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Espresso, Sandwiches, And A Sea Of Books


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ESPRESSO, SANDWICHES, AND A SEA OF BOOKS

It's 11 p.m., and the Barnes & Noble bookstore on Manhattan's Upper West Side is packed. Browsers are thronged around the selling floor and sprawled on window seats. Upstairs, in the cafe, people munch sandwiches and sip espresso while listening to a symphony. Kids wander into a minitheater to watch a puppet show. Kathleen Connors, a local resident, can't believe it. "Saturday night, and all these folks want to hang out here," she marvels.

Welcome to the world of Barnes & Noble superstores, the fastest-growing trend in book retailing. While many retailers are still riding out the effects of the recession, Barnes & Noble, best known for its 10% to 40% discounts, has decided that bigger is better--stores with 20,000 to 40,000 square feet and 100,000 titles, plus food and entertainment. In addition to setting up 75 superstores a year for the next three years, the company plans to expand its children's book, software, and college textbook businesses. "We are clearly positioned, right across the board, to exploit all the media forms," says Leonard Riggio, chief executive and half-owner, with Dutch retailer Vendex International, of privately held Barnes & Noble Inc.

FIERCE FIGHT. So far, Riggio's fast-growth strategy is working. Superstore sales rose 114%, to $328.8 million, in the fiscal year ended Jan. 30. Total sales for the bookstore company jumped to $1.09 billion from $921 million the year before. Software Etc. Stores Inc., the mall-based retailer of home-computer accessories that is 27% personally owned by Riggio, grossed an additional $203 million in 1992, a 100% increase from 1990.

But some bookworms think Riggio may be overestimating his future market. Although the amount Americans spent on books grew 12.5% last year, according to the Commerce Dept., the growth is likely to slow to 7.3% this year and a scant 3.5% in 1994, figures Cahner's Economics, which tracks the industry. Booksellers contend the business is likely to become a fierce battle for market share. "Opening up new car dealerships doesn't mean Detroit will sell more cars," says Bill Kurland, owner of Shakespeare & Co. Booksellers. For now, the superstores are taking sales away from independents such as Kurland, whose Manhattan store is a block away from the new superstore. But they may also end up cannibalizing sales at B&N's 800 existing mall stores, notes retail consultant Kurt Barnard.

Riggio firmly believes there is ample room for growth in the market. But just in case, he is nurturing his other divisions, too. With juvenile-book sales mushrooming, Riggio is adding more square footage to the Barnes & Noble Jr. stores that form part of the superstores. Already, children's books contribute 15% of superstore sales.

Riggio also continues to expand into textbooks--by far the most profitable part of his empire because of large operating margins in a captive market. Barnes & Noble runs 285 college bookstores, up from 239 a year ago, on such hallowed campuses as Columbia and Northwestern. Two weeks ago, it signed up Pennsylvania State University.

For Software Etc., Riggio is experimenting with new formats and products. This fall, the 290-store chain will begin setting up nonmall shops adjacent to B&N superstores: up to 70 in each of the next two fiscal years. Software Etc. is forging into multimedia, too. It already sells the Philips CDI Player, which plays interactive CD-ROM disks, and is in discussions with Panasonic and 3DO to sell their multimedia machines.

NEW NICHES. Still, books are Riggio's first love. B&N has grown from 23 superstores in 1989 to 160 in 1993. The newer stores include ample seating room and cafes that serve Barnes & Noble coffee. Now, with corporate debt down to 48% of capital from over 80% in 1992, Riggio plans to boost the number of in-house titles B&N publishes--on such diverse topics as art history, fiction, and science--to 300 books this year from 200 in 1992.

B&N's rivals aren't dozing, of course. Kmart Corp.'s Waldenbooks Inc., the No.1 U.S. bookseller, with 1,275 stores, will expand its mall stores from 3,000 sq. ft. to 6,000 to 8,000 sq. ft. Borders Inc., another Kmart division, will add 12 superstores in the next six months to its existing 33.

Meanwhile, smaller stores are moving into specialty niches, such as ethnic fiction, business books, and women's titles. They're betting that real readers don't want bagels and Beethoven with their books. But if the crowd on the Upper West Side is a barometer, Riggio may have the last word.Sunita Wadekar Bhargava in New York


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