Borders Looking for a New CEO, Again
When Ron Marshall replaced
George Jones and joined Borders as its CEO last January, some were not keen
on the change of management.
David Schick of Stifel Nicolaus & Co.
wrote at the time, “We believe such powerful macroeconomic factors are at
work that a management change could confuse the key constituents (vendors)
and cause incremental friction in the model. Borders has seen too much change
in three years, in our view.”
Change, however, is in store for Borders again. Mr. Marshall has
chosen to leave the chain to join another retailer (reportedly A&P).
Mr. Marshall who came to
Borders billing himself as a “turnaround expert” clearly failed to do that
at the bookstore chain despite it being “a powerful brand with millions of
loyal customers who love to shop in the stores.” The chain’s same-store sales
declined 14.6 percent for the recent holiday period.
Michael Norris, senior trade
analyst at Simba Information, told The Associated Press, “Ron never
answered the question that I had since he took over year ago, ‘Why should
I shop at Borders?’ Improving the cash flow by itself doesn’t do much to
improve customer flow.”
The choice of a new CEO “needs
to make the Borders brand really mean something,” Mr. Norris said. “You have
to give consumers a compelling reason to go to the stores when consumers
can literally pull out a smart phone and access any content they want.”
Borders’
CMO Michael Edwards will serve as interim
CEO of the company while it conducts a search for a permanent replacement
for Mr. Marshall.
“We have a clear commitment to drive the top line at Borders Group and there
will be no interruption of our strategic plans and efforts to focus with great
energy and determination on this goal during the transition,” said Mr. Edwards
in a press release. “I look forward to continuing momentum in this direction
while we remain disciplined on the bottom line, where we have made significant
progress over the past several months. I am confident this will be a smooth transition
and appreciate the continued support of all of our partners and associates.”
Mr.
Norris sees Mr. Edwards as a positive change from Mr. Marshall.
“You’re
going from a guy who ate spreadsheets for breakfast, lunch and dinner to
someone well versed in creating branding initiatives,” he told the AP.
Discussion
Question: What is your assessment of Borders at present and what do you
expect to happen at the chain with the latest change in leadership? Do
you have any recommendations for the new management?
- Borders Group Announces Departure of CEO Ron Marshall; Chief Merchandising
Officer Mike Edwards Named Interim CEO – Borders Group/PRNewswire via COMTEX
- Borders Chief Marshall
Quits After Year, Said to Take A&P Job – Bloomberg/BusinessWeek - Borders Group CEO Marshall
leaves for another job – The Associated Press/Yahoo! - Borders Group Announces
Management Changes Including New CEO; Holiday Sales Results Also Reported
– Borders Group/PRNewswire-FirstCall
Borders lost critical ground. All the attention to cost cutting did nothing to build the customer experience and loyalty. As a loyal Borders customer, I’ve suffered through the loss of inventory, insane front-end labor scheduling and the addition of toys, remainders, candy, etc. It’s time that Borders remembers that it’s a bookstore.
Here’s an example of the sort of nuts & bolts issue that is holding back Borders: If you try ordering “Game Change,” the best-selling non-fiction book in the country, you’ll find it in stock at Amazon but on two weeks’ back-order at borders.com. And doing a bricks-and-mortar search for the same title shows about half the stores in my trading area to be out of stock.
It’s very hard for the also-ran in the bricks-and-mortar book business to compete at this level of execution. Barnes & Noble is showing sales growth at its website that will start to offset comp sales declines at its physical stores. (And these sales drops are more modest than Borders to begin with.) If B&N capitalizes on the e-book trend with its own device and compatible items like the Apple tablet, it has a credible long-term way to compete against Amazon.
Meantime, Borders has struggled for years with a viable competitive argument to shop its stores. It has withdrawn from a lot of the music and video business that once gave it a brand identity, but it’s left with overspaced stores as a result. But the bottom line: It doesn’t matter whether the new CEO is focused on the balance sheet or on branding initiatives until he or she gets the execution right.
The tumult at Borders, at the macro level, is indicative of the single largest challenge facing retailers–too many square feet chasing too little demand, current or prospective. At the micro level, Borders was never able to create a brand proposition to effectively compete with Barnes & Noble, one of the top brands in the country. Add in the explosive growth of e-readers and digital distribution and it becomes extremely difficult to develop a positive scenario for Borders. Comparisons to Circuit City and Linens N’ Things come to mind. Both fine, multi-billion dollar companies that became redundant.
