How to Fix Barnes & Noble, Inc. (BKS)

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You’ve heard it before: Barnes & Noble, Inc. (NYSE:BKS) is in trouble. If it doesn’t turn things around, it’ll go the way of Borders.

Investors got a glimpse of this last week when the bookseller reported downright abominable earnings. For the three months ended April 27, it notched a loss from continuing operations of $122 million. It was the largest loss by far in the company’s history.

Barnes & Noble, Inc. (NYSE:BKS)In a magisterial display of self-delusion, CEO William Lynch nevertheless claimed that “[o]ur Retail and College businesses delivered strong financial performances in fiscal year 2013.” To put that in context, same-store sales in its flagship retail division fell by 8.8% in the final quarter of its 2013 fiscal year.

To investors and anyone who cares about bookstores in general, its recent decline raises the question: Is there any way for Barnes & Noble, Inc. (NYSE:BKS) to right its ship?

Will it pass the point of no return as, say, J.C. Penney Company, Inc. (NYSE:JCP) appears to have done? In the first quarter this year, the department store chain continued to hemorrhage, with comparable sales falling by 16.6%.

Or can it engineer a turnaround like the one that may be under way at Best Buy Co., Inc. (NYSE:BBY) ? As I discussed over the weekend, shares of the electronics giant have more than doubled this year on the heels of better-than-expected sales and a potentially game-changing partnership with Samsung — the emphasis here is on “potentially.”

In an attempt to answer this question, The Wall Street Journal asked a handful of writers, retailers, and book agents about what they would do to stanch the flow at the ailing bookseller.

The popular fiction writer James Patterson said that he would “make the stores feel like much more exciting places to shop,” hold more events, improve signage, and feature less expensive paperbacks more prominently.

Peter Olson, a former book publishing executive, discussed ways of leveraging its “one real advantage: the traffic of loyal book browsers.”

Let’s start with people coming in to browse, which you can’t do well online yet. They can take this loyal customer base that is willing to travel and leverage it by offering more than just the print books on the shelves. The customer base could be looking for a lot more in terms of rewards, such as a discount for volume shopping, bundling, and help in ordering alternative formats if a book isn’t in the store.

And Gerald Storch, a former CEO of Toys R Us, took issue with its current strategy of diversifying away from its bread-and-butter physical book business through a larger selection of toys and games as well as its collection of e-readers and tablets. “What doesn’t work is trying to change your customer or trying to expand your product offering dramatically beyond the historical offering of the brand. There are very few examples of successfully changing your customer base.”

But while these suggestions may be good ideas, there’s a simpler one that could be implemented today at no added cost: provide better customer service.

Over the weekend, I observed a sales associate at my local store in Beaverton, Ore., chide two parents to “rein their children in” — this, mind you, occurred in the children’s section. To be clear, the kids were doing nothing that average children wouldn’t do. They weren’t making a mess. And they weren’t being particularly loud. They were just playing.

Was this an isolated incident? Perhaps, though it fits into a broader pattern of deterioration in the quality and quantity of service that, I believe, customers receive in Barnes & Noble, Inc. (NYSE:BKS) stores.

The problem here is twofold. First, what’s happening in the actual stores is inconsistent with the company’s own publicly expressed aspirations. “You go to Barnes & Noble, Inc. (NYSE:BKS) to forget about your everyday issues, to stay a while and relax,” its CEO of retail stores said in a recent interview. “When you go to Bed Bath & Beyond Inc. (NASDAQ:BBBY), you don’t sit down on the floor and curl up with your blender and your kid.”

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