The letter’s chewy center is bookstore Darwinism:
a. Fewer bookstore competitors – It’s clear there will be fewer bookstores in this country and as we continue to maintain the best real estate portfolio of locations and best run retail bookstore model, our stores will be the beneficiary of this consolidation…
b. Fewer stores selling books – approximately 50% of the $21 billion U.S. book business is transacted in non-book retail outlets such as mass merchants, as well as drug and mass discounters. As the physical book market contracts over the next four years, from approximately $21 billion to $19 billion, we see many of these non-book retailers de-emphasizing the book category with greatly reduced shelf space and in some cases eliminating it all together. This will provide an opportunity for us.
Evidence of this shake-out already exists as our share gains from our largest physical bookstore competitors have accelerated in the last year. Today, the Company owns approximately 18% of the U.S book market, and we expect that figure to grow to 20-25% over the next three years.
I was just chatting about this with Sivaram of Can Turles Fly?. My expectation: The offline book market will shrivel while Barnes & Noble takes a bigger piece of that shriveled pie.