3 reasons why Borders is broke
Borders filed for bankruptcy yesterday. They will close 200 of their 642 stores over the next few weeks. That is roughly a one third reduction of their brick and mortar stores. Ouch. I’ve heard that the last card to fall is payment to creditors when a company is ailing. It would seem that for the last month or so Borders had delayed payments to their creditors. The writing was on the wall. It was the death rattle if you will. They may be able to recover but they are pretty sick and in need of reorganization.
Those are some old books. Where are the new ones?
In previous blog posts I’ve discussed addressing sick businesses and knowing your customers. You can read about them if you’d like. I think they both apply to Borders. They seemed to miss the boat in several key areas. Here are three that stuck out to me.
- Digital readers; Ever heard of the Kobo, Velocity or Sony brands? Me either. They failed to market their e-reader properly.
- Huge book stores are not what customers wanted. They should have voluntarily started down sizing before it came to bankruptcy.
- Fixing symptoms and not the problem. Over the last 12 months Borders started offering heavy discounts to bring people into the stores. They failed to realize people don’t want to go to book stores at all.
I hate to trivialize a billion dollar problem but it all boils down to basic fundamentals of business. And Borders has failed to understand the market, their customers and even their own product. Good luck Borders. I’m off to read my daughter a story on the Kindle.
Reiter Thinks 
Hi Matt,
I agree that Borders failed to change soon enough — I am not sure sure that no one wants to go to a bookstore. Many do yet the volume is not the same as it used to be. Borders and other large bookstores could have morphed the business to be “information sharing” and entertainment centers instead of just selling books, dvds etc..
The mistake they made was managing decline instead of reinventing to succeed.
Kate
Kate,
Maybe “less” people want to go to book stores. Either way, Borders is in big trouble.
-Matt
Matt,
Catching up. Kobo is actually a well known brand of eReaders. They just get overshadowed by the bigger names. Even still one doesn’t instantly think of iPad as an eReader and there is still much to find out about ebooks as a market. They make money (read J.A Konrath’s blog) but nearly what physical copies make. The publishing market is in upheavel over it. THere is no denying there is money but even still.
You are correct though in that borders changed too slowly. They won in the beginning because the tossed over the model of a book store. They failed to see how things have changed. I predict Barnes and Noble will have this issue. Though the Nook is an outstanding product I can’t see how they will make money without a monumental change in the model.
When it comes right down to it is there room? Does Amazon have it all sewn up? The bottomline is that books can only compete on price. If Amazon has knocked the bottom out what is left? Ebooks can’t charge more…those that do don’t sell well (again JA Konrath for some numbers). There is a price consumer’s will pay readily for an ebook, and even still how is this save book stores? I contend there is room. That this isn’t a price war of books alone. I have several readers (Nook, Kobo, iPad…) one would say WHY? Insanity?! You could have all your books on one device.
True. But not all the stores have sales at the same time, nor sell all the books at the same time. Besides having 3 reades is better then have tons of book shelves. Its minor problem as a reader. Still there is room if book stores are willing to break the mold. Do more. Offer more services…..I don’t know. I will miss book stores. Nothing like loosing time in a book store. My best childhood memories are there. Still….maybe the big chain stores die off and the local ones come back. Who knows.
Still,,,,you are correct that businesses have to adapt.
Bio,
Your reply was longer than my post.
-Matt
Bio,
The proof is in the results. Borders is in big trouble during this bankruptcy filing. Who’s next?
And I also agree, going to a nice quiet book store to get a coffee is a nice thing to do from time to time. But that model is hard to sustain. I don’t know what the answer is. But someone will have the answer and they will revolutionize the publishing business someday soon.
-matt