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  • Could This Company Have Been Saved?

    Posted by David Foster on July 19th, 2011 (All posts by )

    In March 2008, I asked the question If you were the new owner of Borders, what would you do?…which sparked a fair amount of discussion.

    Yesterday, Borders announced that it would close all stores and liquidate. Something like ten thousand people will lose their jobs.

    In retrospect…given the state of the economic and the transition to digital books delivered via devices such as the Kindle…could Borders have been saved by better management, or was its demise inevitable?

    See also this dumb company tricks post, which describes some experiences with Borders.

     

    21 Responses to “Could This Company Have Been Saved?”

    1. Brandoch Daha Says:

      Looking at that “dumb company tricks” thing, I wonder if the rot at Borders hadn’t gone very deep. Fools hire fools, and fools drive out good people. Soon enough, morale’s shot to hell at all levels, and you don’t have any managers who can manage.

      What you end up with is something that looks like a real company until you sit in a meeting and watch a bunch of fools going through the motions, and you realize it’s a cargo cult. Nobody there actually understands what businesses do.

      If (if) that’s what happened at Borders, then the whole nervous system was infected by alien spores and it was beyond saving.

    2. David Foster Says:

      Borders made another appearance in my dumb company tricks series…the symptom was a door propped open, in Florida, with the air conditioning going full blast…but almost certainly, the underlying cause was a failure to establish proper measurement and incentive systems.

    3. tm Says:

      Border’s employees hiding books by conservatives and treating customers rudely who ask where they could find the hidden books probably didn’t help sales.

    4. Lexington Green Says:

      Brandoch Daha

    5. David Foster Says:

      In general, I’ve found the Employee Surliness Level at Borders to be a bit higher than at B&N….and *both* are generally less friendly and helpful than the average supermarket. I suspect some of this may be due to frustrated and angry people with literary aspirations, who thought they were going to be tenured professors or best-selling authors and are/were instead working in a bookstore

    6. Michael Kennedy Says:

      Would someone like to make me an offer on the $500 of Borders gift cards I have ? My sister always sends me these and, since I buy all my books from Amazon, they accumulate. The Borders store in her area, at 95th and Western, is now closed so at least she won’t send me any more.

      I think David’s theory about the employees is valid although I’m not sure about the literary aspirations of those with facial piercings.

    7. Robert Schwartz Says:

      Borders was doomed when they threw in the towel on developing a web purchasing site. That was some years back.

      De-materialization is doing to the book business, what it did to the music and motion picture businesses.

    8. Whitehall Says:

      B&N offered better discounts; Borders only offered coupons on select items, usually liberal polemics.

      Borders did have a touch more class, at least as a veneer, and more expensive, up-market locations.

      But alas, the market went with the cheaper alternative.

    9. zenpundit Says:

      I have seen Borders run by the psuedo-hippie/immature aging art student/we hate conservative books staff and I have seen some larger Borders stores run extremely well, with not only political evenhandedness but depth in subject matter and good service. The Schaumburg, IL. Borders staff went above and beyond for children coming out to see their favorite author. But Borders staff were hit or miss – you could see drastic differences in adjacent locations. Makes me wonder if they trained their managers or let new ones sink or swim?

      I can usually tell how good or bad a bookstore will be overall by it’s history section – staff who think Howard Zinn is a major historian and are unaware of seminal (not obscure) academic press titles are going to run a lousy store.

    10. Shannon Love Says:

      In principle any company can be saved at virtually any point in its death spiral even if that involves selling off 90% of the company to concentrate on core competencies.

      We used to go to Borders a lot over the course of little over a decade but that was mostly because it was first to have a coffee shop and comfy chairs. I probably spent well over $100-$200 bucks a months at Borders on books and coffee. We stopped going to Borders because medical issues in the family necessitated a change in leisure activities so I didn’t see much of the company over the last 6 years or so.

      My own impression is that Borders grew very fast in the 90s because it was at the forefront of the coffee-shop/comfy-chair bookstore revolution. For several years, in Texas at any rate, if you wanted the coffee-shop/comfy-chair experience, you had to go to Borders. Back then, the other two major book chains in Texas, Barnes-and-Nobel and Hastings, were still mostly in small shops in malls.

      However, it was clear to me that the Borders of 2005 and 2010 was the same exact model as circa 1998 when they were growing. Times had changed massively but Borders didn’t. By 2000 and later, both Barnes-and-Nobel and Hastings had copied Borders’ model and removed most of Borders’ competitive advantage. Borders seemed to completely ignore the Amazon revolution until it way to late. It also appears to me that when faced with increasing pressure after around 2003, Borders responded by reducing their comfy chairs in order to increase throughput but in doing so they removed their major drawing point.

      I think the management of Borders simply got arrogant owing to their initial success and then promptly rested on the laurels. I think the company could have transformed, perhaps by shrinking and/or expanding the whole comfy-chair bit into something less book oriented and more like a Starbucks with a better reading selection.

    11. David Foster Says:

      Shannon…I think the management of Borders simply got arrogant owing to their initial success and then promptly rested on the laurels”

      Christensen & Raynor, in their book The Innovator’s Solution, discuss the problems faced by successful companies faced by disruptive competitors and strategies for coping. Few companies, I’m afraid, can navigate these waters successfully. My review of the book here.

