Why Borders Failed


Borders finally made it official:  it is closing all of its remaining stores and laying off its 11,000 employees.   Customers, publishers and authors are mourning the loss. 

Unfortunately, this news doesn't really come as a surprise.  In fact, I predicted Borders would fail and go out of business during a staff meeting three years ago.  Not many people at the time argued with me. It was obvious that they were doing so many things wrong. 

Many people will probably try to blame the fact that readers are flocking to ebooks, but that is only part of the picture, and I'm not convinced it is largely responsible for the failure of Borders. In fact, I think Borders would have failed even if ebooks didn't exist.

Borders had a lot of things working against it:

1.  It had too many stores.  At its peak, Borders had more than 1,200 stores operating under the Borders and Waldenbooks name.  Some stores were located just a couple of miles from each other.  How can cities support so many large bookstores?  The answer is they can't. 

2.  It grew too fast.  Borders had its beginnings as a used bookstore in Ann Arbor, Michigan.  It quickly grew and was eventually purchased by Kmart, which is a good discount chain, but apparently a bad bookseller.  It had also acquired the Waldenbooks stores (which had also been failing) and merged Borders and Waldenbooks into one company, hoping Borders would right what was wrong with Waldenbooks.  Instead, many of the most senior and experienced folks at Borders walked away, leaving Kmart with even bigger problems.  Kmart eventually sold off the Borders/Waldenbooks stores. 

3.  It was late in embracing online book sales.  Believe it or not, Borders didn't operate its own bookselling web site until 2008.  2008!  Up to that time, they were partnered with Amazon, which sold books through Borders' own web site.  Letting your competition sell your books for you is never a good idea.

4.  It was too late to embrace ebooks.  Borders treated ebooks like an afterthought, or a fad that they hoped would go away.  First, they sold Sony ereaders, and then later the Kobo ereader.  But, these were simply ereaders they were selling.  They didn't own the technology the way Amazon owns the Kindle or Barnes & Noble owns the Nook.  By the time Borders tried to jump into the ebook game, it was too late. 

5.  Borders didn't make any money.  Seriously.  The last time Borders made a profit was 2006.  Everything Borders tried to do to gain a profit over the past few years only seemed to make things worse: adding coffee shops to stores, closing popular smaller stores and opening Borders Superstores, launching a brand new web site...all these things cost a lot of money when the chain wasn't making any and only sunk Borders deeper into the hole.  Desperate, Borders tried to sell itself to Barnes & Noble, one of its chief competitors.  No sale.

Unfortunately, those who will pay the price for Borders' business practices will be the 11,000 employees who now have to find other jobs, publishers who will have to find other venues to sell their books and authors who used Borders stores as a springboard to launch their books. 

Are there any winners in this situation?  Actually, I think there are two groups that will weather the Borders storm just fine:

1.  Customers.  The thing about a free market system is that customers are king.  They vote with their pocketbooks and wallets. They determine which businesses will succeed, and which will fail.  Customers decided they preferred to buy their books at places other than Borders stores.  They decided to buy their books from Barnes & Noble, or online, or from one of the independent bookstores in their town.  

2.  Independent bookstores.  They are the real winners here.  As customers look for another bookstore to call home, they will be more willing to give independent booksellers a shot, and they may like what they find.  Nearly every decent-sized town has a popular independent bookstore that caters to a particular niche audience.  Maybe they sell mainly mysteries.  Perhaps they specialize in romance novels.  Or, they could be the store that promotes and supports local authors. Here in Oklahoma City the independent bookstore of note is Full Circle books, and they are doing just fine, last time I looked  Many independents did close over the past decade due to the economy and competition from Borders and Barnes & Noble (and Amazon), but customers are rediscovering the benefits of a good, local independent bookstore that offers things a large bookstore chain or website can't or won't. 

Question for discussion:  Did you buy your books from Borders?  If not, where do you prefer to buy your books?


aftertheinkdries said...

Great analysis, Terry. I wasn't there when you called this three years ago, but I've heard you repeat that original assertion many times. To answer your question, I buy my books all online now. The last time I bought anything at Borders, it was a blank journal with a nice wooden cover. I think it says something that the best thing they had to offer me was a book full of nothing.

I'd like to see what anyone thinks about Barnes & Noble's future. I'm up for round table if you want to do a future blog post together.

Shelly Goodman Wright said...

I bought most of my books from Borders, but mostly because they are close to where I live.

Terry Cordingley said...

I think Barnes & Noble is in a better position than Borders, but they have problems, too. They put themselves up for sale some time ago, and as far as I know there have been no takers. B&N is also losing money, and any business can only go so long without turning a profit. Still, B&N has plunged into the ebook market with its Nook, and it is diversifying its product line to include things other than books. If they want to return to profitability, they may have to shrink the size of their retail locations somewhat and do more business online (taking backorders for books on their web site would certainly be a good start). They need to do what Amazon is doing if they are going to survive, and offer products and services at their stores that customers want, and that might be something different from store to store.

Cynthia Leavelle said...

I buy my books at a local independent bookstore called Pentimento Books. The owner/operator knows me by name. She is very supportive of local authors, including me. Her store has a wonderful atmosphere: soft music,cushiony chairs,and books arranged like a cozy home library. I'm afraid the big chains couldn't achieve that, even with their little coffee shops.

Terry Cordingley said...

The bookstores that serve a niche and provide excellent customer service will be the ones that survive.


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