We’re finally back from our respective vacations, and back to podcasting. The big news from when we were gone was the liquidation and ultimate demise of Borders, so this week we talked about bookselling. About the fallout of Borders closing down, about the big losers, about the possibilities for the resurgence of independent bookstores, and about ordering books on Esperanto.Read More...
So, Borders is basically dead-and-nearly-gone, what with their liquidation starting tomorrow and almost 11,000 employees losing their jobs in the next few weeks. This was a long time in coming, and is a surprise to no one.
That said, it’s a tricky thing to formulate an adequate response to. On the one hand, over the past few years Borders became a shitty big-box soulless retail outlet. I hesitate to even use the word “bookstore,” since that implies a level of care and attention beyond simply clerking sales and pyramiding crappy titles in entranceways. The only difference between Borders and Best Buy was in product margins. And volume of customers, I suppose.
But seriously, the chain trend has always been a troubling one, since there’s everything great about making more books available to more people. I would’ve flipped my shit if there had been a B&N or Borders in Essexville when I was growing up. (Those were dire times that I’ve since made up for by accumulating a National Debt’s worth of unread books.) And historically, Borders was more dedicated to having a deep backlist and a solid selection than their rivals. (See the series of interviews with Borders folks that appeared in the Review of Contemporary Fiction some time back.)
At the same time, these stores replaced quirky hometown bookshops with an offensive homogeneity that I was never completely comfortable with. It’s easy to play the cynic in relation to this sort of crap retail environment and complain that B&N is ruining the taste of Americans by force-feeding Twilight knock-off shit down the throats of anyone who wanders in the front doors. Not to mention that all the table space and end-cap displays and other promotional fixtures are paid for by publishers. I’m always shocked when people are shocked to find this out. Of course these promotions are paid for! There are very few pure things left in this hypercapitalist world, and books have such nonexistent profit margins that these stores had to milk what little they could milk.
That all said, the first bookstore I worked in was technically Borders Store #04. Schuler Books & Music in Grand Rapids was one of the first stores in the country that used Borders’ inventory, ordering, and POS systems, but had its own retail identity. In many ways, it was the perfect bookstore set-up: There was no true competition (Borders couldn’t have a store within 50 miles and the local B&N was a rundown joke), the costs were lower than they would be if the store did it’s own buying and account maintenance, and employees were encouraged to be too well-read and too smart and somewhat snarky and all of the great things that make up that special bookseller aura of the mid-90s.
But to the point: Borders released info on their last operating quarter yesterday and this is some pretty bleak shit.
Losses were $1.5 million; without gains from reorganization items and income taxes factored in, that number would have risen to $20.6 million. The value of Borders’s inventory was $431.7 million; total assets were $696.5 million, with total liabilities of over $1 billion.
And this from a massive company that leveraged certain advantages, like bulk purchasing, advertising money, national recognition, etc.
A while back I hypothesized that when Borders tanked (and really, this has been years in the making), there would be a rise in indie bookselling. I still really, truly hope that is the case, and I have heard from a number of bookstores whose sales have jumped recently, because of Borders and because of general increases in book sales. This is very encouraging and very interesting, but to play devil’s advocate against myself, all of these stores are in major metropolitan retailers.
That fits well with other indie bookselling trends I’ve noticed over the past years. Some of the greatest “new” stores—like WORD, Greenlight, Idlewild, etc.—are all quirky, curated, awesomely informed, out-of-the box thinking, socially savvy stores that happen to be in the NY area. There is one solid indie bookstore within 50 miles of Rochester, NY, and that’s Lift Bridge Books, a nice store, especially if you like kids books. They don’t carry Open Letter titles, which is that irritating truth for a lot of indie bookstores. Margins are too tight, they can’t take risks, etc., etc. So realistically, if an indie store opened here next year, it’s likely that it would stock all the same books that you could get everywhere else.
We do have a decent B&N here in town where residents can browse and buy all Open Letter titles. And that’s really the crux of the problem. Borders was a space for selling books. Yes, online retailing allows for a press like ours to reach a much larger potential audience, but I think our culture is enriched when there’s a lot of ways to interact with, find out about, and purchase books. Maybe libraries will fill in some of these gaps, or maybe everyone will use their iPads to virtually check things out and virtually communicate with each other.
