Used Books Blog

As recently reported, Borders book stores may be for sale after securing $42.5 million in financing to continue operations. However, the terms of the financing (12.5%!) may make it unappealing to prospective suitors. I’m not saying I could get $42.5 million, but 12.5% interest seems excessive in this setting, even amid the credit crisis.

So what’s going on at Borders and what does this really mean? As someone who lived and breathed this industry for three years I think this is, in some ways, a positive sign. However, it might be too little, too late. So how did we get here?

Borders had an astounding lack of vision, strategy and execution. They rested on their laurels and didn’t see the train rumbling down the track at high speed, high beams on and whistle shrieking.

I remember walking into Borders for the first time (longer ago than I’d like to admit) and being overwhelmed. It was big and it had books and music. That’s right, there was a time when Borders was a cut above Barnes and Noble, when you sought out the Borders location nearest you. It was cool and cutting edge. You wanted to buy books there.

Not so today.

Barnes and Noble responded with bigger stores, added music and partnered with powerhouse Starbucks for their cafe implementation. They made their stores inviting and implemented programs (author readings, expanded children’s sections) that would encourage people to stay longer. Their strategy is simple. The longer you’re in the store, the better chance you’re buying something. Trust me, as a new parent, the children’s section and train table in particular is a massive draw. And yes, I spend plenty on impulse purchases.

Barnes and Noble evolved and surpassed Borders in the offline market. At the same time, mass market retailers like Target, Wal-Mart and Costco began selling books and ate into the traditional bookstore market. And then there was this little thing called the Internet and the rise of Amazon.

Barnes and Noble may have been slow to fully realize their position on the web, but they understood the need to be a stand-alone entity. Borders on the other hand decided to ‘partner’ with Amazon. I don’t know the details of the arrangement but Amazon made out like a bandit and Borders was slow to realize they were getting massacred online. Amazon essentially swallowed the Borders brand online. (In some ways it would make more sense to put an Amazon.com logo on all the Borders stores.)

Our business development team at Alibris was often flummoxed by the lack of clarity at Borders and the glacial speed of their decision making process. Visits to the Ann Arbor offices were gloomy and depressing because of the inertia and vise-like grip on status quo displayed. Yet, there were signs of life, of rebirth. New blood with new ideas fighting to turn the company around.

The decision to sever their relationship with Amazon and build their own ecommerce destination was a turning point and the right move - just 8+ years late. They’re also launching a new concept store in the hopes of, once again, leap-frogging Barnes and Noble.

The financing comes from a hedge fund who also happens to be the largest stakeholder in Borders. Off the cuff, it seems a backhanded vote of confidence in the new direction. At a minimum they want to see the impact of a new website and the new concept stores. They want to see if Borders can catch up, though admittedly in the stiff headwind of a rocky industry and economic climate.

Last call! It’s time for Borders to put up, or be shut down.

This entry was posted on Thursday, March 27th, 2008 at 1:39 am and is filed under Book News, Used Books, Books. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.