Borders, Post-Mortem

At this point, it's hard to see that Borders isn't on the verge of a bankruptcy filing, the best case scenario would be a Chapter 11 that would reorganize into a much smaller company that might have a go if focusing on stores that actually make money, but even that, I can't be real optimistic because same store sales are dropping so fast that a store which makes money today might not in two years. Though we live in a country that does allow companies to spend lots of time going bankrupt and doing it on multiple occasions, witness the airline industry.

So what happened?

OK, mid 1980s, Borders is one of the best stores around and starting to spread out in Michigan a little and lend out its inventory system. It's a good system. It lets stock sell down, then reorders. One day you might have 0 copies of The Anubis Gates by Tim Powers on the shelf, the next day they'll get 3 in. So everytime you go to Borders, even if it's once a week, you might see a slightly different but always excellent selection. It encourages you to keep going back. And again, it's a really good system, and stores that use the system generally prosper.

Late 1980s, early 1990s. As Borders starts to slowly spread across the country, and in fact does so before Barnes & Noble starts to open superstores, each new opening is a major occasion. The stores have well tailored massive inventory, they are architecturally distinct, they have book people who have to pass a book test working in them, they are wonderful places to go to. Eventually K-Mart buys Borders, merges it into Waldenbooks, the mall stores generate cash to fund the superstore expansion, and in the early years of Borders as a publicly held company we are told that it is selling much better per square foot than the competition, i.e. B&N. And they have this great inventory system, that carefully tailors a large selection to each individual store on a constant ongoing basis. It isn't uncommon for a Borders to be voted the best bookstore in those local newspaper year's bests, and I would say much more common for that honor to go to a Borders than to a B&N.

Mid to late 1990s. B&N invests in a major improvement in their inventory systems. For new books, the store-specific Borders inventory system was pretty much unique through 1995, I first noticed in 1996 when The Kiss was published that B&N was starting to do the same. B&N also develops a quick replenishment system, so if a store is supposed to carry a book and sells it, another copy will be on hand in a week or ten days in most instances.

Late 1990s. Against a more competitive B&N, the creaks in the vaunted Borders inventory system become apparent.

Problem #1: that sell-down and reorder thing from 1985 doesn't work so well now. Borders will order Pocket backlist once every x weeks, and for some books that don't sell as well maybe reorder them once every y cycles. And once ordered, books take much longer to move from the publisher to the Borders warehouse to the Borders store than to move through the supply chain at B&N. If a Borders and a B&N are both supposed to carry Deathstalker, as an example of a typical must-have JABberwocky book in 1998, and both sell on the same day, the B&N will have a new copy ten days later, the Borders might be back in stock six weeks later.

Problem #2: especially in genre fiction, you need to invest in inventory because it's very hard to sell book #4 in a series when you can't find the first three books, or to sell #1 to somebody who notices #4 when it comes out and says "hey, let me try this series out." The Borders inventory system can't cope with this. By focusing on performance at each individual store, it would delete an earlier book in a series that maybe hadn't sold in a year, and then that store would have trouble as the series progressed because it would have all sorts of strange inventory gaps. That wasn't a problem when you had only 28 really fantastic locations, it gets to be a problem when you have 82 locations and some don't do well in sf/fantasy. B&N on the other hand would keep books on hand for core series at most all stores even if some particular stores weren't sellling them. I could go to the Evanston IL Borders, see all these books they should have but didn't, then go to the B&N across the way and see them. They were yellowed copies from sitting on the shelf and a printing behind because they hadn't reordered in a year, but they were there.

Which brings us to Problem #3, lack of brand consistency. At any large chain whether its Home Depot or Express or Costco you have bigger stores and smaller stores with varying selection. But at Borders, the computer would happily reorder lots of older titles forever and ever at the best stores that sold one or two copies a year at those very best stores while cutting even core titles by reasonably important authors at inferior stores. The wonderful store #89 in Columbia, MD was really like a completely different store than the quiet #179 in Commack, NY. One could have twice as many items as the other, 35 vs. 80, let's say, circa 2000. A B&N might be 45 vs. 65, not that there wasn't a gap but it wasn't near as big in percentage terms, and the B&N was more likely to have the core backlist titles like all the Deathstalker books by Simon Green or all the Blood books by Tanya Huff.

These problems were apparent for a long, long time.

But whatever problems the heads of Borders would solve, it wasn't these.

Maybe it was a real problem that all of that strange quirky store architecture with all kinds of weird diagonally places shelving lines was hard to navigate. And one CEO said this was so, and remodeled all the character out of all of the old stores and made all the lines nice and straight.