Anyway, this PaidContent post about the Borders aftermath is pretty interesting and contains a few harsh points:
What does this mean for publishers and authors?
It’s unequivocally bad news for publishers and authors. Bottom line: The closure of Borders means fewer places to sell books (and promote books and book discovery). Publishers will have to reduce their print runs and shipments, and, as the NYT‘s DealBook pointed out, may have to lay off employees who worked only with Borders. Borders’ closure is particularly bad for paperback sales: it “was known as a retailer that took special care in selling paperbacks, and its promotion of certain titles could propel them to best-seller status.” Independent booksellers, counterintuitively, could also be harmed by Borders’ closing: In the Providence Journal, one independent bookseller feared that publishers, squeezed for cash, will be less able to extend discounts to indies.
Who is losing the most money from Borders’ liquidation?
Publishers. Penguin alone is owed more than $41 million. See our list of the biggest losers from the Borders bankruptcy.
Given the fact that Borders never bought any of our books (they’ve been on credit hold since the formation of Open Letter), this won’t impact us much at all. That said, I’m torn between being gleeful in my typical anti-corporate, anti-culture homogenization, anti-box store way, and feeling bad that we’re losing hundreds of spaces where readers of all ages could find out about books. I know that books aren’t going away, and that the internet and ebooks and edevices will be filling in some of this, but that’s something a bit different. Not better or worse per se, just different. All of this is what makes this a pretty interesting moment for publishing . . . and provides a chance to wax nostalgic about recent eras in bookselling.
I resisted commenting on the $8.3 million of insane bonuses Borders is offering its top execs, but now that Borders has reached a new low and are having a meeting with skeptical publishers this morning to try and convince them that their reorg plan is viable, I think it’s time to really diss on this debacle.
According to PW:
Publishers are unhappy over the size of the executive bonuses, worried about Borders’ plans for returns, and annoyed that the chain appears to have overstated how well they are doing by combining going-out-of business sales with sales from ongoing stores. None of the major publishers has yet to resume shipping to the chain on normal terms, although a number are shipping the chain on a cash basis. Borders is eager to return doing business on regular terms.
The details of the reorganization plan are confidential, but according to the Wall Street Journal, part of the reorganization will include a move out of Ann Arbor and greater reliance on e-book sales.
First off, the bonus thing is bullshit and smacks of all the b-school rhetoric about compensation incentives. “Get us out of Chapter 11 and we’ll make you RICH!” Since 1999, no book person has been CEO at Borders. Instead, they started raiding Jewel-Osco for execs with grocery store experience. Which worked out . . . well, what’s the antonym of “awesome”?
But now, somehow, someway, I feel sure that Borders will work its way out of bankruptcy, pay off these newcomers, and then go totally bust 6 months after they flee.
It’s not that I’m entirely cynical about corporations (yes I am. Especially after this), but look at the two named points of their strategy:
1) Get out of Ann Arbor;
2) Greater reliance on e-book sales.
Forget about the fact that, in some way, Borders morally owes Ann Arbor, but in what part of America will they find a more affordable place to have their headquarters? Downsizing is one thing, moving when you have no money just seems sort of dumb.
And e-books?!?!??!? When was the last time you even noticed that Borders has a website? Yep, never. Well, they do. And you can even buy a Motorola Xoom from there. And some affordable e-books that you can read on your Kobo. I feel like an ass kicking a chain that I used to work for1, but if Borders has even 0.001% of the ebook market, I’ll be amazed.
(Really doesn’t help that they have to post this on the ebook page: “If you have any concerns about Borders’ recent changes, please be assured that your eBook Library is perfectly safe. Access and add to it freely..” Also funny that the Borders ebook software has been “liked” by 2,740 people on Facebook. Open Letter is “liked” by 2,248.)
Anyway . . . yes, focus on that. By the time Borders is shipping back trainloads of unsold merchandise after finally running itself totally into the ground I’m sure they can get their market share up to 0.01%.
