Wednesday, August 11, 2010

Borders, Bookchains and Hard Times

Describe the state of US and UK bookchains today and you have to wonder where they are going to be tomorrow? Many think that these are institutions and that as institutions they just keep going but they aren’t and they don’t have a divine right to trade.

We have seen the demise of some and read many analysts column inches on the challenges facing others. Will Barnes and Noble be privatised and will its sale change anything? Will Waterstones become all things to all people and end up with HMV over the door and a cinema inside? Whatever the issues the greatest challenge is sustaining a physical presence in an increasingly digital world. It not about ebooks its about the Internet and consumer trends away from the High Street. It’s about competing with virtual inventories and stores who do not have the brick and motor cost overheads and are open all hours for self service. Its about competing with libraries fighting for digital virtual business and could change the model to one of lending for free. Finally, they now have to compete also with the likes of WalMart and Target in the US and Asda and Tesco in the UK.

Today Borders has laid off more employees at its Ann Arbor headquarters. Mary Davis, a spokeswoman for Borders, declined to specify the number of "job eliminations" at the company's headquarters, which had 650 workers before the cuts. As recent as January, Borders laid off 88 staff in Ann Arbor. Borders have also reported a net loss of $64.1 million in the fiscal quarter ended May 1 and although this was down from the $86.0 million in the first quarter in 2009, the company's total revenue has dropped from $650.2 million to $547.2 million.

Borders is heavily backing its digital strategy and is selling an e-reader developed by Kobo, which also created an e-book store for Borders. Although Borders claim that they hope to secure 17% of the e-books market within a year, this would seem to some highly ambitious. Kobo is not Borders and their reliance on a third party could be seen by some as being similar to when Barnes and Noble thought Amazon would be its internet store!.

Large chains are public companies and have large investment holders who demand a return and set performance targets and these are often not easy to achieve in the current climate, let alone in a market subjected to a high volume of digital ‘noise’ and radical change.

Some would suggest that one of the biggest problems the chains have is that they have forgotten how to be booksellers and have become glorified shop windows for publishers. Nothing wrong with that as long as the market is buoyant but when it isn’t and times are difficult they may find themselves exposed and with only one hand to play. Amazon taught everyone that bookselling is about selling new, used, old, rare, remainders, self publishing – BOOKS. It not about letting publishers ‘wallpaper’ or effectively merchandise bookshelves with low risk sale or return front list.


Anonymous said...

Borders has been in trouble since the 90s.

I worked there in the early 90s, and put them on Internet, back during the days of GOPHER pages. When the WWW portion of Internet came out, I moved them to that.

As the WWW grew in popularity, I told them (almost verbatim) "If we don't get our catalog online and get more serious about this, a little company called Amazon will become the main seller of books online. We could be number 1, if we move now. If we don't, we will never catch up to Amazon, and even Barnes and Noble will beat us to the punch."

They told me that they didn't think the WWW would be a big thing for a long time, and declined to expand things. I quit and got a job as a programmer/web developer.

The company had already made a number of big mistakes, though, most of which started when they went public. After they bought Waldenbooks, things really went to Hell in a handbasket. The work environment suffered a lot, but they also ended up cutting the depth of their holdings and made changes that affected the quality of new employees.

The two things that made them stand out from Barnes and Noble - superior stock and service - went away, and they became a second-rate bookstore chain. They brought it all on themselves.

These days, I buy all my books at used bookstores or on the Internet. I won't give Barnes and Nobles my business, because they got rid of their horror section and blended it into regular fiction, which makes it very difficult to browse for new titles in that genre. I just don't have any sympathy or loyalty to either of those chains anymore.

Martyn Daniels said...

thank you for this insightful perspective and I would suggest you got it spot on re the initial internet position which is replaying today. Amazon was the goose that laid the golden egg but accountants only saw a goose and couldn't see a golden egg

Anonymous said...

When a company first becomes successful it’s due to the reaction in the marketplace to their products. But what happens when the market shifts and they don’t? The Chicago Tribune and Barnes & Noble are prime examples of what happens when you try to stick to your Success Formula.

Martyn Daniels said...

again no one has the right to trade on forever they must react to the market and consumer demands. The problem that bookchains have is that they like all market leaders can become cumbersome, heavy and slow to change. Yes they also can believe their dine right to trade. Sadly they often forget how to run.
I had the good fortune to work as an executive in a major UK retailer and our strength then was to constantly change and challenge. Even when we were top of tree we still knew we had to develop, change ,reinvent. sadly today's chains lack this spark, drive and 'can do' nature.

Jesse said...

When I was at Borders, the most destructive change was when they went public. When they had to start answering to stockholders, quarterly earnings became the benchmark for everything. Adding the executives of Waldenbooks to their staff didn't seem to help, either, since soon afterwards they adopted more of a mall bookstore mentality.

Being tied to quarterly returns stifled innovation and the ability to move quickly on new ideas. I have seen that happen with other companies, in many industries. Going public may put a lot of money in the owner's pockets in the short term, but it is often the kiss of death (or mediocrity) for the business itself. I have never actually seen a business improve once it added stockholders to the mix.

Martyn Daniels said...

just to add fuel to the debate - a view of Australia's biggest chain