    12. leoncaruthers Says:

      This is what boggles me: what other business is a good fit to all the giant box stores they and Circuit City are leaving/have left vacant in their wake? The boxes are far too big for restaurants, and lack the infrastructure in any event. Is anything else still retailing well enough to support such a footprint?

      The answer to that question is worth at least a million dollars.

    13. Anonymous Says:

      At Borders in San Francisco (Union Square)

      Me: Do you have a biography of Dolly Madison? (After, I had searched)

      Borders: Who’s Dolly Madison?

      Me: Wife of James Madison.

      Borders: Who’s James Madison?

      Me: The 4th President – of the United States

      This same exchange happened at three other San Francisco Bay Area book stores.

    14. Jonathan Says:

      Is anything else still retailing well enough to support such a footprint?

      Bowling alleys and roller rinks?

    15. Shannon Love Says:

      Leoncaruthers,

      what other business is a good fit to all the giant box stores they and Circuit City are leaving/have left vacant in their wake?

      The Borders that I used to go to closed about 5 years ago because they moved the store from the strip mall to a high-cost, upscale business/residential development. The store front sat vacant for about a year before it got cut into for a shoe store and something else I don’t recall. Then it was turned into a high end grocery store “Spouts”.

      Of course this is Texas were commercial properties don’t stay vacant long. I’m glad because I remember the “ghost malls” after the oil bust back in the 80s.

    16. Carl from Chicago Says:

      I tried to understand how Borders was making money and I could never figure it out.

      In general – you want to

      – minimize your real estate cost
      – maximize your revenue / square foot
      – get the right balance on employee costs
      – optimize supply chain costs

      Borders took up huge footprints. The one on Michigan Avenue had a vast basement with bargain books. I can’t imagine how you can make money on bargain books at a few dollars each, when you had to transport them across the country, using up gas all the way and distribution space, to boot. It never made any sense to sell those heavy, hardcover books for a few bucks when you factored everything in, I’d guess.

      As far as revenue / square foot – how did they do that? They had big displays and sections where the books hardly moved. They treated their stores like libraries rather than money making machines. I’m sure it is politically correct to have poetry, literary criticism, etc… but those books don’t sell.

      When I worked at a bookstore as a kid it was

      – diet books
      – romance novels
      – war and western serial novels
      – and then some odd books like Dianetics and horoscopes

      Everything else just sat on the shelf and died. I’m sure there is some kind of book set today that is profitable it is just a fraction of what is there.

      Then you had the coffee bar; that probably made money – but then you didn’t sell the magazines that everyone sat and read all day. The magazines have to be stocked and re-stocked all the time because they turn faster than the books; but most of the time they don’t sell and then you have to find them all over the store and in the coffee bar and put them back on the shelf, until it is time to throw them out when the next issue is here. And did I tell you that magazines are heavy…

      For the staff, like everything else you can’t really generalize about people. However, they did make checkout usually a pain when the store was busy with long, snaking lines around the store. I don’t know if this could be helped, but it sucked.

      Don’t forget discounts. After a while you felt like an idiot if you paid full price for anything. There were always coupons in the mail or email. That is corrosive a bit too.

      Borders also mostly gave up on CD’s. I don’t know if that could have been saved but it used to be a big part of the experience. Maybe no one can make $ on this, I don’t know.

      I think that for their real estate, supply chain and “stock like a library” model they were doomed.

      Do I have a better idea of how to run a bookstore? On a large scale? No. Maybe books go back to a sort of small scale world, but if that is the case then people better get used to patronizing the guy that is giving them new ideas rather than just looking and saying “that’s cool” and buying it on Amazon for less.

      I personally am sad that bookstores are basically dead. It sucks. But the model is dead, too.

    17. Lexington Green Says:

      I went into the Borders on State Street yesterday.

      I am going to miss it.

      But i didn’t buy anything.

    18. Vlad Konings Says:

      I got a Border’s coupon a few months back and went to spend it. I had to look a bit to find anything worth spending it on. Did finally find something I might have purchased anyway at Amazon.

      And, this is neither here nor there, but while scanning through the aisles I noticed a book on human anatomy. Glanced up expecting to see I was in the biology/science/nature section. “Cooking.”

      I didn’t feel entire safe after that …

    19. Sam P Says:

      Carl: back in the late 80s and probably through to the late 90s, Borders’ superstore formula, a big store with a large selection built near a large book-buying public but where real estate was relatively cheap, worked. But eventually you run out of such prime locations and they continued to build into less profitable areas. And of course, right in the middle of their mass expansion, Amazon happened, where the selection was unmatched and overhead was slashed.

      Additionally, Borders management in the mid-90s onward was reputedly poor. K-Mart bought Borders in 1992 and then merged them with Waldenbooks and Brentano’s, which prompted a mass exodus of senior Borders management.

    20. Simon Oliver Lockwood Says:

      Whitehall said: “B&N offered better discounts; Borders only offered coupons on select items, usually liberal polemics.”

      You obviously never bothered to join its free Rewards program that sent an e-coupon or two every week — ranging from 25% to 40% off any single item. Ruthlessly using those, I managed to keep their costs approaching Amazon’s.

      Off to pick the bones of the corpse.

    21. Mike From Chicago Says:

      “I went into the Borders on State Street yesterday.”

      There’s always the Barnes & Noble which is part of the DePaul University campus on the corner of State and Jackson – it’s a pretty good bookstore – busy too.