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Is Borders to blame?
February 21, 2011 | 12:27 pm
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By Chris Meadows
Publishing Perspectives has a pair of articles about the Borders bankruptcy. One, penned by former CEO of Borders UK Philip Downer, puts his perspective on who and what are to blame for the failure. The other, by Edward Nawotka, looks at who is going to get hurt by the closure.
Downer writes that blaming Borders for some of its problems is a little unfair. He points out that Borders got burned badly in the dot com bubble and had to concentrate on its core competencies of physical bookselling to stay afloat. It might have been a mistake to leave the Internet alone for so long, he suggests, but it is easy to make judgments in hindsight.
A true business partnership with an alternative sector specialist, delivering an online experience that complemented the benefits of bricks and mortar, might have generated stronger revenues, and created a channel that supported the stores, rather than simply sucking business from them. It may even have positioned Borders better for exploiting digital content. But would it have had a significant, positive impact on earnings?
He does admit that a number of Borders’s problems might trace to their legacy computer systems, which were state-of-the-art in the 1980s, but continued to be adequate for so long that by the time they realized that the systems were holding them back and reducing their flexibility, it was too late.
Slow systems, and the lack of flexible reporting/analysis tools for line management, created a degree of management inertia. Borders, which should have been the turn-on-a-dime, forefront-of-change #2 player, found it difficult to instigate projects or to alter operating processes. The company was victim of its own traditions in a way no young business should be.
When Borders UK was sold and was able to get rid of the legacy systems, he writes, it underwent a considerable improvement in flexibility and inventory control.
As for the accusations that Borders’s reach exceeded its grasp, that it overexpanded into too many locations, Downer points out that in its heyday this expansion strategy was responsible for the company’s very success, giving people a great place to hang out and be social before the Internet came about.
What ended it was something they could not have foreseen—migration by consumers to the lower prices and greater convenience offered by on-line stores, supermarkets, and discount chains. (That pesky Internet thing again.) And Borders’s international chain locations had their own problems, as many of them had higher costs and different challenges associated with them than running stores in America.
In the end, Downer suggests, it might be the changing media business climate that is most to blame. Certainly, looking at how the only other remaining megachain, Barnes & Noble, is itself struggling along suggests there might be something to that.
Nawotka’s piece notes that the Borders bankruptcy is going to hurt a lot of people. Borders employees is obvious, as 30% of its stores are closing and thousands of full-time and part-time employees will be losing their jobs. Publishers are going to lose much of the tens of millions of dollars in back payments they are owed, and will undoubtedly see a lot of excess inventory flood remaindered book tables in the next year or so. Mid-list authors will also lose out, as the loss of a substantial print outlet will lead those publishers to order fewer books and become even less likely to want to take a chance with non-bestsellers.
Readers will lose one more place to browse books, and other booksellers will be affected as well as books have that much less critical mass with which to compete with other media. And local papers might publish fewer book reviews without advertising from Borders that supported them.
The big winners will be digital publishing (obviously) and whatever store chains snap up the vacated space. Rumored contenders include southern bookstore chain Books a Million, and perhaps dollar-discount shops like Deal$.
I’m starting to wonder how long it will be until Barnes & Noble goes, too. If one good thing comes out of the Borders bankruptcy for them, it might be that the loss of one big chain might spur people to be more anxious toward avoiding the same fate for the only one that’s left.
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Comments:
Having read all of the above, it clearly adds up to one thing – it was Border’s own fault and no one else’s. They were in control of their IT decisions. They were in control of their management. They were in control of their own destiny. They made poor choices, badly controlled expansion, poor IT decisions and they paid the price. Mr Downer is full of pat excuses but he is clearly a major part of why they failed.
It may have been unwise to leave the internet aspect of book-selling alone for so long…
Golly. That //may// just be the understatement of the year. Even indie writer could tell–’way back’ in ’07 and ’08–that eBooks were something to be grasped, or at least looked into. It is sad, for me personally, that so many bookstores are closing. It is inevitable, however, that if companies ignore consumer trends they will lose revenue and alienate future clients. That’s Business 101, so comments regarding “hindsight is 20-20″ don’t really apply.
I see a bit of exageration in the Borders bankruptcy impacts analysis.
First, because Borders isn’t going away (just yet); they are merely cutting off their worst-performing stores. Which is to say the ones they think they can do without. Bad for the employees of the specific stores but if their sales volume were so significant to their markets they wouldn’t have to close up shop.
Second, with 75% of Borders stores overlapping B&N sites *and* both chains struggling to break even 11 months of the year it is pretty clear there currently is overcapacity in the US B&M book retailing space. This is not an unusual situation for many a business to find itself in, especially in tough times. Usually it is the weaker players that have to close up shop first when there’s overcapacity.
Third, the reason for the overcapacity is that customers are getting their midlist and indie books from sources other than the superstore chains. So again, it is overstating the impact to attribute harm to those authors from the closure of underperforming rerailers at a time the market for their product is still growing. After all, all publishher reports for 2010 stress that the mainstreaming of ebooks is still *not* impacting the growth of print book sales in either unit or dollar value.
The cold hard truth is that Borders finds itself in their current predicament precisely because their stores do not matter enough in the marketplace and they don’t matter because the products and services they offer as a “competitive advantage” don’t matter to the market of 2010 as they did in the market of 1980.
Enough with the handwringing already people.
Don’t exhaustt your tears just yet when there are bigger “disasters” coming.
Downer’s discussion of the IT problems is similar to, and yet different from, this statement by Jim Milliot at Publisher’s Weekly about the merger of Borders and Waldenbooks: “The most serious problem of the newly formed retailer was Borders’s inability to combine its computer and inventory management systems with that of Walden, an issue that plagued the company right up until the end.”
That would have been in the mid-to-late ’90s, a time when Downer indicates that Borders’ IT systems were becoming “arthritic”.