So what happens now?

Unless you’ve been living under a rock or deep within a cave the last week or so, you’ve heard over and over again about the final demise of Borders Books.  Everyone seems to have their own opinion on what caused the once powerful bookseller to go under.  Fingers are pointed at the downturn in the economy, the e-book revolution, Amazon, and publishers.  Some even point at the real heart of the matter, in my opinion — Borders’ upper management.  So, what is the truth and is the demise of Borders an omen of things to come?

The simple answer to what went wrong with Borders is “all of the above and more”.  Borders and Barnes & Noble came to prominence at a time when superstores of all flavors were the rage.  Readers were dazzled by the huge selections offered under one roof. If they didn’t have what you wanted, you were sure to find something else that intrigued you.  Plus, they were more than happy to special order any title they didn’t carry.

Borders did a lot of things right — in the beginning.  But, for the last ten years, they have done more things wrong than they’ve done right.  One of their first major missteps was when they contracted with Amazon as their online presence.  I remember the first time I went online to check availability of a title at Borders.  The local store didn’t have the title but there was this new button that let me order it online and have it delivered to the store or to my house.  Cool.  But when I clicked on the button, I was redirected to Amazon.  What?!?  I hit previous page and tried again.  Yep, I was taken to the Amazon site.  Barnes & Noble didn’t do that.  They had their own online store.  So did the local indie bookseller still in business.  So why is one of the largest bookstore chains in the country using their competitor, the online presence so often cursed and denigrated by booksellers everyone as being the epitome of evil?  How much money did Borders lose this way?  More importantly, how many customers became Amazon customers because Borders was sending them there?

Then came the increased popularity of e-books.  Amazon brought out the Kindle.  Sony brought out their own line of e-readers.  Kobo had dedicated e-readers and Barnes & Noble brought out the Nook.  Where was Borders in all of this?  For a long time, nowhere.  Then they started selling the Sony readers and Kobo readers in their stores.  Then they partnered with Kobo, much like they did Amazon (although, to be fair, Borders did own a share of Kobo).  Would having their own dedicated e-reader have saved Borders?  Probably not, not without a lot of other changes, but it might have bought them some time.

Did Amazon put the final nail in Borders’ coffin?  No.  Did it help bring down the bookseller?  Most definitely.  The lower prices and the ability to find any book you want lured customers away from the bookseller.  But, let’s be real here, folks.  The responsibility for a number of customers going to Amazon instead of Borders lies with Borders.  They quit stocking as many books as they once did.  Worse, they quit stocking as many mid-list writers as before.  Sure, you could find that best seller and that newest “hot” author.  But the work horses of publishing — the mid-list authors — were quickly disappearing from their shelves.  Add to the fact that you could place your special order with your local Borders and it might or might not ever arrive there and, well, you have dissatisfied customers who will look elsewhere for their books.

Fast-forward to the announcement that Borders was filing for bankruptcy.  Publishers weren’t being paid for books delivered to the stores.  Landlords were being blamed for not renegotiating leases.  Borders was going to be forced to close a number of stores.  Guess what?  A number of stores that were shut down were stores that were posting profits while stores that weren’t were kept open.  Does anyone else see the flaw in that?  So, was anyone surprised when Borders asked publishers to keep sending them books and deferring payment for them?  What I never understood was that there were publishers who did.  Now those publishers are out even more money than ever.

Borders is now in liquidation.  Soon, it will cease to exist and there are cries going up about how this signals the end of bookstores.  But does it?  Or is this a very good lesson in how not to run a company?  Borders failed to adapt to the changes in the economy and in market demands by their customers.  Borders often failed in customer service areas.  (A caveat.  I know there were some Borders stores where the employees were knowledgeable and more than happy to help you.  But that seemed to be the exception and not the rule.) Instead of adapting or even reinventing their market plan as customer demands changed, Borders took away space from books to add stationary products — and, sorry, but who writes letters these days — and educational games and expensive DVDs (which could be bought at much lower prices at the local Walmart or Target).

So, back to my initial question.  Are we entering a new age in bookselling now that Borders is gone?  I don’t think so.  I think we are seeing the natural evolution of the market.  Bookstores need to take advantage of being able to sell not only hard copies of books but electronic versions as well.  This can be done by becoming part of the google e-book market.  It can be done by letting small e-presses and authors sell gift cards for their books.  Bookstores need to be inviting.  In other words, not only do they need to be well stocked but they need to have knowledgeable and personable employees.  They need not look like a generic store.  Have nice lighting, comfortable seating.  Be willing to take special orders — and make sure those orders are fulfilled.

