Borders at a Crossroads
Borders Group just hired a new CEO and is flirting with bankruptcy. The company is cutting costs like mad, trying to trim its debt, laying off employees and doing virtually everything it can to avoid Chapter 11 and de-listing by the NYSE. Same store sales for the most recent nine-week period were down nearly 15% from the prior year.
Borders has been hit by a threefold punch, including the economic meltdown, fierce competition from Barnes & Noble, Amazon, and dozens of other booksellers, and a changing marketplace in which book buyers are increasingly comfortable with shopping online, an area where Borders has historically lagged. Basically, Borders got caught in the squeeze.
The new CEO, Ron Marshall, is a financial guy, which may be necessary to shepherd the chain through this period of cost cutting. But let’s hope he can think beyond the numbers so that Borders doesn’t become just another Circuit City, suffering a painful and possibly irreversible decline.
In a Wall Street Journal article, the CEO of Hachette Book Group USA recalled a recent conversation with Marshall: “He said he is hell-bent on insuring that Borders is the first choice for the serious book buyer.” Let’s hope that by “serious book buyer” Marshall means a specific type of customer that Borders can serve better than its competitors, not simply people who buy a lot of books. Every bookseller wants them.
Borders must find a way to differentiate its brand from its massive rivals, and the key to doing so is finding a unique customer base it can serve in a distinctive way. At this stage of the company’s struggle everything should be on the table, and a serious strategic review should accompany the cost cutting. But the company doesn’t have a lot of time, and if it’s suffering from the destructive internal dynamics that so often accompany stalled growth, it will be that much tougher.
Let's face it, Borders has been chasing and copying its competition for some time. They do nothing special today and most likely no one would notice if they ceased to exist.
You nailed it when saying that they must provide a distinctive offering/experience/encounter to a distinct group of people. The must create a compelling reason to visit a Borders. The likelihood that they will do this fast enough is (unfortunately) low.
The greater lessons for businesses here are:
1. Don't lose your plot – stay focused on the special reason you exist and the special people you are supposed to serve.
2. Stay maniacally focused on the people whom you serve, so that when new (or old) competitors innovate, you advance your plot rather than having the plot become boring or irrelevant.
Borders was special because of the wide selection and # of locations. They let Amazon, B&N; and others take the game away from them. It's too bad – I fell in love with books at a Borders.
Comment by Doug Davidoff — Tuesday, January 6, 2009 @ 6:20 PM
The book business is looking more and more like the newspaper business (fading into the sunset). Amazon’s Kindle and Sony’s Reader Digital Book are pointing the way. A year or so, someone demonstrated the first book ATM machine. Pick your title, feed your credit card, wait ten minute and out pops a freshly printed, trade paperback.
Nicholas Negroponte warned us years ago that bits are much cheaper to move around that atoms. Me, I’m a book lover. I have hundreds. It’s not clear to me that the texting and Facebook generations have the same reverence for atoms as they do for bits.
The book business is a pretty stupid business anyway since books are basically sold by the pound with virtually no regard for the value of the content. Most of the books in a bookstore wind up getting returned and mulched. From a publisher”s standpoint, the distributors take 60% off the top, may or may not make any effort to sell your wares to the retailers, hold your money for 120 days, hold back 20% for returns and charge you rent in their warehouse.
If that isn't bad enough, only 2 out of 10 books every repay the advances on royalties paid to authors. As much as I love books, it is not clear to me at all why anyone would want to be in the book business.
B&N; has a lock on bricks and mortar, amazon has a lock online. i'm sure borders has bright capable people. they should shut it down and go do something where they have a shot a being successful.
Borders has a nice store where I live, but I confess, at Christmas time I went there, found what I wanted, looked at the line at the checkout, went home and ordered them from amazon with two day free shipping and no sales tax. Sad but true.
Sometimes growth stalls for structural reasons. You have to know when to hold 'em and know when to fold 'em. Not every growth problem is solvable.
lanny goodman
albuquerque, nm
Comment by lanny — Thursday, January 8, 2009 @ 6:53 PM