Barnes & Noble College Bookstores

A Case Analysis

I. The Problems or Questions

Barnes & Noble Education is one of the largest operators of college bookstores in
the United States. The conflict began when McGraw-Hill implemented a new return
policy that assessed a fee for all new, unsold textbooks returned by college bookstores.
This “restocking fee” was only to be assessed against bookstores that failed to keep
their return levels below 15%. The B&N College chain had an average return rate of
34% with the previous year’s rate being 51%.

The campus bookstore sent letters to each professor urging them not to choose
textbooks published by McGraw-Hill for their courses. McGraw-Hill in response sent
letters to the professors justifying their new policy and claiming B&N College failed to
manage their inventories adequately.

II. The Facts

B&N College (a unit of Barnes & Noble, the world's largest bookseller) operates the
official bookstore for the university and is contractually obligated to stack all course
textbooks and materials. The conflict began last month when McGraw-Hill implemented
a new return policy. McGraw-Hill would now assess a gee for all new, unsold textbooks
returned by college bookstores. McGraw-Hill allowed retailers such as B&N College to
return all new, unsold textbooks without penalty. The campus bookstore, troubled by the
seemingly abrupt change in policy, promptly sent a letter to each of the university's
professors. McGraw-Hill immediately rebutted by sending its own letter to professors
explaining why its new policy was, indeed, justified.

Total publishers' net sales of college textbooks were over $4.5 billion in 2010,
representing approximately 19 percent of all book sales. Cost of production, however, is
not the only barrier to entry in the college textbook market. Textbook returns are
primarily caused by inaccuracies in predicting college enrollment levels, a task made
more difficult over the past decade by two demographic related factors.

III. The Alternative Courses of Action

The possible alternative action in the said problem Barnes and Noble would
continue to supply tangible books to bookstores in the future. The bookstores that are
unhappy with the restocking price would be informed, nevertheless, that preventing
book returns would actually increase their earnings. More importantly, we would
concentrate more on reducing the price of our books by making them available online in
digital form and through book rentals.

IV. Your decision and Reasoning

Barnes and Noble college should consider the importance of operating their own
used- book division. They can lower their return rate and avoid the restocking cost by
providing a service for renting secondhand books. Additionally, Amberly ought to inquire
about the possibility of a temporary reduction in the restocking cost. So, reduce it from
5% to 3%. We are able to charge textbooks onto our student account for a few weeks,
much as at St Cloud State. Have the restocking price decreased to 3% during those
times, and after a certain deadline, it will be raised to 5% in an effort to lower their return
rate. It will also help if the professor is competent. The number of returns by students
and for the professors will be reduced if instructors inform students that a particular
textbook is necessary.

Case Questions:

1. What environmental factors are contributing to the conflict between B&N

College and McGraw-Hill?

When it comes to environmental factors, Ebooks are always a lower cost than a
physical book, especially physical books in actual bookstores, this results in tight
competition in the industry. From exhibit 1 from the textbook, you can see how
expensive books are from the bookstore, and the decreasing student government funds
also affect the demand for the student to purchase textbooks. For that reason, the
market share of B&N College might drastically change/ go down in value.

2. Discuss the balance of power in the channel. Who has the advantage?

In this case study, McGraw-Hill has an advantage over B&N bookstore. This is
because B&N has a certain lack of certainty, because a lot of their business relies
on students, professors, and the books that publishers put out to educate the students.
Also, McGraw Hill publishes high end, quality books that bookstores want to have in
their bookstore.

3. What causes of channel conflict can you identify within the channel?

If we were Barnes and Noble, moving forward we would keep selling physical books to
the bookstores. However we would communicate with the bookstores that aren’t happy
with the restocking fee that avoiding getting book returns would actually help their
profits. More importantly we would focus more on decreasing our book costs by offering
them online in digital forms and book rentals

4. What solution might you recommend to Amberly as a potential avenue for

consideration?

What Amberly should consider would be the importance of B&N College operating
their own used-book division. By offering a rental service of used books, they can
reduce their return rate and avoid the restocking fee. Amberly should also see if the
restocking fee can be reduced for a short amount of time. So instead of 5%, lower it to
3%. Similar to how at St Cloud State, we are able to charge textbooks onto our student
account for a couple of weeks. During those times, have the restocking fee reduced to
3%, and after a specific deadline, the restocking fee will be increased to 5% to reduce
their return rate. Proficiency in the professor will help too. If professors let students
know that the specific textbook is required, it will help lower the amount of return by the
students and for them to have the correct book.