« Editorial, Resources

Bad Decisions, Worse Luck: How Borders Blew It

Firing its community relations coordinators, handing Amazon its web site, “category management”…Why 2001 was the beginning of the end for the bookseller.

By Edward Nawotka

Borders logo

As we all know by now, Borders bookstores are now being liquidated. Hundreds of stores are closing and 10,000 people are losing their jobs. Publishers are going to suffer as the people responsible for selling to the bookstores also lose their jobs and hundreds of thousands of unwanted books come flooding back into their warehouses as returns. Authors are going to find their announced first printing — and subsequent royalties — shrink as their publishers print fewer books based on lowered sales expectations.

While the disappearance of Borders might possibly be seen as a referendum on the long-term viability of bookstores and their ability to compete against digitization and e-books, it should be remembered that the basis for Borders’ demise was laid a decade ago, way back in 2001. At the time, the company had more than 2,000 stores in the United States (360 of them superstores), 50 overseas, and earned more than $3 billion in annual revenue. But a series of unfortunate decisions and one tragedy permanently undermined the company’s position in the marketplace.

The first was in January that year when Greg Josefowicz, the former president of Jewel-Ocso, a division of the grocery store and pharmacy chain Albertson’s, added the title of Chairman of Borders Group to his list of titles, which had already included president and CEO and of the company.

Can you treat books like orange juice and shampoo? Josefowicz seemed to think so and soon implemented the controversial strategy of “category management,” a program that limited the number of titles that would be on sale in a particular genre, say cookbooks or biographies. It wasn’t as draconian as pay-to-stay “slotting” — the norm in the grocery business — but was nevertheless widely criticized as favoring large publishers over small presses and for catering exclusively to mass market tastes.

Next came February’s announcement that Borders would eliminate the community relations coordinator positions at individual stores, thus killing off the strongest tool available to establish loyalty among local readers.

Then in April 2001, Borders abandoned managing its own web site and handed over the responsibility for running it to — you probably know this already — Amazon.com. The shortsightedness of this decision, in hindsight, cannot be overstated.

Finally, on September 11, the company’s top earning store was destroyed during the terrorist attacks on the World Trade Center — a significant loss by any measure. Yes, Borders bounced back and opened a flashy new store nearby some years later, but that one was never as beloved as the WTC site and it closed a few years later.

What followed over the next decade was just more in a series of unfortunate events. There was labor unrest as Borders’ employees at various stores tried to unionize — a 2003 strike even shut down the store at the company’s home of Ann Arbor. Layoffs hit Borders HQ and the management suite started to look like a clown car, with droves of people coming in one door as others fled through another. The final blow was the 2008 financial crisis, which derailed ambitious plans to reinvent the chain as a state-of-the-art, digitally-minded retailer — well before Barnes & Noble got around to doing the same thing.

Ed Nawotka, Editor-in-Chief, Publishing Perspectives

Ed Nawotka, Editor-in-Chief of Publishing Perspectives

Looking back, my fondest memory of Borders is of making a pilgrimage into Ann Arbor to buy a copy of William Gibson’s Neuromancer in 1984 at Store #1 (I grew up in nearby Wayne, Michigan). All the cool kids on my block were reading the book, and Borders was the cool place to buy the book (and pick up some Dungeons and Dragons modules at the hobby shop next door…Yes, I was a geek).

Since then, I’ve enjoyed shopping at dozens of Borders across the United States, in outposts as far away as Kauai, Hawaii and San Juan, Puerto Rico. Like many, I will be sad to see them gone.

And I’ll be honest, I’ll mostly miss Borders because shopping there was just so damn cheap. Provided you were part of their loyalty program, you could regularly take advantage of coupons that gave you 30-40-50% off your purchases. On top of this they’d give you “Borders bucks” — basically a further discount. If you were savvy enough, you’d never pay full-price for anything.

