Wal-Mart passed on Barnes & Noble before, but maybe it should look again

March 6, 2013
March 6, 2013

Wal-Mart studied buying US bookseller Barnes & Noble in the past, according to people familiar with the matter. Given the troubles the world’s largest retailer has competing with Amazon, maybe Wal-Mart should look again.

Since Barnes & Noble founder Leonard Riggio last month offered to buy the company’s retail assets, which include its website, the financial community is positing that all of Barnes & Noble is in play. Riggio’s offer doesn’t include the Nook e-book business, which suffered a 26% revenue decline in the fiscal third quarter compared to a year earlier.

There is also speculation that Microsoft, which is already a minority investor in Nook, could buy all of Barnes & Noble. Microsoft had looked at the bookseller the same time Wal-Mart did in 2010, according to the people familiar with the matter. Since then, competition between Wal-Mart and Amazon has grown more intense and Wal-Mart stopped selling Amazon Kindle devices last year. This past holiday season, Wal-Mart kicked off a same-day delivery service, mimicking Amazon’s offering.

Wal-Mart declined to comment.

Wal-Mart had studied a Barnes & Noble deal in 2010 when the bookseller explored a possible sale. The logic was that Wal-Mart could use Barnes & Noble’s web site to help it better compete with Amazon, people familiar with the matter said. Despite Wal-Mart’s size, it’s still behind Barnes & Noble when it comes to certain aspects of online sales, including third-party merchant products.

Barnes & Noble in 2011 added items sold by third-party sellers, creating an online service similar to Amazon’s Marketplace service. Wal-Mart, which began its independent sellers service in 2009, has signed up only six outside retailers, while Barnes & Noble has over 200. Wal-Mart executives have expressed worries about this area, according to leaked minutes of a recent meeting obtained by Bloomberg.

As part of its exploratory bid discussions in 2010, Wal-Mart contemplated continuing to sell some of the books in retail Barnes & Noble bookstores, but adding its own best-selling items, the people familiar with the matter said. That could attract customers who avoided Wal-Mart because of its stores’ cavernous size when they just wanted to grab a few items and get out quickly. Wal-Mart US division head Bill Simon said yesterday that smaller stores are a critical part of  the retailer’s future.

Of course, both Wal-Mart and Barnes & Noble could decide to maintain the status quo in the end. The bookseller has been down this road a few times and a sale never went through.  Wal-Mart’s recent M&A strategy has largely focused on overseas deals but given Amazon’s continued rise in the US, perhaps it should look more at its home market.

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