Borders has announced that, in approximately one week, they will be closing all of their remaining stores, ending the liquidation of stock that started when they first announced their impending bankruptcy a few months back. Although it may be a bit of a blogging faux pas, I’m going to edit and re-post an editorial I wrote on another site back then, as I feel the point still merits making.
The business sections of newspapers across the nation are all carrying the not-entirely-surprising news that Borders, the nation-wide chain of bookstores, will be declaring bankruptcy, liquidating their assets, and closing their doors. All sorts of reasons are being flung around as to why this is happening: the state of the economy, competition from other sellers, particularly Amazon, and the advent of the iPad, Kindle, and other e-book devices. I’m no corporate businessman; I didn’t even finish the Bus. Ad. minor I started in college. But as I watch all of this happening, I’m reminded of a local music store that shut down 6 or 7 years ago with similar reasons, and I wonder, as I did then, if the stated reasons are really the culprits, and if this could have been avoided.
The local music store, which shall remain nameless, came to mind so readily because the excuses sounded so similar, and because I remember calling “bullshit” on it back then. The store owner said he couldn’t compete with the chain stores such as Wal-mart, and with Amazon and all the illegal downloading. That may be. But I’ve come to suspect something about customers, given some stores which survive and some which don’t. I don’t think a competing store is going to steal most of your customers away from you. You have to actively lose them first. People are creatures of habit, and it’s going to be hard to get them to abandon your store if you’re giving them a reason to want to stay.
I didn’t feel like this store owner was making an actual effort at it, or at least not a respectable one. His store was a hole-in-the-wall in a strip mall, with a sign on the building but nothing to get your attention unless you looked straight at the actual building. He didn’t run ads in the newspaper, nor on television, nor radio. The minor media blitz he got for shutting down was likely the first time many people in town had heard of the place — it was on Main Street, and it still managed to be that obscure. What’s more, he wasn’t going to be getting any word of mouth, because he didn’t run a very good store. His selection was poor, both on new titles and used titles, and his prices on new titles were worse than any other store I’ve seen; his prices on used titles weren’t very good, either, always worse than the other used CD store in town, and sometimes worse than the new prices at chain stores. I realize a local store can’t always get the sweetheart deals that a store like Wal-mart can, but that just seems like he was being delusional on his pricing. And it was the used market that was killing him; I have no doubt on this. People go into a specialty record shop looking for the old, the obscure, or just the slightly-out-of-date, the stuff which they can’t just waltz into Target and buy off the rack. He didn’t have much of that, and what he did have was anywhere from two to five times as much as the other local used CD store was charging. He wasn’t losing to Amazon. He was losing to his in-town competition, a store which is still thriving today. I was always the lone customer when I went to this guy’s store. I’m always in a crowd of dozens when I go to the other store. Further, the competing store is bright, well-lit, and makes good use of its space. His store was poorly lit, with uneven floors, and sections ordered haphazardly. It wasn’t a welcoming environment. And despite being the sole customer, it was hard to get the guy’s attention, and he didn’t stand behind his merchandise. Sure, his stickers on the used CDs said you could bring them back if they didn’t play, but I tried that once and was unable to get my money back (this was, of course, the last time I bought anything from him.)
Now, some of this doesn’t apply in the case of Borders, of course. Borders is always well-lit. Borders generally had decent customer service, and a reasonable return policy. Borders’ prices, while not able to compete with a used book store, and nothing remarkable, weren’t horrible either (well, on their books, anyway; their prices on other things were sometimes pretty steep). And they certainly weren’t hole-in-the-wall locations; there are many malls across the nation whose managers are currently panicking, trying to get someone to come in and replace what had been one of the centerpieces of their mall.
