Wednesday, July 20, 2011

The Demise of Borders with a Side of Baloney

Photo credit:  Retiring Guy

Why Borders Failed While Barnes & Noble Survived. (NPR, 7/19/2011)

1.  Invested too heavily in CD and DVD sales.
2.  Didn't develop an online presence.
3.  Not to mention the whole ebook thing.

Excerpt: The retailer's first bookstore opened in Ann Arbor, Mich., 40 years ago. Along with competitor Barnes & Noble, Borders pioneered the book megastore business. But Borders made some critical missteps over the years that cost it the business.

The vast tracts of retail space that Borders will soon vacate speak to a gargantuan business that essentially killed itself. At one time, size was its advantage. Borders built a reputation on offering a huge variety of books — tens of thousands of titles in a single store — at a time when most bookstores could afford to stock a fraction of that.

Borders also had an early technical advantage: a superior inventory system that could optimize, and even predict, what consumers across the nation would buy.

But in the mid-1990s, Borders lost its edge.

"It made a pretty big bet in merchandising. [Borders] went heavy into CD music sales and DVD, just as the industry was going digital. And at that same time, Barnes & Noble was pulling back," says Peter Wahlstrom, who tracks Barnes & Noble for the investment research firm Morningstar.

He says Barnes & Noble also invested in beefing up its online sales. Eventually, it also developed its own e-reader, the Nook.

Borders did not. Instead, it expanded its physical plant, refurbished its stores and outsourced its online sales operation to Amazon.

"In our view, that was more like handing the keys over to a direct competitor," Wahlstrom says

NPR asks the wrong guy for some perspective on this story.

Dan Raff, a management professor at The Wharton School, argues that smaller-town America will suffer from the loss of a chain bookstore.

"The big-box store was a glorious thing while it lasted. To people in many parts of America, they were a kind of Aladdin's cave," Raff says. At Borders, people could access literary variety, contrary to smaller, independent bookstores

Here's a partial list of the stores that Borders closed earlier this year.

Columbus, Ohio.
Madison, Wisconsin.
Pittsburgh, PA.
Tucson, Arizona.
Dallas, Texas.
Paramus, New Jersey.

And here's a list of Borders' Wisconsin locations, 4 of which have already been shuttered.

Sorry, Dan, but this is not smalltown America.

In Wisconsin, smalltown America is, to name some examples, Berlin, Richland Center, Shawano, Rhinelander, Rice Lake, Marinette, Platteville, Tomah, and Black River Falls.  (It's an extensive list, actually.)   But it's not Madison.  Not Eau Claire.  Not Fox Point.

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