How To Build A Million-Dollar Business

Barnes & Noble

Build A Better Mousetrap

Leonard Riggio doesn't simply compel you to buy books; he makes you fall in love with them. At any of 449 Barnes & Noble superstores nationwide, you'll find customers curled up in comfy chairs, sipping cappuccino, or gathered round for poetry readings. Parents and toddlers are poring over picture books here, and over there is a college student engrossed in her studies.

This is not retailing as usual. "What we've tried to do is develop the bookstore so it's more like a community center than an ordinary retail establishment," says Barnes & Noble chairman and CEO Riggio, 56, who might be the world's most accommodating host in addition to being one of its more innovative retailers. Riggio doesn't view lingering, lounging customers as a drain on his profits. They're the very reason his stores are profitable.

Any bookstore can bring in folks who are looking for books. Barnes & Noble brings in people who are looking for entertainment, or peace and quiet, or--dare we say it?--intellectual stimulation. It just so happens that whiling away a few hours of quality time in the world of ideas also inspires people to spend money. The proof is in the sales. Revenues at Barnes & Noble stores totaled almost $2 billion for fiscal 1996, up from just $921 million for fiscal 1991.

The New York City-based Barnes & Noble chain is part of a larger, $2.45 billion operation that Riggio has grown virtually from scratch--one that includes 566 B. Dalton Bookseller, Doubleday Book Shops and Scribner's Bookstores; a million-customer mail order operation; and online commerce via America Online and the Internet.

If Riggio's domain seems massive and diverse, it is. And it's all the more impressive when you consider how it all began. "I was an engineering student at New York University," says Riggio, "and to help pay expenses, I got a job at the NYU bookstore." That job sparked an interest and led Riggio to open his own bookstore on the NYU campus in 1965 with $5,000 in savings. He owned nine college-based stores by 1971, when the opportunity arose to purchase New York's venerable Barnes & Noble bookstore.

The Barnes & Noble of 1971 didn't much resemble the company's current format. Founded in 1873, "it had been bought by a conglomerate and was a shell of its former self," Riggio says.

So Riggio reshaped it. Realizing that vast selection was one of Barnes & Noble's biggest selling points, he set about collecting the most comprehensive inventory possible. "We put that together with a fanatical commitment to customer service and increased the volume at the store eightfold in five years. [In the process,] we brought an energy and enthusiasm to the [book] business that didn't exist before."

New Barnes & Noble locations followed--first in New York City, then in other cities, and finally into the suburbs. Wherever it goes, the Barnes & Noble formula is tough to beat. The encyclopedic inventory, together with discount pricing, a welcoming environment, cultural and educational events, and conscientious, sentient customer service delivers a knockout punch. In some communities, book sales have risen as much as 80 percent after Barnes & Noble moved in.

All because Riggio had the vision and chutzpah to take a perfectly functional industry and improve it--far beyond any expectations. What can the average entrepreneur learn from such a wild success story?

"Don't look at the megastores of the world vicariously and say `I could never do that,' " Riggio advises. "An intelligent human being willing to commit himself to a goal can achieve almost anything."

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This article was originally published in the September 1997 print edition of Entrepreneur with the headline: How To Build A Million-Dollar Business.

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