The headline broke last Wednesday on my laptop screen while I was getting ready for another day of classes at grad school. It was hardly surprising, given the number of troubling stories about Borders’ financial situation that had slipped out since the holiday shopping season. Borders, the big box book and media retailer a distant second in market share behind brick-and-mortar leader Barnes and Noble, entered bankruptcy protection.
(The headline actually came via Borders’ facebook page, where they urged patrons to get their news from their own reorganization site. Of course, this is when everyone decided to open that page in one tab, and get their news from anywhere else they could. Hey, you can’t blame a company for trying to get out in front on something like this, right?)
I’ve been a fan of Borders for a decade, ever since I first trolled their old format stores (old and new books, superior selection and good coffee from a private label, in-house cafe) in Uptown Minneapolis and out by Ridgedale Mall on the west side of the Cities. At that point, I was never an exclusive Borders customer–Barnes was always so much closer–but I distinctly recall going to the Uptown location and seeing several titles that I still have never found for the right price, and my then-nascent bibliophilia was stoked.
Though Borders wasn’t always closer, for many years, their selection was far superior to the other bookstores. As the 00s moved along, big box bookstores popped up in retail outparcels, strip malls, semi-anchors (and sometimes full anchors, Rosedale and Brookdale in the inner-ring Twin Cities, for example) all over the country. The brick-and-mortar boom was mirrored by the rise of e-commerce and a little online bookstore named Amazon. More locations and more outlets meant more sales and more opportunities for writers to get their work out to a paying audience.
I became a loyal Borders customer in 2006, while I spent a year in Florida. Business was booming, and Borders Rewards couldn’t be beaten: every sale built cash value that could be used during the holiday shopping season. While Barnes and Noble was working with a subscriber loyalty program, BR was virtually giving money away. And money given away to customers will be returned to the business in kind. And so it was. I gladly cashed out my first year’s holiday bonus bucks on Christmas presents and a few things for me for which I didn’t want to necessarily pay full price.
2007 rolled around, and no sooner did I enjoy my first holiday rewards did Borders modify the program: they ended the holiday bucks, replacing it with Borders Bucks, if I remember correctly, it was $5 for every $50 spent in store. It wasn’t nearly as good a deal as the original program, and I was sure to let the clerk know that this wasn’t a very smart move. She patronizingly agreed, shrugged her shoulders and handed me my receipt.
In 2007, Borders also entered into a partnership with Seattle’s Best, outsourcing their coffee to an inferior brewer (for all their talk of being ‘smooth-roasted’, I’ve never had a cup of Seattle’s Best straight that hasn’t resulted in giving me some royal heartburn. I don’t get heartburn, and I don’t like splashing milk in my coffee) and willingly sharing their profits in their locations with someone else. (In fairness, Barnes did the same thing with Star*ucks shortly before, with the evil coffee empire having a respective hand in respective pies. The roasting methods differ, and I prefer a cup of Sanka from an old soup can to having to suffer a cup of Starbucks’ torched grind, with Seattle’s Best being the preferred poison. Where was I?)
What did Borders care? Business was booming, and people wanted books. They may not have read them, and most of them may or may not have been actually literate, but by God did they want books! As the demands of the masses swelled, the industry–notorious for being one of the toughest media to break into–let their standards down.
Tons of new books from new writers hit the display tables and shelves of bookstores across the country, independent booksellers either got run out of business or dug out their inner hipster catering to the counter-culture niche market (many of whom would regularly shop the big boxes, abscond from the store with a paper bag tucked under their arm like they just bought some smut, get in the Subaru Outback with the Phish and old Gore/Lieberman stickers on it, tear down to the independent store downtown and elegize loudly, sanctimoniously for the impending doom of the little guy, the rise of fascist, corporatist America and how Dick Cheney was behind it all.) The aftermarket bookstores indirectly benefited from this, too, as people bought books, they apparently refused to buy bookshelves and sold their excess to the Half-Price Books of the world.
In short, the chains became glutted with mediocre stock. By the time 2008 rolled around, I was married, we were trying to get a non-profit off the ground and I was starting graduate school. Borders (nor anyone else) had none of my textbooks, and Amazon had a thriving marketplace. In person, I preferred to shop Borders, but most of my business was online if for no other reason than I had no real choice in the matter, and Amazon didn’t charge sales tax, while offering most books at a great price.
