Over the past few weeks, Borders executives have been in NYC negotiating with publishers. Many articles have been stated that this is the final chapter for this 40-year old bookseller. They all focus on eBooks and the poor economy as the reasons. But I think it is much deeper than that and the problems started a decade ago.
1) Reliance on old systems – Borders Expert System was the top book inventory system when it was created. It was one of the main reasons Kmart purchased Borders. The system worked when they had 20 stores, but it was never able to scale to 200 stores and definitely not 500 locations. It required too much manual input from the buyers. Plus, every shipment from publishers had to go through a Borders warehouse and be stickered. At one time this controlled inventory, but as the industry moved to JIT replenishment, this cumbersome system slowed everything down. It generally took Borders 7-10 days longer to get books back in stock.
2) Not understanding the Waldenbooks asset – Waldenbooks was folded into Borders once Kmart had purchased both. At the time Waldenbooks had 1200 locations and was 10x larger than Borders. But the future was in the 25,000 square foot ‘superstore’ concept and not the 3,000 square foot mall based Waldenbooks. All of the cash WB made was spun into Borders growth. I am not arguing with that decision. But they should never have tossed WB aside. Borders never understood the WB model. They tried to create “Borders Lite” mall stores. Basically taking a Borders inventory mix and shrinking it. Mistake. WB thrived on Romance, Mystery, Sci-Fi and Children’s. They sold mass market books. They had loyalty programs of readers in the millions. All were disbanded.
3) Missed the Internet – Possibly Borders biggest error was to turn over their internet business to Amazon. At the time, Amazon was very small and Borders was challenging B&N for the largest bookseller in the country. But Borders partnered with Amazon and basically sent their best customers to the competition. Borders had tremendous customer loyalty and from Waldens, the Preferred Reader Program of over 3-million frequent buyers. Amazon took all of them and has destroyed any Borders on-line efforts. By the time Borders pulled the on-line store back, it was too late.
4) Location, location, location – During the rapid growth days of the superstores, I would go on numerous road trips to visit bookstores. It always seemed that when a B&N and Borders were in the same area, the B&N had a better location. I don’t have statistics, but when there was a side by side comp, the B&N always seemed busier.
5) Music and Video – Borders jumped into music and video just as that industry was taking a hit from on-line and digital downloads. They may have had a few good years, but in the long run they ended up with massive amounts of old technology in physical cds and dvds – where the market had moved away.
6) Bunkering in Michigan – I like Ann Arbor. I always enjoyed visiting and impressed with the people. But they should have stayed in the NYC area. The talent pool is much larger for publishing and bookselling in the NYC-area. Plus I know of a few instances that very talented people wouldn’t even consider Borders because they didn’t want to leave NYC. Borders also missed out on what was happening in the publishing industry. Would always see the B&N people at meetings and events because they were local. It is less of an issue today but 15 years ago, it made a huge difference.
7) Hoard information – For many years Borders refused to share sales information with the publishers. B&N openly allowed publishers sales and started to coordinate re-orders etc with them. This allowed B&N to get a jump on Borders for re-orders of hot titles. I can remember feeling good when I confined my contact at Borders to fax us the top 100 titles instead of 50. No inventory numbers though. By keeping this information closed, Borders hurt their own case for getting re-orders and they also lost valuable days. B&N could make a decision and get books to market in 3 days, Borders would still be thinking about it.
Having the revolving door in the corner office and not investing in eBooks are just the latest issues. I want Borders to survive. I believe they can survive. But they must completely revamp. The brand is strong and there is definite value. But the current “business as usual” attitude will only drive them deeper into the hole. There are many steps Borders needs to take to survive. Maybe in the next blog post?