Jul 30, 2010 (10:07 AM EDT)
Barnes & Noble Pushes Nook, Expands Store Presence

Read the Original Article at InformationWeek

As Amazon cuts prices to sell more Kindles, Barnes and Noble is expanding its in-store floor space to the Nook, which the bookseller says is driving sales among its best customers.

In giving its e-reader a more prominent place in B&N stores, the company said it would increase Nook-dedicated space from displays to fully staffed, 1,000-square-foot "boutiques" that feature demonstration tables, multiple Nooks for customers to try, flat-panel screens for video demos and a display of more than 100 accessories, including Nook covers by popular designers.

B&N plans to begin rolling out the Nook stores-within-a-store through the fall, marking a major marketing push heading into the back-to-school and holiday shopping seasons. Despite Amazon's recent price cuts, pricing for the Nook will remain the same at $199 for the 3G/Wi-Fi model and $149 for the Wi-Fi-only version. Similar Kindles cost $189 and $139, respectively.

B&N's reasons for giving up valuable store space to the Nook reflect how e-readers are driving sales. The company said that among its best customers, those who have purchased a Nook spend 20% more on digital and physical books and buy 70% more of the items on a unit basis. In addition, the devices are increasing the company's customer base, with 25% of Nook users new to B&N's online store.

Amazon has also reported higher sales attributed to the Kindle. The online retailer this month announced that unit sales of e-books surpassed that of hardcover books. In addition, Amazon this week said Swedish author Stieg Larsson has become the first writer to sell more than 1 million digital books on Amazon. Larsson is the author of the bestselling "Millennium Trilogy."

While both vendors have recognized the sales value of their respective e-readers, the companies are taking different approaches to boost hardware sales. Without physical stores to leverage, Amazon is banking that its lower prices will lure customers from B&N and other rivals, such as Borders and Sony.

In a statement sent to InformationWeek in response to Amazon's latest price cuts, Sony said it did not intend to go tit-for-tat with Amazon.

"Pricing is one consideration in the dedicated reading device marketplace, but Sony won't sacrifice the quality and design we're bringing book lovers to lay claim to the cheapest e-reader," Phil Lubell, VP of digital reading at Sony, said.

Nevertheless, analysts say price will continue to be a key factor in e-reader sales, as its far more important to get the devices in the hands of book buyers than to make money on the hardware. In addition, e-reader makers face competition from the emerging category of tablet-style computers, such as Apple's iPad.

While tablets are more expensive than e-readers and lack the same high-resolution screen, they also do much more, such as surf the web, access email and play video, music and games. If the price of the computers were to get too close to e-readers, then tablets could steal customers, analysts say.