The upside of all this is that the indie stores I’ve been talking to seem to all be having up years . . . Especially those located near soon-to-close Borders Stores. I suspected that a majority of Borders shoppers (something about using the words “majority” and “Borders shoppers” in a sentence feels wrong) would have turned to ordering online, but it’s reassuring to see that there are still a lot of people out there who want to visit a physical bookstore. It’s a great opportunity to indies to show a new group of consumers all the benefits they add to a community.
UPDATE: As I was finishing this up, I came across this piece on a new part of the “Teacher Appreciation Days” at Borders:
It’s an expansion on the BORDERS – GET PUBLISHED program that Borders runs in cooperation with BookBrewer, a self publishing service. For a measly $75 a teacher can sell their eBook through the Borders eBook store as well as other major eBook retailers, and receive a complimentary paperback version of their book.
I’m thinking that Borders is SO focused on e-books and potential e-book revenue that they’re totally unaware of the outside world. I’ll let MediaBistro take it away and deliver the parting shot:
Note: aside from the complementary paperback, this deal can be found anywhere for free. Teachers can publish through Amazon, Smashwords, B&N, or Kobo at no cost to themselves. You really need to ask if the $75 fee is worth it.
On a related note, Borders seems to have gotten a little scatter-brained since the bankrupotcy. The press release mentions two e-reader that Borders no longer sells. One is the original Kobo, which was discontinued months ago.
Yes, I’m sure this reorganization will go smoothly . . .
1 Schuler Books & Music, which used to have one of the greatest staffs and fiction sections in all the U.S., is technically Borders Store #04. We used the Borders POS and Inventory system, Borders sent us stock that we would always have to supplement/replace with “real” books, etc. I’m thinking that this arrangement is going to have to change, since Schuler has been expanding, whereas . . .
As you may have heard, Borders is in a bit of trouble. Not that they haven’t been on the brink of disaster for years, but with the announcements of the past couple weeks—including the suspension of payments to some publishers, resignation of several execs, closing of a distribution center, etc.—it sounds like they really are on their last legs.
There’s a lot to be written about this and the impact such a collapse would have on bookselling and book culture in general, but in terms of what went wrong, The Atlantic has an excellent article by journalist/founder of Public Affairs Books Peter Osnos:
So what happened to Borders? An early innovator in controlling inventory, there was expert staff at its Ann Arbor headquarters and store managers who believed in the value of book-selling. At its peak, Borders superstores had all the attributes of good book-selling—extensive selections, browsing space, coffee bars, and outreach programs to surrounding communities. In 1998, Borders shares hit an all-time high of $41.75.
To understand Borders’ decline, it is worth going back to its origins on State Street in Ann Arbor. The store was founded in the early 1970s by Tom and Louis Borders, University of Michigan graduates who developed an inventory tracking system that, by the standards of the time, was as sophisticated as computers allowed. When I came into publishing in the middle 1980s, I was impressed with the shrewd team of buyers who dealt with publishers’ sales representatives and the store staff that made the most of the simple aluminum fixtures where books were displayed. The Borders brothers began licensing their inventory system and began to expand to locations in Michigan and around Philadelphia. [. . .]
The Borders brothers decided not to stay in the book business, and in 1991 sold the small chain and inventory systems to Kmart for $125 million. In retrospect, that was when the trouble began. Kmart already owned Walden mall stores, which were an awkward commercial fit with the Borders culture. Kmart itself was at the start of a downward spiral, and in 1995 Borders was spun off in an IPO. For a time, the newly named Borders Group seemed to be working. Under the leadership of Leonard Riggio, Barnes & Noble was expanding also, and the competition between the chains seemed to create dynamic energy that benefited them both. The losers were the local independents who couldn’t keep up with the marketing and promotional resources of these national corporations. [. . .]
Fast forward past a crucial mistake of making Borders.com an affiliate of Amazon, and you end up in the 2000s:
bq.Meanwhile, the mall business was drying up, and Walden eventually all but disappeared. The role of the Ann Arbor-based experts in selection was gradually diminished. A series of expensive marketing roll-outs and loyalty programs never gained necessary traction. Most damaging was the management turnover, especially at high levels. CEOs and other executives flowed through the Ann Arbor offices, cutting staff, rounding up financing from private equity investors, and promising to catch up with the digital age. But Borders always seemed a step behind where they needed to be. Borders stores took on a generic quality as executives and investors lacked the knowledge and patience to address the chains’ mounting problems. .