We’re in a Darwinian, survival of the fittest stage. Expect more casualties.
Borders’ leadership panicked and instead of building on their core competency they searched for other avenues to add revenue. They need to focus on their customer and build loyalty programs that makes a consumer drive out of their way to go to a Borders rather than someone else. It’s a multi-step process of building back their market share.
But just like flipping a house, the bones are there. They will need to first train their associates to recognize and call important repeat customers by name, go the extra mile for customers, and adopt the best hotel chain philosophy of “it’s a pleasure to assist you.” This rather inexpensive maneuver will be one of the steps back to building up a good brand.
Inventory is the second. There’s nothing more frustrating for someone to go into a book store to buy a popular book and here, we’re out! Unacceptable! This drives the customer to order online and they may not come back!
I don’t understand the purpose of a brick and mortar book store. Between Amazon.com, Wal-Mart, and the public library, why would someone pay more for what others sell or give away for free? The business seems so redundant.
There was no monumental moment for Borders in the last year that really suggested that change was going to come. It felt as if Ron Marshall fell asleep at the wheel. That was until the end of 2010 when the decision was made to close 200 Waldenbooks locations.
Waldenbooks, as a brand, had a much stronger and more loyal consumer base than Borders did. When Borders did away with the Waldenbooks Preferred Reader program, they turned off a lot of costumers. And since then they’ve been closing store by store. The Walden’s experience did give a customer a reason to shop in store. And that experience is lost on the large mass-produced stores like Borders. The customer came to know the retailer, came to trust them, and would listen to advice. They could order books through the store without the hassle of online shopping. It was a friendly neighborhood bookstore that catered well to customer service and assisting the customers. It is a shame that Borders closed all these locations.
As we have witnessed with the demise of Linens n’ Things, the consumer did not need two chains selling the same products, and Bed, Bath & Beyond emerged as the victor.
As we have witnessed with the demise of Circuit City, the consumer did not need two chains selling the same products, and Best Buy emerged as the victor.
As we are witnessing with the demise of Borders…. Well, you get the idea.
There is no need for both Borders and Barnes & Noble, and B&N will emerge as the victor. I will be surprised to see Borders survive as a stand-alone company, and in fact expect them to declare bankruptcy within the next 30 days. However, due to the fact that Pershing Square has a considerable investment in both Borders and Target, I would not be surprised to see the Borders name live on within a Target store, and see Target expand their book business.
With respect to Ron Marshall, he provided little marketing expertise or leadership to Borders, and he is leaving the company in worse shape than when he arrived, with holiday sales down almost 15%. Internally, employee morale is at its lowest. Borders is not in good shape, and Marshall did little if anything to improve the retailer’s situation.
I have to say that Borders’ future doesn’t look real bright. I’m just not sure there is space left for them after Amazon, Barnes & Noble, and soon to be Apple.
I’m thinking the new CEO’s name might just be Captain Edward John Smith. (He was the Captain of the Titanic.)
Mr. Livingston does not understand the purpose of a brick and mortar bookstore. The purpose of all bookstores, whether chain or independent (my choice always, as a five-year veteran of Denver’s Tattered Cover), is to allow readers to find things they would not otherwise know about. Books are like clothing–you have to try them on, and you have to be exposed to things that challenge your beliefs. Books are also like food–consumption is necessary for a healthy and vigorous mind. You can argue that Amazon allows you to be exposed to contrary ideas and can feed your mind, but it’s so much easier to go to a bookstore, and better for the community in which you live.
Another purpose: to bring humans together. Not all of the transactions in a bookstore are between the bookseller and the customer–there’s something to be said for the serendipitous meeting of two people with common interests in their favorite section of a bookstore. And there are author signings–a chance to meet your literary or non-fiction heroes in the flesh–no website can do that.
You can keep your Amazon and your Kindle, and after today, your iSlate or whatever Apple is going to call it. Give me books made out of paper and bookstores with four walls and a ceiling.
