noble in an effort to bolster its book sales competition with Amazon.