Some other CEO from supermarkets, he felt Borders needed category management like in supermarkets where the big supermarket chain would partner with a marketshare leader like Procter & Gamble to plan how the detergent aisle would look.

Or, now that Borders was a national chain, we need to function like a national chain selling our display space in the front of the store and getting our managers to put their endcaps up when they are supposed to instead of still acting like it's 1992 and you actually have local color.

Then we got more remodeling, replacing those character-filled shelves where the hardcovers and mass markets were shelved separate in the genre categories and huge amounts of excess mass markets could squeeze in right behind (sometimes books could get lost back there, I loved going through the entire on-shelf backstock and finding them) with unified hardcover and mass market shelving. This was a disaster. The remodels were very disruptive to the stores, and the new shelves were less efficient, so stores would run out of space and return books at their whim which would then not be replenished for several weeks which would exacerbate the whole out-of-stock thing.

One of the things you might notice is that the charm of Borders in its best days at its best stores was that it had carefully tailored inventory unique to each store, and each store felt like it was in and of its community instead of being just another Borders. Many of the changes made in the first decade of this century slowly took away bits and pieces of the best characteristics of the best Borders.

You may notice that none of the changes all these CEOs were doing sped up the supply chain. Even after Borders put in a reorder for a backlist book, it would still take two to four times as long for that book to make its way back to the store shelf. It could still be weeks after a book sold before the reorder was even placed. There were some efforts made by the sf/fantasy buyer in 2006 to rationalize the sf/f section so that A stores had a full A range selection thus doing away with some of the weird gaps that had developed over the years, but this didn't help much at the D or E store range to reduce the overall inconsistency of the brand.

Sometime when Borders tried to solve a problem, like getting a new inventory system for its mall stores in the mid 2000s, it managed to fail. Now, really, all the inventory management software that has to exist in 2005, and Borders manages to buy something that doesn't work? How, how, how, could they manage to do that?

And then somehow or other, everyone at Borders failed to notice that the mall store business was no longer generating cash and had become an albatross. George Jones was the CEO when the company first announced it had cash issues in the first half of 2008, which was just about the same time that the company unveiled his pet project of a new store concept. As I have blogged about, this is the one unforgivable thing, to either not notice the company is running out of cash because you're fiddling with your new concept or to still fiddle while you run out of cash. And what happened after was more unforgivable still. He cut back title counts. So all those books, the Hot Blood anthologies in their Kensington reissues a good example, that were on sale at the best Borders and not too many other places, were cut. Well, people noticed. The best Borders were no longer appreciably better than the best B&Ns, the worst Borders were still worse. They did try and remedy this some in Fall 2009.

The odd thing is that the new concept store George Jones fiddled with in 2008 was focused on digital initiatives. What if Borders had gone out to an all-out embrace of the Sony Reader then, and not fallen behind so miserably on e-readers? Christ, what if Borders had realized it needed a website, instead of being a hopeless third, then ceding to Amazon, then investing a fortune to try and regain all that lost ground.

I can forgive Borders some of its recent transgressions. The feeble Area E attempt at selling eReaders is justified when you are losing same store sales quickly, don't have cash, can't afford to have dedicated staff standing at the front of the store. I was upset, but I can forgive that. But I can't forgive idiots who think it's OK to go ten years taking eight weeks to replenish a book that your closest competitor can replenish in eight days. That's dumb-ass, and it was allowed to perpetuate under many CEOs for many years.

And I did write letters to Borders CEOs over the years to discuss some of these things.

Let me be clear, I want Borders to survive. As I've explained, we need more than one big chain. This week's case study: Brandon Sanderson's THE WAY OF KINGS was the #7 fantasy hardcover on Nielsen Bookscan last week, a major impressive showing four months after publication. As of a few days before Christmas, B&N put this title on to "No Replenishment" and has sent out the call to all their locations to return all of their copies. Now, do I want the fate of every one of my clients tied in brick-and-mortar to what B&N is doing? God, no, please, anything but. Poor Jig, in a B&N world, Jig is dead. Hard to even know if Jig's creator would have had a chance if Jig had been relying on only one major chain.

But if you're wondering why it seems very likely that Borders will be seeking court protection in the weeks or months to come, I think this post is as good an explanation as you will find, anyplace.

It's hard to even know whether to encourage people to shop at Borders when they need the business but maybe will never be able to pay the publisher or reorder a copy if they can't get credit arranged, or to just throw in the towel. I've been shopping at Borders for almost 30 years, 225 of their superstores, and it's a damn shame.