Borders UK

While I'm cautiously optimistic that Borders is having an OK holiday season (it seems to me they've been less promotional with the Borders Reward coupons, which is a good sign), Borders UK is officially dead, a few years after being sold off to local management in a leveraged buyout.

Other than for some lease guarantees and damage to the brand equity, this doesn't directly impact Borders US, but it's a very sad day nonetheless.

When Borders decided to open up stores internationally in the late 1990s, I was a big fan of the idea. In the UK, it seemed smart that Borders purchased a local retailer Books Etc. which had some nice stores, mostly mall, but ranging from a tiny closet on Holborn St. to a huge flagship at their Charing Cross HQ. And it was exciting to me to visit the very happening Jam Factory Borders in Melbourne Australia in 1999 or the flagship UK store on Oxford St. when I went over for London Book Fair. While start-up costs led to some large losses, sales trends seemed OK as more stores opened enabling the company to leverage its fixed costs over more stores and bigger sales.

But something odd happened to the international operations after 9/11. With diminishing tourism, it was to be expected some that sales at an Oxford St. or Charing Cross road store and other flagship locations like that would flag. But while most of the world recovered with time, the bad trends that emerged at international Borders locations after 9/11 never really reversed. Kind of like how the Toronto Blue Jays seem to be one baseball franchise that never totally recovered from the 1994 baseball work stoppage, 9/11 seemed to have an outsized effect on Borders overseas.

And after that, things snowballed. The challenges in getting a reversal of sales trends led management to slow down on expansion and do some disinvestment. Ultimately, the decision was made to sell, and the Australian and the UK operations were sold off in separate fire sales to separate owners. The buyers of the UK operation seemed to struggle almost from the very start, parceling off this piece of Books Etc., later selling off five leases including the Oxford St. store to a fashion retailer.

Macro, the UK bookselling market was not in good shape. The large big box retailers like Tesco started to heavily discount books. The chains reacted by becoming heavily and boringly promotional themselves; one London Book Fair spring even I got bored walking into another bookstore because the front of every store whatever the chain looked exactly like the front of every other.

But micro, I can't explain why 9/11 had such an outsize effect on Borders internationally, or why Borders UK ended up running into the ground way more than other book retailers. I can tell you why Borders US has had troubled times and how the new CEO here is doing good things to turn around, but even with decent enough experience wandering about British bookstores over the past ten years, the UK situation is a puzzlement.

There are some nice rants in the comment section on this article from the Bookseller, but none quite explain things. You read this October interview with the head of Borders, you wouldn't think the company would be gone in two months.

I do know that there was a huge performance gap between the major flagship stores and the stores in retail parks in Beckton or Watford, enough so that you have to think either rents must have been very cheap or the company was making too many really bad real estate bets. But is that explanation enough?

In the US, the bankruptcy process is much more friendly to incumbent management and opportunities much more generous to reorganize the business in friendly hands. In the UK, a company in trouble is put into administration in third party hands, and it seems as if the administrator may have spurned offers from Barnes & Noble and/or the old Books Etc. management for some portion of the store base. Why? Who knows.

Waterstones, owned by HMV, is now pretty much the only large retail bookstore chain in the UK. So it's them, Amazon, and then WH Smith's and the big boxes, which can move large quantity of some things but none at all of most because their shelf space is variable and for the most part very very small. Borders wasn't a huge chain but was at least some counterweight to the larger players.