Currently there is a change happening in our paradigms towards brick and mortar shops and online retailers. The best way of viewing a tangible expression of this change is by looking at the relationship between the physical Barnes & Noble and the online version.
Most understand the gist of roles that brick and mortar and online fill. Brick and mortar has a building, electricity, employees and physical goods that it has to pay for. Online has no physical space and very little employees; what it sells can have an inventory cost of nothing therefore the online channel can charge much less for it's goods. In the past this has caused tension between the physical retail channel and the online channel as they compete for the same customers.
The decision a customer has to make is do I want it now at a higher price or can I wait a few days to have it shipped and save money. A change in tide has happened and now the online channel can provide these same goods instantaneously in certain markets such as the publishing industry. Now that we can get books instantly from online at a much lower cost then two aspects of eBooks will be the only downside of going online. The first is resistance to adopting new technology, the eReaders are very simple to operate but there will still be those that will not want to pick up something that's different. The second is personal preference, which some people just love the feel and nostalgia of a physical book.
Is any one channel cannibalizing the other? There may come a time when the retail channel is sending more profits towards the way of online but both channels will be needed to ensure the success of the company as a whole. Even though I have almost completely switch to reading eBooks I still prefer going to the store, browsing the shelves to find my next read. I'll buy one of their ridiculously priced coffees and spend an hour in the store shifting through the assortment of books. There is a lot of money being spent on me to visit a physical space but it is required for B&N to secure their brand as my eBook reading platform.
I am an anomaly and you may be one too if you're reading a blog about IT. You know that there are multiple places to purchase eBooks and can quickly do a simple price check between B&N's eBook store and Amazon's Kindle store but a majority of new eBook adopters may not know of all of the options out there. That's where B&N's retail locations are giving them an upper-hand in the online battle. Joe Schmoe who is in a B&N retail location sees that the eBook price is $7 cheaper than the physical edition. With interest piqued he heads over to the eReader display and an associate then sells him a Nook. From now on Mr. Schmoe will be purchasing eBooks from B&N's online bookstore rather than the Kindle store.
The retail landscape is changing drastically but at the same time it's not becoming completely irrelevant. What if Amazon.com decided to open up a retail space? There would be a significant amount of buzz around it but the real focu would to be getting the potential eBook customer in and finding a way of putting a Kindle in their hands.
Most of the tech community probably favors Amazon since it's been so prominent in our online lives. But the retail focus is what will make B&N online a sleeper competitior.