During the quarter, store sales at B&N’s 720 outlets across the U.S. fell about 3 percent, while online sales rose 51 percent to $141 million. At a recent investor conference, CEO William Lynch said B&N expects to have about 25 percent of the digital book market by 2013—and an accompanying revenue boost of between $3 billion to $5 billion, according to a Dow Jones report last month.

SEE ALSO: Barnes & Noble Rebranding eReader Software To Nook; Adds Android App

After being beaten to the digital punch by Amazon (NSDQ: AMZN) with its Kindle, and now facing more competition for online book sales by Apple’s iBookstore, B&N has been playing an aggressive game of catch-up lately. In June, the company reduced the price of its 3G edition by 23 percent and added a lower-end WiFi version to compete in the $149 price range. The 3G edition launched late last year at $259, but is now going for $199.

That same month, it turned its digital distribution strategy around when it put its Nook e-reader brand front and center on separate devices. The company previously emphasized the “B&N eReader” brand in its apps as it hoped to promote the Nook device across e-reader platforms on the iPad, iPhone and Android systems. The move was similar to Amazon’s strategy of placing its Kindle app everywhere.

But the problem B&N has is that the Nook still isn’t as well known as the Kindle. But that can change very quickly, as B&N has one thing Amazon doesn’t: easy promotional space in its highly trafficked brick-and-mortar stores. To celebrate the Nook’s one-year anniversary last week, B&N announced that it would expanding its in-store Nook displays to full-service, 1,000 square-foot “eReading Nook Boutiques,” which will be rolling out through the fall.

The Nook Boutiques will feature a large flat panel display showing video demos of Nook e-Book Readers and offer more than 100 accessories and dedicated salespeople to promote Nook downloads and sales of e-books and accessories from designers like Kate Spade.

It sounds like a reasonable idea to make use of its spacious retail outlets, especially since in-store sales declined last quarter. And while it could introduce readers to the joys of buying e-books, ultimately, B&N is helping give its customers a big reason to show up at its sales locations before its digital sales start to become meaningful. Release