Blog Post

How Starbucks Can Become the Barnes & Noble of E-books

With Barnes & Noble on the ropes, some may be worried their days of perusing for books surrounded by overstuffed chairs and overpriced coffee may be nearing an end. But this week’s launch of the Starbucks Digital Network (SDN) should put those fears to rest.

So what is SDN exactly? It’s a content and community portal that gives Starbucks hot-spot users access to free premium content  such as the Wall Street Journal and other news offerings, music and video, as well as access to a curated list of e-book samples from major publishers.  So far, Simon & Schuster, Hachette, Penguin, Harper Collins, and New Word City have signed on, allowing access to the books in-browser using Skyshelf’s platform.

So, just how could Starbucks use this new network to become a force in e-book retailing?

Emphasize the social aspect of reading and book buying. If you don’t think reading is a social experience, you haven’t witnessed the rapid growth of book clubs. If Starbucks could create localized bestseller lists and recommendations for e-books, it could effectively create a social reading network connected to a 6,000-plus network of physical retail storefronts.

Integrate with multiple e-book storefronts. Most people will buy from one or two e-book storefronts; today SDN has a tie-in with iBooks, but if Starbucks could also partner with, say, Seattle neighbor Amazon to fuse its curated e-book channel to the Kindle store for purchase completion, it would create a highly powerful tandem and cut Starbucks in on quite a few more e-book purchase transactions.

Rewards and reinforcement. With some of retail’s most loyal and frequent customers, Starbucks would be remiss not to create reward and loyalty programs tied its content network. By giving credits towards e-book purchases for its “frequent fliers,” it can reinforce loyalty and likely incent digital content purchasing.

This only scratch the surface of what Starbucks can do in e-books. Who knows, in a few years we might see e-readers sold next to bags of coffee and Starbucks-only editions of e-books available through SDN. However, as we’ve seen, the company’s mixed results at content retailing means that there’s no guarantee it will use the comfy chairs and Pike Place blend to its full advantage.

Read the full post here.

Image Source: flickr user basykes

8 Responses to “How Starbucks Can Become the Barnes & Noble of E-books”

  1. Michael,

    With tongue firmly set in cheek as you sat at your typewriter did really try to write the most ironic title for this article or do you really believe that Starbucks setting their sights on B&N’s ebook strategy is good business? And if the irony in the title wasn’t enough the woman in the photo is reading a newspaper. I can’t see how the irony would be lost on you if you’d happened on this article written by someone else.

    Amazon owns this space it’s likely that 70-80% of eBooks are sold via the Kindle and every one else is an also ran. The rest of the retailers including B&N and Apple compete for number 2 and will be for a long time. With respect to Starbucks their gross margin on coffee is probably more than three times what they can expect from eBooks (and possibly anything else they sell). And so with the comparative lack of margin will be a corresponding lack of investment in growing the eBook ‘store’. This story is actually less about Starbucks than about SkyShelf as a platform for aggregating many retailers which collectively might represent a decent retail channel for publishers.

    Starbucks has sold books before with great fan fair – some on an exclusive basis – and they’ve proven that they can move units but this exercise has been inconsistent and highly selective. There is no reason to expect that Starbucks can turn into a book merchandiser to match Amazon with any consistency or expertise and moreover, few publishers are going to be encouraged by past behavior that’s been subject to the whims of management and the expediencies of getting the core coffee business back in shape. That means less attention, less merchandising spend and less mutual interest in building the Starbucks eBookstore. In short, publishers will be happy to sell titles via Starbucks but will remain committed to investing time and effort in proven partners like (in particular) Amazon and B&N.

    Amazon will certainly act in self interest – witness their syndicated Kindle reader that allows readers to access their Kindle accounts using devices other than a Kindle, but working with Starbucks isn’t a ‘partnership’ that is immediately in Amazon’s interest. Amazon can do any amount of curating – if that’s the service Starbucks offers and there’s no evidence they have any expertise at this – so perhaps delivering an audience is a benefit. But here, what makes sitting in a Starbucks conducive to buying a book versus checking email and facebook which are probably more likely activities?

    Lastly, I found the comment ‘who knows in a few years we may see eReaders sold next to bags of coffee’ a really safe bet on your part. Although I would have been more likely to suggest that this could happen by next Tuesday given they are already sold in outlets such as Target and Walmart.

    Thankfully, you undercut your entire article in your last sentence with a dose of reality. Having said all this and, as someone familiar with the publishing industry, it is always good that the industry gains the support of a wide array and variety of retailers: Starbucks sells any Books at all that’s a positive thing. However, let’s not over estimate their impact even if the target is only B&N’s comparatively (to Amazon) small eBook presence.

    • I’m guessing you didn’t read this piece too carefully.

      I never anywhere suggest they will compete with Amazon – I suggest they need to integrate with as many ebook storefronts as possible. Also, I’m curious why you think that partnering with a retail storefront that has probably the most loyal userbase in America would be out of Amazon’s interest, particularly if they can manage and garner the lion’s share of actual sell-through for eBooks.

      As for e-books gross margin vs. coffee: It’s kind of implied and recognized Starbucks core revenue engine is and always will be coffee sold at retail. I’m not even sure why you would talk about relative size of margins and revenue of core versus ancillary businesses. It’s not, in my view, crazy to suggest they should make their digital content efforts more than just a hobby.These are hardly mutually exclusive goals.

      And including a caveat in a last paragraph doesn’t undercut an article – it’s simply a recognition that Starbucks, like many retailers, often fail to execute despite built-in advantages.

      Lastly, thanks for agreeing with me:”a really safe bet on your part”. I love backhanded compliments :)

  2. Starbucks needs to have live acoustic (or open mike) music on Friday nights and such. Starbucks Unplugged would be an excellent venue for all ages casual music (there’d be a volume restriction etc) and they’d 1) sell a lot more coffee 2) sell more music 3) make a lot of musicians and music fans very happy. So obvious, c’mon, this digital stuff is nothing compared to music, if curated properly.

    • I think Starbucks has done a good job in curating music in general, through their partnership with Apple/iTunes as well as their Starbucks compilations on CD. I think you’re right, they could definitely expand on live music (some Starbucks do have live music, but its location by location).

      Still, they have a real opportunity is digital content delivery (e-books is the obvious focus of my analysis here) given their large affluent customer base and the honey that is free Wi-Fi, tied to the new SDN. Whether they capitalize fully is yet to be seen.