Harrison-Keyes

Problem Solution: Harrison-Keyes Inc.

Since 1990, America’s major book chains--Barnes & Noble, Borders, and Books-A-Million--have opened about 700 new stores. As of September, 1997, Books-A-Million had 93 stores nationwide, Borders had 180, and Barnes & Noble (whose public relations department proudly states that "a new Barnes & Noble superstore opens every 4 1/2 days") had 440 stores.

The sheer number of superstores in operation today has given these three corporations an inordinate share of the book retail market. While in 1972 independent bookstores controlled 84 percent of the market, by 1983, shortly after chain bookstores first began expanding, that share had dropped to 71 percent. By 1994, the market share of independent bookstores had fallen to 41 percent. Today, independent market share stands at 25 percent, leaving only a few corporations in control of 75 percent of the book retail market. Market studies indicate that this trend will continue in the future. In 1996 alone, as the independents’ market share continued to plummet, sales at book superstores rose 36 percent, to $3.27 billion. It is not hard to foresee a day when independent bookstores have only a negligible presence in the book retail market. (Kornhaber, 2004, p.2)

What this means for writers and publishers is simple. As late as 1983, publishers could get away with selling most of their books to independent stores and still turn a high profit. In other words, they could get away with publishing new and innovative fiction by relatively unknown authors because there were stores willing to buy it. Today, though, it is impossible to survive as a publisher without selling most of your books to chain bookstores. If those chain bookstores aren’t interested in buying new, experimental authors, then publishers can’t afford to publish their books. The reasons for the ascendancy of book superstores are manifold. One of the main factors involves the prices at which these superstores can afford to sell their products. Run by corporations worth billions of dollars, stores like Barnes & Noble can offer discounts that independent stores, with their limited budgets and assets, could never hope to match.

Over a century old, Harrison-Keyes was founded in 1899 and made its early money publishing the works of literary giants. In recent years, the Company has suffered the woes plaguing the entire industry. As competition from low-cost retailers eats into profits, publishing companies are finding success -- or even survival -- a challenge. In an effort to revitalize the company, the Harrison-Keyes Board of Directors recently hired a new CEO.

Describe the Situation

Issue and Opportunity Identification

What exactly is the problem with chain bookstores? They’ve probably increased the total number of bookstores in the US, and they seem to offer a wide variety of books. What is important to publishers, though, is not the number of bookstores in the country, but the number of book buyers. Every independent bookstore in America has a person or group of people in charge of deciding which books to order from publishing companies. Thus, if there are 500 independent bookstores, there are 500 autonomous buyers placing orders, and publishers can sell them a wide variety of books because they all have different tastes. Corporate bookstores, however, only have one or two book buyers for the entire chain. So although there are 400+ Barnes