Barnes & Noble Education, Inc. (BNED) is a contract operator of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States.
The company is also one of the largest textbook wholesalers and inventory management hardware and software providers. The company operates physical, virtual, and custom bookstores and serve more than 5.8 million students, delivering essential educational content, tools and general merchandise within a dynamic omnicha...
Barnes & Noble Education, Inc. (BNED) is a contract operator of physical and virtual bookstores for college and university campuses and K-12 institutions across the United States.
The company is also one of the largest textbook wholesalers and inventory management hardware and software providers. The company operates physical, virtual, and custom bookstores and serve more than 5.8 million students, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment.
The company provides product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. It offers its BNC First Day equitable and inclusive access programs, consisting of First Day Complete and First Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition.
The company expects to continue to introduce scalable and advanced solutions focused largely on the student and customer experience, expand its e-commerce capabilities and accelerate such capabilities through its service providers, Fanatics Retail Group Fulfillment, LLC (Fanatics) and Fanatics Lids College, Inc. D/B/A Lids (Lids) (collectively referred to herein as the F/L Relationship), win new accounts, and expand its revenue opportunities through strategic relationships.
Segments
The company operates through Retail and Wholesale segments.
Retail segment
The Retail segment operates college, university, and K-12 school bookstores, comprising physical bookstores and virtual bookstores. Its bookstores typically operate under agreements with the colleges, universities, or K-12 schools to be the official bookstore and the exclusive seller of course materials and supplies, including physical and digital products. The majority of the physical campus bookstores have school-branded e-commerce websites, which it operates independently or along with its merchant service providers, and which offer students access to required and recommended course materials and affinity products, including emblematic apparel and gifts.
The Retail segment offers existing and prospective clients the flexibility of physical, virtual or custom store solutions. Students have access to the right course materials at the right time, combined with a superior in-house customer service department to help with ordering, delivery, and digital content inquiries. At certain institutions, students also have the flexibility of using financial aid, and proprietary campus debit cards for their course material purchases.
The Retail segment offers its BNC First Day equitable and inclusive access programs, including First Day Complete and First Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate, directly by the institution as a course charge or included in tuition. It has entered into several agreements with major publishers, including Cengage Learning, McGraw-Hill Education and Pearson Education, to distribute their digital content through BNC First Day. In addition to BNC First Day programs, the Retail segment offers a suite of digital content and services to colleges and universities, including a variety of open education resources (OER) course material.
Many institutions have adopted First Day Complete in Fiscal 2024, and the company plans to continue to scale the number of schools adopting First Day Complete in Fiscal 2025 and beyond.
BNC First Day Equitable and Inclusive Access Programs
The company provides product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. It offers its BNC First Day equitable and inclusive access programs, consisting of First Day Complete and First Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition.
First Day Complete is adopted by an institution and includes all or the majority of undergraduate classes (and on occasion graduate classes), providing students both physical and digital materials. The First Day Complete model drives substantially greater unit sales and sell-through for the bookstore.
First Day is adopted by a faculty member for a single course, and students receive primarily digital course materials through their school's learning management system (LMS).
Offering course materials through the company’s equitable and inclusive access First Day Complete and First Day models is an important strategic initiative of it to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing its market share, revenue and relative gross profits of course material sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales.
In December 2020, the company entered into the F/L Relationship. Fanatics and Lids, acting on its behalf as its service providers, provide unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of its logo general merchandise business. Fanatics operates as the company’s service provider, including processing consumer personal information on behalf, using their cutting-edge e-commerce and technology expertise to offer its campus store websites expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with Lids, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, the company’s campus stores have improved access to trend and sales performance data on licensees, product styles, and design treatments.
The company maintains its relationships with campus partners and remain responsible for staffing and managing the day-to-day operations of its campus bookstores. It also works closely with its campus partners to ensure that each campus store maintains unique aspects of in-store merchandising, including localized product assortments and specific styles and designs that reflect each campus’s brand. The company leverages Fanatics’ e-commerce technology and expertise for the operational management of the emblematic merchandise and gift sections of its campus store websites. Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for its partner campus stores, and Lids owns the inventory it manages, relieving it of the obligation to finance inventory purchases from working capital.