There’s a lot of Monday-morning CEOing that can go on, but I truly agree with this almost anti-MBA comment he makes at the end of his essay:
Len Riggio, Jeff Bezos of Amazon, and the successful independent proprietors, whatever their other business virtues and flaws, really have a deep attachment to books and the people who read them. But when Borders expanded, they brought in executives from supermarkets and department stores (all of whom insisted they were readers), and the result was a shuffle of titles and more downsizing against a backdrop of financial engineering, which only seemed to make matters worse.
The printed book market just doesn’t seem large enough for Borders anymore. Borders is the second-largest bookstore chain in the U.S. behind Barnes & Noble. Unfortunately for these companies, bookstore chains are going the way of the dinosaur with Amazon digitizing books and becoming the largest online seller of books in the United States. Borders is developing a Kobo e-reader to try and compete, but with e-book readers from Amazon, Apple and Barnes & Noble, Borders may be living on borrowed time.
How troubled is Borders? The company’s stock currently sells for under $2 dollars a share. Borders has to repay a $42.5 million dollar loan due on April 1. If Borders can raise this money, the bookstore chain still faces a $360 million dollar note payment due July 2011.
Perhaps the most damning sign was that the company’s CEO left to take a job at a supermarket chain. The company’s short-term hopes lie in getting creditors to refinance debts. The best hope for long-term survival is an acquisition by a larger bookstore chain like Barnes & Noble.
The strategy of simply stocking as much as possible (and more of what people are trending) and letting the customers come and buy it just isn’t working as well as it used to. That said, we’ve been talking about the imminent demise of Borders for at least two or three years now. So who knows. Maybe the world just isn’t ready yet for a post-big-box-store existence.
PW offers up some encouraging news about the book business on Wall St.:
Led by a remarkable rebound by book retailers, the Publishers Weekly Stock Index jumped 23.9% in the first six months of 2009, easily beating the Dow Jones Industrial Average, which declined 3.7% in the January through June period.
That’s great, although also a bit heartbreaking . . . Back at the beginning of the year, shortly after Borders hit its stock low of $.40, I talked a lot of smack about investing a small amount of money, convinced that there was no way this would stay below a $1.00. Well, as of June 30 the price is $3.68 . . . I was one bit of confidence away from making around $8,000 for every $1,000 invested . . . the best laid plans . . .
Not that the meteoric rise in the Borders stock price has to stop there: just wait until they launch a U.S. version of Happily Ever After, their bookish online dating site. . . .
But maybe Borders wishes it was . . . From PW
A series of one-time charges and lower sales lead to a loss from continuing operations of $184.7 million at Borders Group for the year ended January 31 compared to a loss of $19.9 million in the previous year. Total revenue declined 8.9%, to $3.27 billion. Sales fell 9.4% at the company’s superstores in the year, to $2.65 billion, and declined 14.7% at Waldenbook Specialty Retail, to $480.0 million. Comp sales were down 10.8% at the superstores for the full year, with book comps off 8.2% and non-book sales down 16.1%. Walden comps were off 5.1%.
As a result, Borders stock soared from $.63 to $1.05, which is precisely why I don’t understand the stock market. Here’s a one-liner from Forbes explaining why Borders was a “big mover” on Wall St. yesterday:
The operator of more than 900 book stores will cut its costs by another $120 million and it expects sales to keep sliding in 2009.
As reported in Publishers Weekly,: sales at Borders fell by 10% in the third quarter to $693.4 million, resultiing in a net loss of $172.2 million for the period.
And in terms of being for sale? Well, that’s now a thing of the past:
Borders also announced that it is no longer for sale. Company CEO George Jones said that after completing a thorough review of its options, the company determined it was best “to remain as we are,” adding that he was “quite pleased” that the review is over and that Borders will remain an independent, publicly-traded company. The company still has the option to sell its Paperchase division to Pershing Square Capital, Borders’s largest shareholder, for $65 million. That option expires Jan. 15. The company said it is talking to Pershing about different financing arrangements.