More than that, I think we will see the return of specialty bookstores, smaller stores that stock only mysteries or romance, etc.  These were the stores that managed to survive in the face of the big box stores because of customer loyalty.  But the key for this to happen is tht the stores that open do so with sufficient operating capital to function for several years without profit.

But there is another player in this that has to understand that the market is different now than it was five years ago, much less ten or twenty years ago.  Who am I talking about?  The publishers.  Those houses that have been around forever and have become dinosaurs.  They have dragged their corporate feet when it comes to e-books.  They continue to hang their survival on overpriced hard cover books — something most readers can’t afford any longer unless they order from Amazon.  They are sacrificing mid-list writers, their bread and butter, for big names that aren’t selling like they used to.  Worse, they use accounting systems that aren’t accurate and one day authors will finally have enough and will band together to demand an accounting and houses will fall.

What does this mean, it means that we have already entered a new phase of publishing.  Borders was a victim of this new phase but not because of any one factor.  Mismanagement on a huge scale teamed with the change in customer demands and often foolish decisions by publishers all combined to bring down the bookseller.  Other factors were present as well.  Does it mean there will soon be no bookstores?  Not at all.  As long as there’s a demand for physical books, there will be bookstores.  They just won’t be on every corner and there won’t be two or three around every mall.  We might have to actually drive a few minutes to get to one.  But you know what?  That’s how it used to be.  So you could say we are taking a step back in time.

No, the real question we should be asking is how many publishers will be unable to recover from the loss of Borders.  Not so much because of the loss of shelf space.  That won’t help the industry, but it’s not a killer.  There are other options out there for publishers, if they will pull their heads out of the sand long enough to see them.  No, what may bring down at least a few publishers is the amount of money owed by Borders to them.  In some instances we are talking debts in the millions.  For an industry that is already suffering, that is going to be hard to absorb.

What will be the result?  Short term it’s hard to tell.  Authors are going to see smaller royalties and even smaller advances than now.  More mid-listers will find themselves not being picked up by their publishers even though their numbers have remained solid or even increased.  For readers, we’re going to find it even harder to find some of our favorite authors and we will see yet another increase in the price of books.  E-books from the main publishers will continue to be priced higher than many are willing to pay.

It’s the long term implications that are harder to predict. My gut feeling is that we’ll see some of the major houses either selling off huge chunks of themselves or doing major reorganizations, closing down lines once thought to be sacrosanct — in an attempt to stay alive.  But publishing will survive.  People want to read, despite what we’re told.  The question becomes not, are we entering a new age but can the upper managers of the large publishers learn from past mistakes and move their houses back into profitability or will they go the way of Borders?  I’m hoping for the former but expecting the latter.  The only thing for sure when it comes to publishing is that the ride is going to be a bumpy one.

13 comments

  1. We have a handful of small indie stores within reasonable driving distance here, long-established ones which have survived the whole bumpy ride of the past decade or so. Because each of them knows who and what they are. If I go to the one just around the corner from me and say, “My kids really loved those Harry Potter books. Do you have anything else like that?”, they will quiz me as to whether the kids were most attracted by the magic, or the puzzle-solving, or the exciting adventure, etc — and then direct me to the Nancy Drew/Hrdy Boys stacks, or to Lemony Snicjet, or Goosebumps, whichever matches my answer. And if they don’t carry the sort I’m looking for, they’ll offer to order it, or recommend another nearby shop that carries that sort of books instead. If I ask that same question in the nearby Borders, or the Books-A-Million, or any of the *three* B7N’s within the sam perimeter, I’m likely to get, “Fantasy is over that way.”

    Wal-Mart is better than being Wal-Mart than anybody else. But the big-box bookstores are trying, essentially, to be “niche-WalMarts”. If I wany scads of books at discounted prices and minimal customer service, the WalMart is closer to my house than any of them.

    1. Stephen, you’re lucky to have that many indies so close. We have a couple left in the DFW metro area. Most fell to not only the influx of Borders and B&N but also to landlords raising rents so high they, and many other small shops, were forced out. Now that there are empty storefronts on every corner, rents are coming down. Landlords are learning that it is better to have an income stream than to have empty property.

      You also hit on why the indies can make a comeback — if they are willing to go that extra mile. How many of us will willingly pay a little bit more for something if we get good service and are called by name? I’m betting a lot, especially if we know that the bookstore will start ordering in books we happen to like if we prove to be good customers. So I’m here with fingers crossed that we see a resurgence in indie stores.

