Illustration by Marc Rosenthal

When Barnes & Noble announced, a couple of weeks ago, that its Nook division lost almost five hundred million dollars last year and that its C.E.O. was resigning, there was one obvious conclusion: the company was doomed. After all, the Nook was how B. & N. was going to compete with Apple and Amazon, and thrive in a future dominated by e-books. With the Nook’s failure, B. & N. looked like just another business anachronism, a chain of cavernous barns selling piles of outdated merchandise. Who went to a store anymore to buy a physical book?

But the hastily written obituaries left out some important facts. To begin with, B. & N.’s retail business still makes good money, and, though its sales fell last year, its profits actually rose. Its operations, thanks to better inventory management, are more efficient: it can make more money while selling fewer books. The Nook is the only part of the business that’s losing money. Being a book retailer isn’t easy—thanks, above all, to Amazon—but Borders’ bankruptcy, in 2011, left B. & N. without a major national competitor. “In this market, you could actually pick up market share simply because you’re the only major bookseller left,” John Tinker, a media analyst at the Maxim Group, told me. And B. & N. has generally avoided the expensive, long leases that can drain a retailer’s cash flow; many of its leases are short—which gives it flexibility in terms of moving or downsizing—and, since its stores generate foot traffic (which is good for surrounding stores), it has considerable leverage with landlords. B. & N., which still has more than six hundred retail stores (and six hundred and eighty-six college bookstores), also retains considerable leverage with publishers. As a recent report from the Codex Group showed, browsing in stores is still a far more common way of finding new books than either online search or social media. So publishers have a stake in B. & N.’s survival.

There are plenty of things B. & N. could do better, of course. Its Web site could be sportier. Its stores, publishing people gripe, are too cluttered, often with non-book merchandise, and don’t do a good enough job of showcasing its key product. (The demise of the Nook should help in this regard, since those giant Nook display booths took up a lot of floor space.) It might also be time for the firm to embrace more innovative ways of pricing and selling books; Peter Olson, the former C.E.O. of Random House, has suggested that B. & N. could bundle e-books and print copies, or offer volume discounts. Motivated, personalized customer service would also make a difference. The obvious model here is the experience at Apple’s retail stores. But B. & N. could also look closer to home. Independent bookstores are now thriving, thanks in large part to their close ties to both publishers and customers. “Stores that can help you not just find what you’re looking for but also help you discover books you haven’t heard of are still very valuable to readers,” says Daniel Raff, a management professor at Wharton who’s written an in-depth study of Borders and B. & N. This suggests that, instead of succumbing to the temptation to reinvent itself, B. & N. should focus on something truly radical: being a bookstore.

Of course, a lot of people consider this a hopeless strategy: in their view, physical books are “technologically obsolete,” and the book industry is heading down the path that the music industry took, where digital downloads decimated CD sales and put record stores out of business. It’s true that, between 2009 and 2011, e-book sales rose at triple-digit annual rates. But last year, according to industry trade groups, e-book sales rose just forty-four per cent. (They currently account for about a fifth of the total market.) This kind of deceleration in the growth rate isn’t what you’d expect if e-books were going to replace printed books anytime soon. In a recent survey by the Codex Group, ninety-seven per cent of people who read e-books said that they were still wedded to print, and only three per cent of frequent book buyers read only digital.

E-books obviously have certain advantages (like the fact that you can carry lots of them around with you), but for many book buyers their main appeal is that they’re cheaper. Against that, the Codex Group finds that people of all ages still prefer print for serious reading; e-book sales are dominated by genre fiction—“light reading.” This may be just a prejudice that will vanish as e-books become more common. But we do read things differently when they’re on a page rather than on a screen. A study this year found that people reading on a screen tended to skip around more and read less intensively, and plenty of research confirms that people tend to comprehend less of what they read on a screen. The differences are small, but they may explain the persistent appeal of paper. Indeed, hardcover sales rose last year by a hundred million dollars.

For many people, as a number of studies show, reading is a genuinely tactile experience—how a book feels and looks has a material impact on how we feel about reading. This isn’t necessarily Luddism or nostalgia. The truth is that the book is an exceptionally good piece of technology—easy to read, portable, durable, and inexpensive. Unlike the phase-change move toward digital that we saw in music, the transition to e-books is going to be slow; coexistence is more likely than conquest. The book isn’t obsolete. Barnes & Noble just needs to make sure it isn’t, either. ♦