In case you’re interested in buying some Borders stock, at this very moment, it’s listing for $0.98 on the NYSE, which is $0.26 higher than the 52-week low.
There are a few interesting paragraphs not included in the earlier GalleyCat post:
We think that the best course for IPG’s client publishers is to accept the option of still shipping to Borders. Borders has been paying IPG, they are reported to have cash on hand and access to credit in the future, and the last thing anyone wants is to have only one giant chain in the retail book market. Borders may prosper, and even in the worst case, given IPG’s uniquely flexible policy, the value of your inventory would be preserved.
On the other hand, booksellers and wholesalers in trouble sometimes resort to tactics that can damage publishers. Sometimes they return books that are selling well and then reorder the same titles. This allows them to start the payment meter over again, but of course it means more damaged copies. Sometimes they order far more copies than they need for the purpose of having more stock in their warehouse to comfort their secured creditors. Sometimes they have no reasonable expectation that they can stay in business, but order books just in case some miracle arrives to save them. We will not allow your titles to become pawns in any such games.
We do not see evidence of this sort of behavior to date at Borders, but we have, for some weeks now, scrutinized every one of their purchase orders, in some cases reducing them to reasonable amounts. Their performance has been erratic. We will continue this vigilance in regard to the titles of publishers who wish IPG to continue to ship them.
I really don’t want to spread a sense of “doom and gloom” about the publishing industry, but wow, this bit of info about Borders from GalleyCat is not very encouraging:
GalleyCat has received a copy of a “special alert” sent from a major book distributor specializing in independent publishers to its clients, warning them that Borders, whose financial difficulties are widely recognized, “now tell us that they will not be paying us for two months due to anticipated excessive returns,” a situation the company views with understandable concern. [. . .]
Therefore, the distributor is telling its clients they need to make a decision this weekend: “Publishers must either instruct [us] not to ship their titles to Borders [or] accept the provision that [we], for Borders business only, will guarantee payment only for the publishers’ historical printing cost of books that are not paid for, rather than for the whole amount of any unpaid invoices.” (As the memo explains, the printing cost of a $14.95 paperback is roughly $1.50, compared to the $7.48 the distributor bills Borders.) The new policy is contrasted to what the company says other distributors do, asserting that some of its competitors are refusing to take any credit risk at all on inventory sent to the struggling chain.
Rumors about the coming demise of Borders have been floating around for months. Hopefully this is just a recession induced hiccup and not the beginning of the end . . .
From PW Daily:
The anticipated cuts at Borders were announced this morning with the bookstore chain saying that it has eliminated a total of 274 positions.
The majority of the cuts came in its Ann Arbor headquarters where 156 jobs were eliminated, with the company reporting that the cuts occurred in virtually all departments such as marketing, IT finance and human resources. While some cuts came in the merchandise group no changes were made in the newly reorganized buyer/planner group. [. . .]
The cuts are part of Borders overall effort to reduce annual expenses by $120 million over the next 18 months.
The site won’t go live until early next year, and marks Borders re-entry into the online retailing scene. Once upon a time, they managed their own website, but then sold it to Amazon in 2001.
According to PW some of the new features on the site include:
The Magic Shelf, essentially an area featuring books visitors can click on for more information. In an attempt to imitate the experience of walking into a Borders store, the site places the books on a realistic looking, three-dimensional shelf. Over time, as customers shop at the site, the Magic Shelf will become personalized based on past purchases. A related area, Picked for You, allows customers to list areas they are interested in and Borders will stock the area with appropriate titles.
Ummm . . . cool. I guess. Although it sounds a bit childish . . .
Sometimes it’s hard to figure Borders out. I love their stores and feel that historically, they’ve been more interested in backlist and literature than B&N, but something seems odd about this. After selling off the UK division, I wonder if reclaiming their website isn’t a way of adding value to the U.S. company for an impending sale . . . I have no evidence for this—it’s just pure speculation.
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