Contracts
Physical and Custom Campus Bookstore Solutions
The company operates physical campus bookstores. Its physical bookstores are typically operated under management agreements with the college or university to be the official college or university bookstore and the exclusive seller of course materials and supplies, including physical and digital products sold in-store, online or through learning management systems. The company pays the school a percentage of sales for the right to be the official college or university bookstore and the use of the premises; approximately half of its agreements do not have any minimum guaranteed amount to be paid to its partners. In addition, it has the non-exclusive right to sell all items typically sold in a college bookstore both in-store and online. The company has the ability to integrate the store's systems with the colleges and university’s systems in order to accept student financial aid, university debit cards and other forms of payment. Its decentralized management structure empowers local teams to make decisions based on the local campus needs and fosters collaborative working relationships with its partners.
The company also offers solutions for institutions to provide general merchandise products at the physical on-campus store, with course materials offered virtually and fulfilled direct-to-student (either to an individual address or a central campus pick-up point).
The physical bookstore management contracts with colleges and universities typically include five-year terms with renewal options and are typically cancellable by either party without penalty with 90 to 120 days' notice. Its campus bookstores have an average relationship tenure of 15 years.
Virtual Campus Bookstore Solutions
The company operates virtual campus bookstores. Its virtual bookstores generally operate under a contract as the institution’s official source of course materials with exclusive rights to book lists and access to online programs that link course materials to the courses offered by the school. Its virtual-only solutions typically ship course materials directly to students and have the ability to offer ship-to-campus options.
Virtual bookstore agreements typically have terms between three and five years, with automatic renewal periods. For the past three years, it has retained approximately 90% of its contracts annually, with the majority of the contracts automatically renewed as per the contract terms or renewed before their expiration dates. The company pays the school a percentage of sales for the right to be the official college or university bookstore.
The company also operates Textbooks.com which is one of the largest e-commerce sites for new, used, and digital textbooks. This division is primarily for direct-to-student sales.
Customers and Distribution Network
The company operates physical college and university bookstore operations and virtual bookstore operations (K-12 virtual stores and Higher Education virtual stores) located in the United States, in states and the District of Columbia. Its Retail new business sales team is organized by specific territory and can offer all solutions (physical, virtual or custom store solutions) to public, state, private, community college, trade and technical, for-profit, online education institutions, within their respective territories.
Product and Service Offerings
The company offers a broad suite of affordable course materials, including new and used print textbooks (which are available for sale or rent), digital textbooks and publisher-hosted digital courseware, at its physical and virtual bookstores, as well as offered directly to students through Textbooks.com. It offers a robust used textbook selection, unique guaranteed buyback program, dynamic pricing, and marketplace offerings.
The company’s physical and virtual bookstores provide a comprehensive e-commerce experience and a broad suite of affordable course materials. Additionally, its physical campus stores are social and academic hubs through which students can access affordable course materials, along with emblematic apparel and gifts, trade books, technology, school supplies, cafe offerings, convenience food and beverages, and graduation products. The majority of physical campus stores also have school-branded e-commerce sites which it operates independently or along with its merchant service providers, and which offer the same products as the on campus stores plus additional items.
Product and service offerings include:
Course Material Sales and Rentals: Sales and rentals of course materials are a core revenue driver, and the company’s faculty and student platforms operate as a seamless extension of its partner schools’ registration, student information and learning management systems. Students can purchase course materials, including new and used print (available for sale or rent), eTextbooks, and publisher digital courseware platforms. It works directly with faculty to ensure the course materials they have chosen for their courses are available in all required formats before the start of classes. The company’s wholesale distribution channel enables its Retail segment to optimize textbook sourcing, so they are able to more efficiently source and distribute a comprehensive inventory of affordable course materials to customers. BNC's Adoption & Insights Portal (AIP) is an innovative platform that provides enhanced support for faculty and academic leadership to research, submit and monitor course material selections, further driving affordability and student success.