      1. Amanda, remember that Norfolk/Virginia Beach is a kind of weird place. Taken all together, this metro area is actually the largest “city” in VA, but we still have significant parts of fully-developed town where they pretty much roll the sidewalks up at night. Tradition and plain old cussedness run deep ’round he-ah.

        And something like 20% of the whole local economy is either directly or derivatively driven by being home to both the largest naval base in the world (and nation) *and* the master jet base for the east coast. We Sailors tend to have a very wide range of tastes, and we can be amazingly particular about our entertainment. Single Squids living in barracks also tend to have a higher-than average percentage of their income available to spend on fun, too. So, the indies that get discovered by enough Sailors generally do ok.

        But even without us Squids, the natives in this area are kind of prone to that weird mindset, too. The indie store closest to me is two doors down from a store that specializes in vintage music, with nearly half their stock on vinyl — and they’ve been in business since vinyl was all there was to sell. They know their music, and they know their clientele. You give them a lyric-fragment you remeber from high school, and one of them will walk you over and pull out that Triumph album for you. And if you come back in less than a month later, even money they’ll remember the question.

        (And I *really* wish I had proofed that first response before posting it. Yikes …)

  2. I’m hoping indie bookstores really make a comeback. I like the coziness, the camaraderie, the unique (and more local) offerings. Will we miss Borders? Sure. For about a minute. Then we’ll move on.

  3. Shelley, the fact that indies can and do stock for the local taste in books is a prime example of one of the things Borders did wrong. They took ordering power away, on the whole, from local managers. Books were ordered on a regional/national basis so that every store had basically the same stock. It didn’t matter what the local customers wanted.

    Will I miss Borders? Yes and no. Yes because I mourn the loss of any bookstore. Also because our local Borders — which was profitable and yet was closed in the first round of shut downs — had a wonderful community liaison who loved working with local libraries and authors. Other than that, I won’t miss them at all. They had fallen a long way from the company they had once been.

  4. Another piece of the what’s wrong with the big-box marketing model just fell into place as I re-read this. Thanks Amanda. 🙂

    The way I see it, my B&N membership card is essentially a “loss-leader” mechanism. It gets me to come in for the huge discounts on new releases and best-sellers … but that only works if the other half of the “loss-leader” marketing method is operable. When the grocery store gets me to come in for $4.99 rib-eye, I’m likely to buy potatoes and Texas toast and so on to go with it. But if you give me a #0% discount on Dragon’s Ring, and I discover that I love it … what good have you done yourself, if none of Dave’s other titles are anywhere in your store? You have, in essence, *pushed* me onto Amazon, or into a used-book store, rather than giving m incentive to come back into your grocery store to stock up on baking potatoes and Emeril’s steak seasonings.

    1. Steve, you’re right and that is something the publishers and the big box stores haven’t quite figured out. They will keep the so-called best sellers on the shelf, even when they aren’t selling, but will pull books by mid-listers off the shelves because they might not be selling well in NYC (or another major market region), even if they are selling well in other parts of the country.

      It’s the same lack of thought publishers show when they bring out book 2 or 3 of a series but book 1 isn’t available. That really is a head scratcher.

  5. I guess we live in interesting times. I feel sorry for the Borders staff, not such a high paying job and many of them do it because they love books.

    1. Chris, the employees, those who have slogged away in the stores and in non-executive offices, are the ones I feel for. It’s hard to work for a company and be enthusiastic about it when the company apparently cares little for you or for your customers. I know from talking with some of my friends who worked for Borders that that is exactly how they felt. Now I’m jsut hoping they can find jobs soon.

  6. The B&N membership card is mindboggling. The store could buy my loyalty with a discount . . . but make _me_ pay to be loyal to them? Who are they kidding? I buy the few bestsellers I read at the grocery store for a big discount. Otherwise, I have to be in an absolute “must have it right now” frenzy to buy anywhere but Amazon.

    1. Pam, you just hit on my problem with the B&N discount card. I had a card from them when it was free. But when I had to start paying for it, I quit renewing it. The discounts aren’t enough to justify that additional nit to my pocketbook. Of course, part of that is also because I simply don’t buy as many hard cover books as I used to. My thought is that if they really wanted it to be a loyalty card, it would be free. It would be a marketing tool where they could skew advertising emails to someone based on that person’s purchases which are tracked through their card number. But maybe that makes too much sense.

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