Sometimes, the coffee I bought at the cafe cost more than the books I bought…I would often ask my wife as I was leaving the store with an armful of stuff that I’d bought for a pittance, “How can they afford to stay in business?”

Now I know. They couldn’t. As I look back on it, it may seem oddly prophetic that the first book I bought at Borders was the one that defined the early digital age and introduced us to the word cyberspace. Still, while management would like to blame e-books and digital publishing and the economy for the demise of Borders, the truth is that it all really comes down to one thing — human error.

DISCUSS: Will Others Fill in the Gap Left By Borders?

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12 Comments

  1. Jenny Frost
    Posted July 20, 2011 at 8:50 am | Permalink

    Ed, good article. Incredibly bad management has killed this bookseller indeed. Good job retracing some of the key events, decisions. I hadn’t thought about the WTC store in ages, but I remember it well and fondly. It was quite a gorgeous store. Even though we have all known Borders was on life support for some time, it is still a blow to lose the chain. And so many jobs, not what publishing or our economy needs just now.

  2. Posted July 20, 2011 at 9:30 am | Permalink

    Thanks, Ed, this is a very interesting article with lots of information I knew nothing about! Sitting over here in Europe, I really “bought in” to the general theory that Borders fell a victim to the digital revolution etc.

    I had never realized they’d made so many mistakes, and in retrospect, the two biggest were probably (1) handing over their website to their arch rival in this digital age (Amazon) and (2) kill off their links to the local community (firing those “community relations coordinators”).

    This said, in a normal, free market economy, one would expect the void left by Borders to be filled by indie bookstores…Is that really impossible? I’d love to know your take on that. Here in Europe, bookstores (in Italy and Germany as far as I know) seem to strive as long as they remember to (1) maintain an online presence; and (2) cater to the local community (for example, via sponsoring local social events, having a nice welcoming store with a coffee bar etc)

  3. Posted July 20, 2011 at 9:49 am | Permalink

    I said the exact same thing. Bad business decisions. I was never a Borders fan. Over the years I kept going back hoping for a better customer service experience and it never happened. Barnes & Noble knew how to treat me. At Borders I always had the impression they were disorganized and employees were not trained properly, they just said OK you’re hired and left it at that? The only sadness I feel about this store closing is I hate to see bookstores close, but I feel for all the employees who are loosing their jobs. Probably a majority of them are students working to pay off student loans.

  4. Posted July 20, 2011 at 10:11 am | Permalink

    Excellent piece! Thank you for pointing out management decisions, as well as the “bad luck” of pushing into music and movies just as MP3 sales and lowered DVD prices took off, are equally to blame in the downfall of Borders. Seems so many people are losing sight of that.
    I will be sad to see Borders stores disappear, and only hope some of our local indies survive as a result.

  5. Posted July 20, 2011 at 10:45 am | Permalink

    Great insights and wonderfully informative.

    Thanks.

  6. Posted July 20, 2011 at 11:14 am | Permalink

    No matter what reasons we ascribe to the failure of Borders, do we honestly think there is (or will be) the same market demand for bricks-and-mortar stores (where we would actually buy books rather than drinking coffee and nibbling a muffin while on our digital devices)? Even Barnes & Noble must scale back its physical store presence, and we’re going to see fewer stores overall in the future, not more. Bad choices doesn’t get around the fact that book retail will end up in the same place as music and movie retail.