Equitable and Inclusive Access: The company offers its BNC First Day equitable and inclusive access programs, consisting of First Day Complete and First Day, which provide faculty required course materials on or before the first day of class at below market rates, as compared to the total retail price for the same course materials if purchased separately (a la carte), and students are billed the below market rate directly by the institution as a course charge or included in tuition. It has contracted with VitalSource Technologies, Inc. (VitalSource) to use their technology to power its BNC First Day inclusive access platform, for digitally formatted courseware, from all major publishers, including Cengage Learning, McGraw-Hill Education and Pearson Education, allowing it to accelerate and optimize BNC First Day implementations. The seamless delivery is made possible by its BNC First Day technology and publishers' technology integrations with campus systems. These initiatives provide students, faculty and institutions greater access to more affordable course materials. First Day is offered on a class-by-class basis, as adopted by the individual instructors on a campus, as compared to First Day Complete, an institution adopts the program for all or the vast majority of undergraduate (and on occasion graduate) courses.
eTextbooks: The company has contracted with VitalSource, a global leader in building, enhancing and delivering digital content, on its digital reading platform and digital content catalog. The strategic relationship with VitalSource allows it to use its technology to power its BNC First Day platform, as well as its a la carte digital course material platform and catalog, for digitally formatted course materials, allowing it to accelerate and optimize BNC First Day implementations.
General Merchandise: For the company’s physical campus bookstores and custom store solutions, it drives general merchandise sales through both in-store and online channels and feature collegiate and athletic apparel, other custom-branded school spirit products, lifestyle and wellness products, technology products, supplies, graduation products and convenience items. The company continues to see growth in general merchandise sales, which has been further bolstered through its F/L Relationship. It continues to enhance the user experience and product mix offered through its next generation e-commerce platform.
The company operates True Spirit apparel and spirit shop e-commerce websites, through its F/L Relationship, which are virtual stores that appeal specifically to the alumni and sports fan base. It also operates pop-up retail locations at major sporting events, such as football and basketball games, for its partner colleges and universities. The True Spirit e-commerce websites for athletic branded merchandise and the physical pop-up retail locations build its partner schools’ brands through alumni and athletics, fostering school spirit and capturing the excitement of collegiate sports. The company utilizes event driven direct marketing strategies for events, such as tournaments and playoffs or homecoming events, to target an online population of students, alumni and sports fans, with emails, social media posts, and search engine marketing.
Cafes and Convenience Stores: At the company’s physical campus locations, it operates customized cafes, featuring Starbucks Coffee, as well as regional coffee roasters, and stand-alone convenience stores. Its Cafe locations and convenience marketplaces offer diverse grab-and-go options, including organic, vegan, gluten-free, and regional fresh food products. These offerings increase traffic and time spent in its physical stores. As market needs change, the company is adapting its model to include more grab-and-go pre-packed fresh food items, simplified menus to reduce food waste and new technology to reduce operating complexity and make the customer experience more efficient.
Brand Marketing Programs: Through the company’s unique relationship with students, colleges and universities, and its premier locations on campus and online, it operates as a media channel for brands looking to target the college demographic and derive revenue from these marketing programs. The company also focus on promoting lifestyle products to students and faculty by promoting various brands to connect on a much more personal level. It creates strategic, integrated campaigns which include research, email, social media, display advertising, on-campus events, signage, and sampling. The company’s client list includes brands, such as Clinique, College Ave, Dell, DoorDash, HelloFresh, Hewlett-Packard, and Wall Street Journal.
Merchandising and Supply Chain Management
The company’s purchasing procedures vary based on type of bookstore (physical or virtual) and by product type (i.e., course materials, general merchandise or trade books).
Course Materials and Trade Books
The company’s primary suppliers of new textbooks are publishers, including Pearson Education, Cengage Learning, McGraw-Hill Education, Macmillan Learning, and John Wiley & Sons. It also receives a supply of used textbooks from students, through returns of previously rented and purchased books. The company offers a Cash for Books program in which students can sell their books back to the physical or virtual bookstore at the end of the semester, typically in December and May.
General Merchandise
General merchandise vendors and product selection is driven by its central merchant organization that is responsible for curating the overall product assortment, as well as in conjunction with Fanatics and Lids through its F/L Relationship for logo and emblematic general merchandise assortment in-store and online, respectively. Benchmarks are established across school type, region and the demographics of each of the company’s schools to allow for store level insights and customization for a product assortment that is unique to address the needs of each school that it serves. The company’s ability to support and promote its partner schools’ brands strengthens its relationships with the administration, faculty, alumni, fans, parents, and students.
