The first day of business began for many in publishing with the news that Borders has decided to delay payment. While Borders has been teetering on financial ruin for many quarters (almost always to be bailed out by its backer, Pershing Capital), such woeful news after the holidays– when sales are considered to be at its best in the retail market– indicates a very bad year ahead for Borders. As usual, someone must take the blame, so the resignation of two Borders executives is no surprise.
What is most surprising about Borders’ dismal announcement is that it comes only a month after the chain started exploring ways to buy its brick and mortar competitor, Barnes & Noble (who started the year by happily announcing better than expected sales of their e-reader, the Nook, along with a record-breaking single day sales for December 23, 2010). Although I once used to champion Borders as the more serious chain store, much has changed at Borders. While some analysts are quick to crow that digital readers and less book-reading by the general public as the causes for Borders’ demise (and therefore the demise of all brick and mortar bookstores), I would point out that Borders’ financial issues began well before the Kindle.
Nearly a decade ago, Borders decided to revamp the whole chain based on customer surveys. One finding of the survey was that the chain had more male customers than female customers as opposed to Barnes & Noble which skewed more heavily towards a female demographic. Another realization Borders had from their survey was that they were not getting as many repeat customers as Barnes & Noble.
The essence of the survey told Borders that it was not Barnes & Noble (what a surprise). Rather than honing the qualities that made the chain better than its main competitor (a deep and serious selection of books — yes, truly, it was so at one point; a company culture that gave flexibility to its managers in selecting for each store based on trends each manager saw; a male reading audience that found in Borders a kindred retail chain), Borders decided to become a lesser Barnes & Noble.
To reassess the freakish bookstore Borders had become, I ventured into one of its worst incarnations at the store perched on top of Penn Station in New York. This is a store where one is not so much invited as assaulted by merchandise. Yes, merchandise…not books. One has to delve deep into the shelves to find good books. On the right hand side upon entering the store is yet another feeble attempt to follow Barnes &Noble’s lead: racks of magazines. One valuable piece of retail real estate, the front tables, is squandered on loose random sales titles while another front table advertises Borders’ feeble attempt at the digital market reader. A large amount of square footage is taken up by Borders’ stationery line, Paperchase: journals with cartoon covers meant for teeny-boppers.
While waiting on line, as far as the eye can see: cutesy impulse-buy toys, DVDs, and chocolate. This crucial point of purchase is made into a bewildering array of diverse items with nothing in common rather than a streamlined yet interesting array of items. One only has to consider it in contrast to a Barnes & Noble’s handling of the line: magazines faced out, Zagat’s or Michelins, and a select arrangement of Godiva chocolate bars. For better or worse, at least Barnes & Noble manages to convey a coherent notion of eating chocolate while reading magazines.
I have yet to come to the most important point: the book purchase. Having misplaced Tolkien’s The Return of the King, I felt it important to complete my life by owning the last volume of the set. Oddly enough, this specific Borders had at least several volumes of The Fellowship of the Ring, The Twin Towers, The Complete Lord of the Rings, The Hobbit, as well as a number of Tolkien’s less famous works, but not a single copy of The Return of the King. I had a similar problem a year ago when trying to find the second volume of Pullman’s trilogy (I have wondered if all of Harry Potter can be found at a Borders). I was not looking for obscure works but novels with a large audience. If such novels cannot be reliably found at a large chain bookstore, it indicates a serious problem with inventory and keeping the shelves well-stocked.
Alas, but the inventory problems will worsen as publishers look to minimize their risk with Borders. Borders’ announcement of delayed payment and liquidity problems after Christmas has surely upset many publishers. I have no doubt that many VPs of sales spent the day tallying the amount owed by Borders and the potential sales lost if Borders does not recover. Although Borders lags behind Barnes & Noble and Amazon, it owns enough market share to do damage. Yet, this is not the first time Borders has had liquidity problems. If its financial backers rally again to Borders’ aid, its doubtful this will be the last time of such problems.