Many have already looked back on the big box book boom and pointed to Amazon and the recession, as well as the rise of e-readers, as the coup de grace for Borders. While Amazon certainly was on the rise to where it is today, these brands and companies co-existed for close to a decade before now, I have a hard time believing that an e-tailer killed a bookstore. As many would also agree, one can’t pick up, feel and leaf through a book on a screen (even though Amazon offers a leaf-through option now, it’s just not the same) and though tablet readers interest me, I’m not comfortable with reading a book on a screen, electronic ink or otherwise.
There are indeed mitigating factors that have led to Borders’ demise, but the most significant one opens in the morning and closes at night; they did it to themselves. The Wall Street Journal mentioned in their coverage of Borders’ filing for Chapter 11 last week that holiday sales have decreased for the chain every year for the past few years, predating the recession, linking directly to when the retailer ended their original rewards program. They couldn’t pay publishers late last year, but in fairness, those same publishers were more than happy to dump gobs of lackluster product on a naive middleman for years. Borders was slow–though not as slow as some in the media seem to believe–to pick up on the e-book craze. They closed the used sections in the older stores (Barnes did with most of their stores, too, but not all) and willingly gave away a slice of their revenue to a coffee conglomerate. Their website was notoriously awful to navigate and the prices were often worse than in-store, with expensive shipping. And all of this happened in the midst of an energy crisis which spawned a severe recession from which we are still reeling and likely still in. As a last ditch resort to generate cash flow, late last year, Borders introduced Borders Rewards Plus, a subscription program that offered marginally better benefits, yet anything but cost-effective.
And now, Borders is closing 200 of just over 600 locations, contracting payroll and lease costs, but also willingly ceding a significant market share and potential revenue to their competition. They may have overexpanded, but they also weren’t the only game in most towns, so it’s not like fellow casualties Steve and Barry’s or Krispy Kreme, whose rush to open locations led to their rush off the cliff into the Bear Stearns memorial abyss.
And yes, I did just call them casualties. I just don’t see how they’re going to pull out of this, for three reasons:
1) the aforementioned ceding of market share, alienating what loyal market base (thanks in large part to the Barnes and Noble effect) they had, thus unintentionally encouraging them to shop the competition;
2) Circuit City, the distant #2 to Best Buy, made some similar egregious administrative and strategic mistakes in the mid 00s, tried bouncing back, only to close some, then all of their stores, the stock went to nil and the company disappeared almost overnight. A private equity firm bought the name and resurrected it online, where it is today: nothing more than a binary ghost of viable brick-and-mortar competition;
and 3) Borders’ presence in England, Borders UK, was spun off into a separate entity in 2007, and the entire franchise went into administration (UK’s equivalent to Chapter 11 protection) later, and then liquidation (Chapter 7) in ’09.
True, Borders had nothing to do with Borders UK falling on their sword, but this is likely the path they will take: they will liquidate the inventory at the 200 stores, but be faced with potential lawsuits and penalties from property management companies for breaking lease agreements. The liquidation, coupled with the $500+ million debt financing only able to be obtained by court order as part of their efforts to reorganize, won’t be enough and they’ll have to shutter the remainder of their stores. It’s not illegal and it’s certainly cynical, but how will they even begin recoup the potential revenues lost by closing 1/3 of their stores to pay off a half-billion dollar liability sheet?
I’d love to be wrong on this. And if I am, you can rest assured I’ll print it here, clearly and loudly.
So I went into one of the closing Borders Saturday night during my work break. The place was packed with bargain hunters. The cafe had already permanently closed, to my dismay. I picked around and didn’t find much that was a better value than what I could get with Borders Rewards coupons (coupons that one is oddly not allowed to use during liquidation, according to the fine print on the sale announcement I received in my e-mail. One would think that liquidation would mean getting rid of as much inventory as quickly as possible.) So I found a few items and went to the line and waited. I looked around, and saw a lot of people walking out empty-handed. Still a glut of mediocre inventory, lots of stuff people don’t want to buy even at a discount.
I went to the counter with my CD and extra copy of the Oxford American annual music issue. I told the young lady behind the counter that I was sorry to hear they were closing and how much I appreciated Borders. She responded to my goodwill by sneering down through her glasses at me, whining about how she was going to have to look for another job while she went to school. She then proceeded to throw my purchase in a bag, stuffed the receipt in with the same care and glared at me until the next person came to the counter. It’s not our fault your store is closing, miss, so don’t act like we’re the ones who are taking your job away.
If anything, we come to the going out of business sale to bury Borders, not to praise it.
UPDATE: According to a story in last week’s Detroit Free Press–marginalized rightly by the Japan crisis–Borders is further gutting another 75 stores, bringing the attrition rate from their chapter 11 fallout to roughly 45%. It’s looking like it’s more and more obvious that they’re going to pull a Circuit City.