No Single Bidder for Borders
Borders, according to several reports, is in early discussions
with an unidentified company to sell 225 of its stores after failing to find
a single bidder to buy the whole company. The chain had originally
set May 6 as a soft deadline to make a deal to sell the business.
Rival Barnes & Noble,
according to The Wall Street Journal, made an offer to acquire 10 stores along
with Borders’ website and its customer list.
Many seem to believe that access to the over 40 million individuals enrolled
in the Borders Reward Loyalty program is the key motivator in any pursuit of
the bookstore chain.
A piece on Benzinga.com speculates that Amazon.com may
be the unidentified party that is looking at a partial acquisition of Borders.
The
desire to acquire Borders’ customer list is easy to grasp, but the
piece, written by Benjamin Lee, suggests that Amazon may be interested in
acquiring store locations in anticipation of the day when it has to collect
sales taxes in most states.
"If (and when) Amazon loses this tax battle, having physical stores
would allow the company to have a greater presence in cities nationwide —
something its customers have been clamoring for. If prices are comparable,
consumers statistically prefer to purchase items at physical locations, as
they can see and test products in person. The ability to return and exchange
items easily is another added advantage," wrote
Mr. Lee.
Reports suggest that publishers are willing to work with Borders in
the hope that the chain can be saved. The loss of distribution would severely
hurt the publishing business, with many executives believing that physical
stores are still the best method for encouraging incremental purchases.
For Borders,
it is still business as usual until some resolution takes place.
"We are focused on moving forward with the execution of our business
plan," wrote
Mary Davis, a spokesperson for Borders, in an email to Bloomberg News. "We
are continuing to evaluate interest in the company as expressed through the
ongoing Chapter 11 process."
Discussion Questions
Discussion Questions: What do you think is the most likely scenario for Borders? Should it fail to find buyers, what will the loss of Borders mean for the publishing business at retail?
Borders has three major assets: their employees, the book list, and retail location. Given the quickly weakening nature of the publishing business, all three assets may not be equally desirable to one entity going forward. Some of Borders’ assets may be more or less attractive to a variety of players. Depending upon which pieces remain or which pieces Borders wants to keep, the company may emerge in a new format or maybe even in a new business.
The concept of “the publishing business at retail” is the real issue here. The definition is changing rapidly, as digital content delivery turns traditional bricks-and-mortar retail on its ear. (Just ask Blockbuster.) As I said a couple of months ago when Borders announced its big wave of store closings, there was a Borders, a B&N and an independent within a five-mile radius of my house. Meanwhile, I have not bought a printed book in the two years that I’ve owned a Kindle. Having a retail footprint may make sense for Amazon, as long as it can cherry-pick the best locations. It apparently serves a tactical purpose pertaining to the looming issue of sales taxes, but won’t be a significant part of Amazon’s overall business.
If it fails to find a single buyer, I can envision a scenario in which it sells its lists to one buyer and disperses the real estate as best as it can–even if that means selling off stores one at a time.
There’s no question Borders has been badly managed over the past few years and continues to shoot itself in the foot.
Unwilling to walk away from music, for example, it removed listening stations and now lumps everything from jazz to country in one giant section know as “popular music” which is impossible to shop unless you know exactly what you are looking for, in which case you’d be better off ordering it on Amazon for half the price. It’s flooded its stores with remainders and junk toys, candy and whatever else some genius told them would maximize sales per square foot–all moves designed to drive the best book customers right out of their heads.
That said, losing Borders would be a tremendous blow to print publishing, particularly since the chain tended to stock a broader range of books, especially in Literature than Barnes & Noble does.
The collapse of brick and mortar books stores will further accelerate the inevitable growth of ebooks in the same way the collapse of physical music stores accelerated the growth of iTunes and other digital music sellers.
What gets lost are the “browsing” purchases which are critical to maintaining healthy book sales–oh, and yes–a really nice retail environment to kill time in.
Borders is a victim of the passing parade from a wonderful place to browse for books and relax to the fast contemporary lane of e-books. Borders will sell its list and try to peddle its stores, probably one by one. Publishers will feel some pain but they struggle through and rise again.
Like so many things, book stores will likely make a comeback and return in a generation or two when the bloom is off the rose in the e-book world and people again want the leisurely comfort of book browsing again.
Unfortunately, I think the circumstances speak for themselves: 1. Borders can’t make a profit; 2. No one is willing to buy Borders.
Based on the above, I can’t imagine any real impact beyond the current employees and leaseholders.
I always loved the architecture and art book section at Borders; they always had 10-12 shelf sections of these books, which seemed endless compared to B&N’s 2 shelf sections of art and architecture books.
I do HATE, absolutely HATE the fact that they made many management and customer missteps in the past few years which include:
– Reduced sales staff to provide personalized customer service.
– Turning the information counter from a fully assisted information center to a limited assistance kiosk.
– Falsely believing that wireless headsets provided better service than internal use of paging/wireless phones/ and frequent overhead announcements. The overhead announcements conveyed a sense of responsibility to the customer and that the employees were actually doing work instead of making fun of customers over their Britney Spears looking microphone headsets. I personally found the headsets to be very annoying and wrote to Borders often asking why they made such a change. The response was that they believed the headsets would provide better service. All I saw was that they took even more customer service tasks away from the face of the consumer and became nothing more than a way for employees to chit chat amongst themselves.
– Eliminating their partnership with Amazon.com.
– No formal cleaning staff to clean restrooms (I always found Borders restrooms in terrible condition compared to B&N).
– Eliminating specialty CD collections and hard-to-find items.
These are the many reasons I stopped going to Borders.
I remember one of the original Borders Book Shops that opened in Oakbrook, IL in the early ’90s. There was so much service you couldn’t get them off your back. The bargain books were truly bargains tucked in boxes upon boxes of books and the focus was on bookselling.
I miss those days and yes, I miss the paging “Dave 222, Dave 222” in the theatrical voices you used to commonly hear at Borders over the Nortel Meridian phones.
Another dinosaur industry doomed to fail, with Amazon pricing, and Costco selling books way below retail. Add in Kindle and other digital wonders and the book stores might as well be selling horseshoes. Look at the sports industry. Foxsports.com and espn.com can give you instant scores and stories, without having to buy a magazine.
Try as a I may to mimic Gene’s optimism, I’m more reminded of the scene in Rudolph (TRDR) where the Abominable is contemplating a venison snack, and Clarice cries out “Oh, why doesn’t he just get it over with?!” Indeed; this seems to be a death spiral: retrenchments, followed by happy talk, followed by further retrenchments…I can’t see it ending in anything other than (an eventual) liquidation.
First, I don’t think Amazon wants stores. Mr. Lee’s post was pure speculation without any real factual information.
The only asset Borders has is the email list. 40+ plus names is valuable. But sale of the email list and web-business only can come if and when the Chapter 11 is converted to a 7. As long as Borders keeps pretending it has a viable plan they can’t give up the web business or the list.