The company’s ability to source school supplies and general merchandise sold in its campus bookstores, including technology-related products and emblematic clothing, is impacted by the broader macro-economic global supply chain.
Customer Engagement and Marketing
Campus Community
The company’s campus relationships and contractual agreements allow it to seamlessly integrate into the college and university community. With direct access to its customer base through both physical and digital channels, it drives awareness, revenue and loyalty for the schools that it serves. The company actively market and promote to all segments of its customer base for its physical and virtual bookstores, as well as Textbooks.com. The company develops fully-integrated marketing programs to drive engagement with the students, parents, alumni and fans to promote all of its product and services, with a focus on academic course material needs, as well as school spirit, supply, graduation and technology categories. Textbooks.com marketing strategies target an online population of students, lifelong learners, parents and general textbook shoppers through a variety of channels, including email, search engine marketing and affiliate marketing.
The company has robust research capabilities that keep it ahead of the rapidly changing needs and behaviors of its customers, which allow it to proactively respond with relevant and dynamic solutions. The company’s Barnes & Noble College Insights platform, which gives it the ability to reach students, parents, and alumni via email, and its on-campus activities and opportunities with students and faculty, help to guide and inform its strategies and direction. In addition, it expects to benefit from the F/L Relationship for insights on logo and emblematic merchandise, brand selection and style preferences, as Lids may be able to identify certain retail trends for similar age demographics at their retail locations.
The company’s customizable technology delivers a seamless experience providing students and faculty with the ability to research, locate and purchase the most affordable course materials. Its platforms include single sign-on (SSO), student information system integration, registration integration, learning management system integration, real-time financial aid platform, point of sale platform and course fee solutions. Through its fully-integrated purchasing process, students can purchase their course materials in-store, online, or when registering for classes.
Faculty and School Administrators
The company supports faculty and academic leadership with its proprietary online platform which allows for seamless content research, discovery and course material adoption, enabling them to offer course materials that are both relevant and affordable for their students.
Seasonality
The company’s retail business is highly seasonal, particularly with respect to textbook sales and rentals, with the major portion of sales and operating profit realized during the second and third fiscal quarters (year ended April 30, 2024), when college students generally purchase and rent textbooks for the upcoming semesters and lowest in the first and fourth fiscal quarters. Its quarterly results also may fluctuate depending on the timing of the start of the various schools’ semesters, the revenue impact of accounting principles with respect to the recognition of revenue associated with its equitable and inclusive access programs, the ability to secure inventory on a timely basis, as well as shifts in its fiscal calendar dates.
Wholesale segment
The Wholesale segment comprising the wholesale and virtual retail fulfillment, and support operations of its MBS subsidiary. The Wholesale segment enables the company to generate more value from the textbook marketplace through inventory and procurement synergies.
The company is one of the largest textbook wholesalers in the country, providing a comprehensive selection of new and used textbooks at a lower cost of supply to physical bookstores, including its Retail segment's physical campus bookstores. Its wholesale business also sources and distributes new and used textbooks to its virtual bookstores. Additionally, through its Wholesale segment, the company sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to college bookstores.
The company’s Wholesale business provides a competitive advantage for its First Day Complete program, relative to other equitable access programs in the industry, as it is able to source more used physical textbooks for its First Day Complete program directly from its Wholesale segment at a lower cost. Additionally, the company’s Wholesale segment serves as a key consolidation and staging platform for individual student orders or First Day Complete local distribution, pre-timed shipping for bulk deliveries and direct-to-customer fulfillment for its Retail segment bookstores' orders where the bookstore cannot fulfill the order locally.
Product and Service Offerings
Product and Service offerings include:
Wholesale Textbook Distribution: The company’s large inventory of used textbooks consists of approximately 235,000 unique textbook titles in stock and utilizes a highly automated distribution facility that is capable of processing over 21 million textbooks annually.
