Despite lots of work on the part of the management and staff of Borders Books and Music it wasn’t possible for them to emerge from bankruptcy as a viable company. Last week all their remaining stores began liquidation sales, leaving Barnes & Noble as the only national bookselling chain in the United States.
There has been a great deal written about what brought Borders to this point. In hindsight it seems obvious that two major differences between how it operated compared to Barnes & Noble go a long way towards explaining why Borders is closing and B&N is not.
First, it probably wasn’t a very wise move for Borders to, in essence, hire Amazon to take care of their online bookselling for almost eight years (from 2001 to late 2008). Helping one of your major competitors build their business on your dime isn’t as uncommon a mistake as one might think but that doesn’t make it any less potentially lethal. The result was that Amazon grew so much that they were an actual threat to Borders, at which point Borders dissolved the relationship, but by then it was too late for Borders to develop its own web presence fast enough to get any significant market share. Granted, Amazon would still have outgrown both Borders and Barnes & Noble, but it would have been slower and, more importantly, Borders would have had time to create its own online sales presence the way that B&N did.
Second, Borders hasn’t been run by booksellers in a very long time. The last real booksellers left upper management around 1992, shortly after Borders was bought by Kmart. Kmart discovered that, rather than helping them with the problems they were having with Waldenbooks (which had been bought by Kmart years previously), the addition of Borders made the situation worse, which prompted a fast restructuring and sale of Borders. But from then on Borders was run by the common (or short-tailed) American CEO. In comparison, Leonard Riggio, the founder and major shareholder of Barnes & Noble, started selling books while in college and has (with his brother, Steven) controlled B&N from its beginnings as a chain.
But all the foregoing only explains why Borders fell and Barnes & Noble carries on. Both businesses have been subject to the same pressures. It was the weaker one that collapsed first.
If you’ll forgive the gruesome imagery, it’s like two castaways stranded on a desert island without any food. The fitter (and, likely, larger) one will live longer before starving. If his companion dies first . . . well, you can guess what happens. And so the remaining one gets a reprieve, for a while.
But there’s still no food on the island.
Barnes & Noble has had some hard times recently. In theory, the company has been up for sale for months and months now but there just aren’t any takers. Its sales are down and profits are down moreso. But Borders closing should give them a boost for a while. Some analysts have guessed that B&N might capture as much as 900 million to 1.1 billion dollars in sales next year from former Borders customers. But Borders’ sales last year were around 2.25 billion dollars. That leaves 1.15 billion in sales that are going to go somewhere else.
Some of those sales are going to vanish. Ebooks in general don’t cost as much as physical books and so the total sales in that pool won’t be 2.25 billion. As for the rest . . . . Mostly to Amazon, I suspect. Some small portion may go to independent bookstores as well as “non-traditional markets” (which is publisher-speak for places like the grocery store, Walmart and CostCo).
Here’s the thing, first, people who were shopping at Borders already had chosen a chain over an independent bookshop. They’re not likely to change their minds now. Second, many of the places that Borders operated don’t have any independent bookstores left. So the choices left are B&N or Amazon. And Borders customers already had some reason not to be shopping at B&N.
Bottom line, Borders didn’t go out of business because of poor business decisions or bad management. They folded because people weren’t buying books in bookstores. And unless that changes, Barnes & Noble is going to keep wandering around that island looking for some dinner . . . all the while getting thinner and thinner.
Reprinted with permission from the Dispatches from the Border, the e-newsletter from Borderlands Bookstore, San Francisco’s home for science fiction, fantasy, and horror books. Visit Borderlands at 866 Valencia Street.