But there are other respects in which Borders is sounding very similar to Mr. Anonymous Record Store Owner. The complaints about e-Books and Amazon… yes, I’m sure those are hurting the bottom line some. But Amazon’s been around for 17 years now; you should have figured out how to compete with them by now. (Hint: It starts with being able to put something in the customer’s hand the moment they ask for it.) As for e-Books, yes, they’ve finally gotten some traction in the public’s mind… after multiple failed attempts. They’ve been trying at this since the mid-90s, it’s nothing new; the only new thing is that this time it didn’t crash and burn. So yes, you now have some new competition. But it’s still small competition at best, and I can’t help but notice (checking some books I’d want, and some that are just mainstream) that most e-Books are priced only marginally cheaper than the paperback of the same title. Terry Pratchett’s Nation? $8.99 in paperback, also $8.99 on Kindle. John Grisham’s The Confession is also same-priced in paperback and Kindle, as is Dan Brown’s The Lost Symbol. Steven Brust’s Tiassa? $15.23 in hardback, $11.99 on Kindle. All of these are Amazon.com prices. A Kindle costs $139.00. Even at the most generous difference from this quick scan (and there was seldom a difference at all!), it’s still only a difference of $3.24. I’d have to buy 43 books, all of them with at least that big a difference, for a Kindle to earn back its cost. And then I’d have a device that’s no less cumbersome than a book, and which I can’t read if the battery goes out, or if any of the hundreds of things that can go wrong with an electronic device goes wrong. If you can’t figure out a way to compete with that… you’re not trying. It’s not even like the arguable cases of DVDs and CDs, where the physical item is just a means of conveying the exact same digital item people are downloading; a physical book, having no digital component at all, is in some respects a different entity from the equivalent e-Book. You can read the same story, but you cannot read it exactly the same way. I’m not even knocking the Kindle here, really… I’m just saying that it’s trivially easy to find reasons to buy an actual physical book instead. And yet, Borders claims to be unable to convince readers to buy said physical books from them. (And yes, there are advantages to e-Books as well; I’m just saying that when your product has just as many or more advantages of its own, there’s no such thing as “can’t compete”.)
So what did Borders do wrong?
Part of it is what they chose to sell. I don’t mean books, of course. I’m reminded of a story a former co-worker of mine once told to the local newspaper in an interview. He was a consultant for lots of firms, ranging all the way from small firms such as local restaurants and the web media company I worked for at the time, all the way up to Disneyland. He helped design Toon Town, for one thing. But the story he was telling was of a Mexican restaurant in California that he’d been hired to get back on its feet. The owner’s complaint (and I’m paraphrasing slighlty here due to fuzzy memory, but the original was very close) was that “We’ve done everything we can think of. We’ve started selling hamburgers and other American food. We’re playing top 40 radio now. We’ve opened up a salad bar. But every month we get fewer and fewer customers. What else can we do?” The consultant cocked his head to the side and said “Sell Mexican food.” As he explained to the paper, when people go into a Mexican restaurant and find themselves eating a chef’s salad and listening to Barry Manilow, they don’t know why they’re there any more.
And when I walked into Borders in recent years, I couldn’t see a bookstore any more. The first thing I see is a great big cafe. Then there’s the rows of CDs and DVDs, and a few tables in the center aisle filled with board games. Bookstores have always had a certain amount of side product — they’re the main place to buy magazines and calendars — but there’s something just plain wrong about going into a bookstore and having to hunt to find the actual books. Like the Mexican Salad Bar, it raises the question of why I’m actually there. They aren’t going to have a better selection of DVDs than Best Buy, or better prices on CDs than Target. Why buy a board game from them when any department store has twice the selection at half the price? And even if I were a coffee drinker, there are coffee carts and Starbucks on every street corner. There’s usually another one in the very same mall, so even if I were inclined to get a book and read it in a cafe, sipping some slightly-burned drink with too much cream and a pretentious pseudo-Italian name, I have no need whatsoever for the cafe to be located literally inside the bookstore. And yet (and Barnes & Noble is guilty of this as well), when I walk into a Borders, I’m presented with that as the focal point of the store, as if it were the most important part of being there. As opposed to, you know, the books. Heck, in recent years, the stores were largely rebranded so that they actually say “Borders: Books * Music * Cafe” on the outside, sometimes with “Movies” thrown in there, or “Borders Books & Music”. Unless my memory is playing me false, I remember when they said “Borders Bookstore”, but I can find no evidence of that nowadays. Yet I don’t know anybody who ever called them anything but a bookstore. That’s what people thought of them as, that’s what people went there for. It’s just not what people found there recently.
Hilariously, when I visited the local Borders to see if there were any good closeout deals, I found that the company doing the liquidation had taken this off-market marketing of merchandise to its illogical extreme, and was using some of the shelves to sell merchandise from other chain stores that they had liquidated. Several of the shelves were filled with blankets. That’s right, you could walk into the liquidation sale at Borders and buy merchandise “at closeout prices” that had never been sold at Borders to begin with.