Obviously Mr. Livingston hasn’t seen the parking lot of Barnes & Noble. At least in my market, B&N and a local small chain are jammed–daily, every day of the week. Why? Maybe the leadership at Borders ought to take a field trip. There’s a quick answer to be found.
Borders’, with 515 superstores–377 in its ‘specialty segment’–boasts just over a whopping 30 locations in its home state. In this market, they are toast–gone. In their home state, no less. They abandoned it. I thought to myself when I read the articles, oh yeah, I remember Walden Books, haven’t seen them in years and they weren’t the bookstore of my choice at any time and obviously not the consumers’ either.
Why? Just visit a new Barnes & Noble. Bookstores are all about the experience. Borders or Walden, when they were in this market, never had one. They were poorly merchandised, poorly staffed, and lacked any sort of appeal. They stand no chance whatsoever of making a return.
A visit to our newly opened Barnes & Noble is an experience. It is a destination. It is an outing. It is entertainment. They have become masterful at handling book signings that draw hundreds if not thousands in some cases. Borders or Walden for this market doesn’t even rise to the top of mind when you think of books. They never did.
Certainly the trend is heading digital, however, I can’t see that bothering the experience at the leaders. They will still find a way to manage that change because they understand the experience factor.
An observation that seems to fit falling stores sales. Anecdotal evidence comes from seven visits to four different stores. On five occasions (70+%) the customer service desk had no one waiting to help. That is a change from earlier experience when the desk seemed to always have one or two folks waiting to serve guests.
The culprit for this may be task management. Stores are tracked on accomplishing whether assigned tasks are completed and are of course tracked on total payroll. When tasks are assigned without incremental payroll to complete the tasks something has to give. That “something” is usually tasks that the home office cannot track by check box but can by profit and loss statement customer service.
I don’t think it’s the CEO’s problem. The business model is stale and un-executable. Amazon (and recently Walmart) has done an amazing job of bringing book selling into your home. Why schlep out to Borders when I can get the book I want at the best price with amazing service, etc. The whole experience of book buying was lost long ago with awful service and questionable allocations by bricks & mortar operations. Batman could be the CEO of Borders and it would still probably fail….
Yes there is a clear shift towards digital books and perhaps paper books could soon be a thing of the past. But it’s also the case with categories like greeting cards, paper photos, and photo albums and so it was with typewriters. The key is to change with times and yet carve out its own niche. Amazon did it by being the pioneer of change. B&N is trying with customer experience and Walmart with price.
For setting things right, Borders could start with a focus on stores. Bring the excitement back to stores. Invest on store staffing and training. Get a robust online and mobile strategy and a CEO who could inspire and motivate the staff to go that extra mile in customer service. Perhaps they could try new business models with used books, book rentals and storytelling.
Personally knowing the new (temporary CEO) and some of the talent they have brought on (especially in the customer facing/loyalty areas) in key areas, I think they have a commitment to right the ship.
Having been closely involved with 2 major book retailers, one a highly successful overseas operator, and the other Borders’ UK subsidiary, let me share my perspectives.
Strategically, the traditional bricks & mortar proposition is under major threat from digital, online and the supermarkets. This means they need to face up to competitive challenges by improving their online offering and being more agile by delivering value and experience (as other commentators state).
However, unlike other retailers, bookstores need to keep a slow moving backlist, which breaks every rule of assortment and space productivity. Consequently, the challenge is for the merchants to be more creative with their categories–really understand customer dynamics and insights (very different for reference books vs. culture vs. home & leisure, etc.). Only by leveraging these insights and developing meaningful visions for their categories that offer customers compelling reasons to visit a bookstore and spend money, will bricks & mortar outlets survive. The critical implementation enablers are visual merchandising, staff service, and promotional approaches that transcend “pile-it-high-sell-it cheap.” It can be done.
They must also look at using macro space more effectively with complementary merchandise–not cheap sidelines that demean the authority of books. Top 10 CDs/DVDs are not the answer–a meaningful offer of niche/special interest items–augmented with excellent service builds loyalty and brand reputation that online and supermarkets can not.
Borders UK failed on all these counts, plus they suffered from a total absence of reliable management information upon which to make effective retail decisions. In spite of an injection of PE funding, the business went bust. Hopefully Borders US and the remaining UK booksellers won’t go the same way.