Additionally, the company is a national distributor for rental textbooks offered through McGraw-Hill Education's consignment rental program (which includes approximately 1,136 titles) and Pearson Education’s consignment rental program (which includes approximately 922 titles). Through its centrally located, advanced distribution center, it offers seamless integration of these consignment rental programs and centralized administration and distribution to stores, including the Retail segment stores. These consignment rental programs are available to its wholesale customers, including institutionally run and contract managed campus bookstores, as well as its physical and virtual bookstores.
Wholesale Inventory Management, Hardware and POS Software: The company sells hardware and a software suite of applications that provides inventory management and point-of-sale solutions to college bookstores. It provides on-site installation for point-of-sale terminals and servers and offer technical assistance through user training and its support center facility.
Supply Chain Management
The company’s Wholesale segment serves as the hub of BNED’s physical book ecosystem. Since the demand for used textbooks has historically been greater than the available supply, its financial results are highly dependent upon Wholesale’s ability to build its textbook inventory from suppliers in advance of the selling season. The company’s relationships with institutional bookstores, other bookstore operators, book dealers, publishers, and other distributors and wholesalers secures a supply of high demand new and used textbooks, which is critical to the success of the wholesale business. The products that it sells originate from a wide variety of domestic and international vendors. Its ability to source new and used textbooks is also impacted by the broader macro-economic global supply chain. A primary supplier of used textbooks are students, through the return of previously rented and purchased books to their campus bookstore.
Through the company’s proprietary Database Buying Guide, it has access to the best maintained, most accurate, and most complete source of college textbook information available - a key asset that allows it to develop superior supply and demand insights and risk management capabilities. The company’s broad wholesale distribution channel and warehousing systems also drives inventory efficiencies, allowing it to optimize its textbook sourcing, distribution and liquidation processes for BNC’s retail stores. The company leverages its wholesale distribution channel and warehousing systems to optimize its low-cost physical textbook availability for use in its retail programs, including First Day Complete.
Customer Marketing Strategies
The company has developed deep relationships with its wholesale customer base as a result of its substantial inventory of used textbooks, a comprehensive catalog of textbooks, and superior service and systems support. The company continues to maintain a portfolio of profitable accounts, given the demand for used and new textbooks has historically been greater than the available supply.
Seasonality
The company’s wholesale business is highly seasonal, as a major portion of quarterly sales and operating profit is realized during the first, second and third fiscal quarters, when textbooks are sold for retail distribution.
Competition
The company operates within a competitive and rapidly changing business environment, and each of its lines of business face competition for the products and services they offer. As it relates to the company’s full-service campus bookstore operations, Follett Corporation is the primary competitor for institutional contracts. It also competes with other vendors, including eCampus, BBA Solutions, University Gear Shop, Valore Campus, Textbook Brokers, Texas Book Company, BibliU, Slingshot, Akademos, and on occasion, Ambassador Educational Solutions for virtual store operations. The company also faces competition from direct-to-student course material channels, including Amazon, Chegg.com, publishers (e.g., Cengage Learning, Pearson Education and McGraw-Hill Education) that bypass the retail distribution channel by selling directly to students and institutions and other third-party websites and/or local bookstores. It faces competition from eTextbook/digital content providers VitalSource Technologies, Inc., and Red Shelf, which offer independent bookstores a catalog of digital content and distribution services and have direct-to-student selling channels for digital materials. VitalSource recently acquired Akademos, providing a distribution solution for print materials.
Competitors for institutional contracts for the company’s cafe and convenience general merchandise offerings include Sodexo and Aramark. Its general merchandise business also faces competition from direct-to-student sales from Walmart, Amazon, Dick’s Sporting Goods, Fanatics, Lids, and other third-party online retailers, physical and online office supply stores and local and national retailers that offer college-themed and other general merchandise.
Competitors for the company’s wholesale new and used textbook inventory and distribution include Amazon, GoTextbooks, Valore Books, and Texas Book Company.
Government Regulations
Similarly, the U.S. Federal Trade Commission (FTC) has guidelines that impose responsibilities on the company with respect to communications with consumers and impose fines and liability for failure to comply with rules with respect to advertising or marketing practices they may deem misleading or deceptive.
History
Barnes & Noble Education, Inc. was founded in 1965. The company was incorporated in 2012.
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