Besides all the space used up by the cafe, DVDs, etc., the space devoted to the actual books wasn’t used terribly well either. Now, I’ll openly admit that I have just barely enough claustrophobic tendencies that I don’t like narrow, crowded aisles. But there’s such a thing as too wide, also. You need to make use of the space you have; empty space had better be walking space, or it’s just space that’s removing the opportunity to sell more books. And in Borders I could walk in, and I could stretch my arms out and not even touch a book. On the one hand, it makes it handy for finding different sections (or would, if the signs weren’t too small to be seen from more than a few feet away). On the other hand… it means those sections are so small that there’s very little in them. Not using your space means you have little selection… and that’s deadly to your business. Sure, Powell’s City of Books in Portland manages to get away with having super-wide aisles and still having ample selection, but that’s because Powell’s could fit the average Borders store in their lobby. They can afford to waste space, they have plenty of it; they can do that and still have an entire bookstore’s worth of space dedicated just to science-fiction or any other major genre. Borders is just a normal-sized store, and can’t afford to waste large amounts of space. By doing so, they wind up with only a few shelves of any particular genre. And that means they can only sell the newest stuff; they simply don’t have room for anything else. Want to get caught up on a series you’ve just been introduced to? Too bad! Unless it’s a really hot series right now, they won’t have most of it. Conversely, a local used books chain, Smith Family Bookstore makes use of every inch of their space in both of their stores. Each is, admittedly, a two-story building instead of Borders’ usual one, but even one floor is considerably more full of books than Borders ever conceived of being. If you want something… you have a reasonable chance of it being there. And while it’s “cozy”, it isn’t cramped. How do they do this? Partly by not having huge gaping holes in their floor plan, but also by simply being a book store. You won’t find CDs, or DVDs, or board games, or mochalattaccinos in there. Just books. Just what you came for. Fancy that.
Granted, Borders isn’t in the used book market, so they’re never going to have the back catalog of Powell’s or Smith Family. But had they used their space more wisely, they could have kept more on the shelves than just the absolute newest titles. How many books got remaindered and sent back to the publisher simply because it was time for a new title to be put on the shelf and that book simply hadn’t sold yet… but perhaps would have had it been around longer than a couple weeks? I remember when Brandon Sanderson wrote about finishing Robert Jordan’s Wheel of Time series that one of the things he had to work around was book-sellers’ desire that the books not be any larger than the current books in the series, because they didn’t want to dedicate all that space to one book. But if they had been using their space better, that would not have been as big a concern. When you only have a couple shelves for a genre, selling becomes an “either/or” proposition with each and every book that comes in. Make enough use of your space to allow yourself to keep merchandise that isn’t new-this-minute and it’s no longer “either/or”, it’s “and”. “And” is good. “And” makes you more money.
Part of this, to be sure, is counter-intuitive to a business sense. Keep older stock on hand? Ludicrous! Right? Maybe not. After all, it works pretty well for those used book stores. It only seems ludicrous because most businesses view anything occupying the shelf as an opportunity cost. But that, again, comes down to needing the space, and if you use your space better, that’s less of a factor. Still a factor, true, but there’s no sense in exacerbating it by having a 1:5 shelf to space ratio, is there? And book stores are not the same as most stores. There’s no expiration date on a book the way there is at the grocery. Someone comes out with a new digital camera, it renders the old model undesirable, but you generally can’t obsolesce a book. And the latest, newest thing… isn’t going to fly off the shelves any faster than the slightly older thing. People champ at the bit waiting for the release dates of hot movies, CDs, and video games, but they’re generally unaware of the release dates of most books. Books don’t get that kind of publicity, unless they’re on the level of Harry Potter. With the exception of James Patterson, have you ever seen a television commercial for a book? Probably not. Even before the advent of e-Books and Amazon, it didn’t happen. Bookstores didn’t advertise specific books outside of the store itself… and with as long a history as bookstores have had, it probably means that they know they don’t get a worthwhile boost on sales from doing so. People aren’t as faddish on particular books as they are with movies (again, unless it’s Harry Potter.) So if your new stock is going to sell exactly the same as the old stock… why are you betting everything you have on the new stock? Make enough shelves to keep things around longer, and you can hedge your bets with both.
Would this have prevented Borders’ collapse? I don’t know. It’s always hard to gauge hypothetical situations, and it’s easy to play armchair quarterback on a company’s decisions. But if the recession, the competition, the new media, etc., were having that dramatic an effect on Borders’ bottom line, then it was a sign that Borders needed to change something about how they ran their stores. Seems to me like strengthening the stores’ selling points would have been a good thing. Instead, they diversified into Mexican cheeseburgers, so to speak, and Borders Not-Exactly-a-Bookstore found themselves floundering as people failed to find reasons to go there.
It looks like it was an avoidable situation to me. And it’ll probably still look avoidable when Barnes & Noble goes down the same mistaken path and files for bankruptcy in 2013.