    A year ago, Mike Shatzkin smartly quoted Upton Sinclair, who said, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” I agree with his assessment of the bookstore landscape elaborated on here: http://www.idealog.com/blog/where-will-bookstores-be-five-years-from-now

  7. Posted July 20, 2011 at 12:31 pm | Permalink

    In the post to which Jane Friedman steers us, Shatzkin makes the key point that the main advantage big publishers have had in the past is their ability to get books onto the shelves of stores like Borders. As this advantage disappears with the demise of such stores, authors are beginning to question why they need publishers at all, and many are moving toward self-publishing. But those are finding that there is still an advantage in going with a traditional publisher because book review editors generally will not even look at self-published books. Still, as we all know, general review media have been on a downward trend for some time, so this advantage is weakening also; and, as a recent article in Publishing Perspectives revealed, there are new enterprising businesses arising to provide a way for self-published books to get credible reviews. Interestingly, the segment of the industry where I work, scholarly publishing, is more protected than most because of the need for professors to have the validation that comes from publishing with a reputable academic press. So our sector may owe its survival in part to the promotion-and-tenure system of academe about which we have often complained in the past!

  8. Posted July 20, 2011 at 1:47 pm | Permalink

    I remember thinking they were nuts when they handed off online retail to Amazon- there is a whole pantheon of businesses that ignored e-commerce back then and very few of them exist today. It certainly does put the whole print vs. ebook discussion into perspective: Why are we even having that discussion? Except as a novelty (like vinyl lps), print books are dead. Period. Do I like this? It doesn’t matter, it’s reality. As an ebook only publishing start-up I can’t imagine making the economics of print work. Like the music business, the old model was dead as soon as the print publishers lost control of distribution.
    Done. And, unfortunately, B&N is probably next though they appear to be under much better management. Again, unfortunately, I think their principal task is turning out the lights gracefully.

  9. Eric Welch
    Posted July 22, 2011 at 9:57 am | Permalink

    Good article. There is a broader lesson that seems to be ignored. That’s the rampant mismanagement of many American businesses which have become so large and stodgy as to be unable to meet competition from smaller and/or more nimble and dynamic companies. Just look at the principals of the six publishing conglomerates and the decisions they have been making and you wonder just how long they’ll be able to hang on to a business model designed and implemented 50 years ago. They are following the disastrous model of the music industry. Unfortunately, businesses are managed purely for the short run and personal profit of the corporate CEOs who have no personal or long-term stake in the viability of the company they purport to manage.

  10. Eric Welch
    Posted July 22, 2011 at 10:07 am | Permalink

    Hit post too soon. I meant also to say that the traditional publishers are in for a rocky time beyond mismanagement because the new digital paradigm of POD combined with e-books allows many editors who have become dissatisfied with the trend toward having marketing departments making editorial decisions will be able to start their own publishing ventures dedicated to providing really high quality books. Stephen Roxburgh, the great YA editor of Front Street and Farrar, Strauss and Giroux is a good example. His new venture, namelos.com will set a model for editors and authors to the detriment of the Big Six. Anderson’s concept of The Long Tail will permit these companies to make a lot of money without the need for blockbusters and warehouses.

  11. John Dingler, artist
    Posted September 25, 2011 at 8:46 pm | Permalink

    How many book stores did Borders put out of business? Poetic justice what it did unto others.

    I feel no sympathy for the behemoth corporation; It cared not for ma and pa bookstores. I remember all those fine book stores on Telegraph Ave., Berkeley.

  12. Shell Bush
    Posted March 9, 2012 at 8:29 am | Permalink

    Your comments on Borders are pretty accurate. I used to work at the WTC store up until 9/11. It’s true the company started a downward slide after that event, but the winds of change were already blowing at least a year prior, in my opinion.

    Josefowicz was certainly a big factor; from previous experience I’ve noticed many times it’s not such a good idea to have a CEO from a very different other line of work come into the company. The way the company handled the loss of the WTC store and the disposition of the 110 employees was also indicative of the new mindset in Ann Arbor. I was lucky enough to keep a job in the company – I was able to garb an HR manager slot at the White Plains store – but by then the Borders started going nuts trying to reclaim lost revenue and falling stock prices that all the fun had gone out of it and I left the company.

    I really miss Borders though, for the depth of titles and atmosphere. Never liked the way B&N arranged their stores.

    So many bad decisions, and no listening to the little guys in the stores who actually did the selling.

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