Sales and Losses Increase At Barnes &
Jim Milliot -- 11/6/00

Sales at Barnes & Noble. com jumped 57.7% in the third quarter ended September 30, 2000, to $74.1 million, while the net loss deepened to $48 million from $21.9 million in last year's third period. Sales of textbooks and Harry Potter titles, as well as the addition of 760,000 new customers (for a total of 6.3 million) helped boost sales. Sales growth was also helped by the decision to stop offering deep discounts on New York Times bestsellers; now offers a variety of discounts, said Steve Riggio, vice-chairman of the e-retailer.

The improvement of the company's gross margin from 15.5% in the second quarter to 20.1% in the most recent period was largely the result of increased direct buying due to the opening of's Memphis, Tenn., warehouse in May. The company started shipping product from its new Reno, Nev., warehouse in September, and Riggio said that with the addition of the two warehouses "has plenty of capacity" for the fourth quarter and that the e-retailer plans to fill as many orders as possible internally.

Riggio said that with the creation of its e-bookstore in the quarter, "has laid the groundwork" for the digital delivery of content. He acknowledged that at present the e-book market is small, but said he hopes it will become a meaningful sales channel within a few years, "We're learning as we go," Riggio said.

Commenting on the recently announced integration initiatives with Barnes & Noble superstores (News, Oct. 30), Riggio said he believes the creation of service counters will lead to incremental sales as well as to the acquisition of new customers. He further explained that books that are bought online at the counter and then picked up at the stores will be recorded as sales by that store, while books that are delivered will be counted as sales.

The company also noted that its acquisition of Fatbrain. com had been cleared by the government, and that the deal should close shortly after the shareholder vote on the purchase set for November 16.

For the nine-month period, sales rose 83.4% to $215.5 million, and the net loss increased to $137.6 million from $64.1 million in the first nine months of 1999.

Will Collect Tax's decision to more fully integrate its activities with B&N means that the e-retailer will now begin to collect sales taxes in all states that charge a sales tax. A spokesperson acknowledged that the closer relationship between the stores and the Internet operation constituted a legal nexus to collect sales taxes.

American Booksellers Association chief operating officer Oren Teicher told PW he was "delighted" that will now collect taxes. The ABA, as well as numerous other companies that operate physical stores, have long argued that by not charging sales taxes, e-retailers had an unfair advantage over their land-based competitors. Indeed, following the announcement of the, initiative, ABA president Neal Coonerty sent a letter to the governors of the 45 states where sales taxes are collected asking them to enforce the existing sales tax regulations in their states by making e-retailers collect the appropriate tax. While the letter emphasized the business practices of and B&N, it stated that B&N "is not alone," noting that Borders "has also taken several steps that further establish nexus, including plans to establish Web kiosks in its stores for customers to access the company's e-commerce site."