The Borders Bankruptcy and What it Means for Booksellers and Publishers

Borders Books filed for chapter 11 bankruptcy on February 16, 2011. The factors leading up to the decision included ineffective use of resources, the inability to adapt to a changing market, and poor planning. One of the reasons that Borders has done so poorly in the new millenium is that  in 2001 it delegated its online marketing to Amazon.com, unaware that Amazon was its biggest competitor. In addition, Borders was hard hit when changes in the music industry caught it unawares. People used to go to Borders to sample new tracks before deciding whether to buy a new CD , but now we all do that online as well.

Many will lament the passing of this superstore bookselling giant. People of a certain generation used Borders as not only a place to browse for books and music, but also as a replacement for the coffeeshop or outdoor cafe where intellectuals could meet and discuss literature and politics. But do any of us still remember when the superstores crushed the small local bookshops?

The chant from the 1998 movie You've Got Mail seems quite a propos: "One, two, three, four/We don't want your superstore!"

Borders Closing

The borders bookstores close
The borders bookstores close | Source

Video Discussions by Experts in the Field about the Borders Bankruptcy

The best business videos on this topic are not available on Youtube. If you would like to watch some analysts discuss the Borders bankruptcy you might want to follow these links:

http://www.bloomberg.com/video/66799334/

and

http://online.wsj.com/video/bankruptcy-next-chapter-for-borders-group/8D7F2A20-B469-4C4C-B912-3A5F1F274F37.html



You've Got Mail: The Bookstore Closes

The Borders Flagship Store, Ann Arbor, Michigan

The Borders flagship store in Ann Arbor Michigan
The Borders flagship store in Ann Arbor Michigan | Source

You've Got Mail:Going to the Mattresses

Borders Bookstore: From Humble Beginnings to Second Largest

When it filed for bankruptcy, Borders was the second largest US bookstore, right behind Barnes and Noble. But like many giants, the Borders empire had humble beginnings.

The original Borders bookstore was founded in 1971 by brothers Tom and Louis Borders who were undergraduates at the University of Michigan.(I happened to live in Ann Arbor, Michigan in 1971. For a completely unrelated story about that click here.)

When they first started, the Borders brothers' inventory system tried to fit each store's offerings to its community. They founded a sister company, Book Inventory Systems (1976–1994) to serve as a wholesaler for regional independent bookstore. Until the Borders Superstore expansion in the early 1990s, Book Inventory Systems served more other, independent stores than Borders stores.

So the initial success of Borders lay in the community mindedness of the two Borders brothers, and their own understanding of the book selling business as both consumers and businessmen. But this grassroots start soon gave way to abstract management.

What is abstract management? This is the idea that you can be good at business without necessarily knowing anything about the specifics of a particular business. In 1989 former president of Hickory Farms Robert F. DiRomualdo was hired to expand the company. He knew nothing about books, but he had a lot of experience with mass marketing and branding.

The initial success of Borders was due to the fact that it was founded by people who understood what buyers wanted in a bookstore. The Borders brothers understood the average book buyer, because they bought books themselves. They understood the power of the local, independent bookstore, and they helped other independent bookstores to keep the sort of inventory that buyers wanted to browse.

The eventual downfall of the company occurred when people who were completely out of touch with book buyers took over. The fact that technology was rapidly changing the market also did not help.

A typical Borders store

A typical Borders store in Chapel Hill, North Carolina
A typical Borders store in Chapel Hill, North Carolina | Source

Borders Closes: Effects of the Market and Effect on the Market

In the forty years from the founding of Borders until its demise, the balance of power in the publishing industry has greatly shifted. In the 1970s established publishers had a stranglehold on the publication of books. For most authors, this meant that unless they were able to find an agent to represent them and to convince a New York publisher to accept their manuscript, they had very little chance of selling their book. Bookstores only bought from established distributors and distributors only bought from wealthy publishers who could afford massive print runs and would allow books that were not immediately sold to be returned damaged for a full refund.

The general public was not aware of this, and the average book buyer assumed that if a book did not appear in the stores it had never been written, or had gone out of print because it was not any good.

So the buyer appeared to have lots of choices, but all these choices were completely controlled by a small number of established presses. Book stores were judged on their breadth of inventory, the ease and comfort in browsing books and their atmosphere, but they were not judged on the content of the books, because the book selection available to all was rather uniform.

Mega-stores in the 1980's and early 1990s were able to beat out smaller independent bookstores because they could offer a larger selection of books at discount prices and in very spacious surroundings where people could sip coffee and chai lattes and eat biscotti while browsing books.

But then, one day it turned out that you could stay home and drink whatever you want while in your pajamas and have access to all the books in all the stores, plus an entire selection of other books the stores didn't carry, and pay only a fraction of the cost. And that's when the buyers started switching to Amazon, and the big beneficiaries of this new move were the unrepresented authors and the small independent presses that began to print their own books on demand.

Borders Company Headquarters

Borders Group company headquarters in Ann Arbor
Borders Group company headquarters in Ann Arbor | Source

The Interior of a Typical Borders Store

The interior of a Borders bookstore
The interior of a Borders bookstore | Source

The Borders Closing: The Business Cycle and Cycle of Businesses

All empires start small and are powered by the very young who are willing to take chances on new ideas. All empires crumble when the old and the established take over, and when authority is substituted for critical thinking.

Will Barnes and Noble be a beneficiary of the Borders downfall? Or will they fall by the wayside as well, leaving only Amazon as a serious market contender? This depends on what course of action each of the participants chooses to follow.

This should serve as a cautionary tale for all would-be giants. Today, Google dominates the search engine game. It has only been in the top position for about ten years, but many see Google as unbeatable. And yet, it is precisely when people in power forget that there are other choices that they tend to get unseated. Google has been playing fast and loose with its monopoly, and this is precisely why it may lose it in the near future.

Amazon at the moment has an advantage over all local bookstores that goes beyond size and quantity discounts: because it is a store without walls or borders, Amazon.com need not submit to local sales taxes. Many states that have lost their income streams due to the demise of local retailers are trying to get their hands on the golden goose which is Amazon. But, of course, the moment they manage to pluck the goose, there will be no more golden eggs.

The next few years should be quite interesting for those who watch the publishing and bookselling industry.

© 2011 Aya Katz



You've Got Mail

Comments 32 comments

Mentalist acer profile image

Mentalist acer 5 years ago from A Voice in your Mind!

I read most of stuff on the kindle for less than $4.00.;)


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Thanks, Mentalist Acer. How long ago did you buy your Kindle? Did you see it as a major investment at the time?


rogue73 profile image

rogue73 5 years ago

nice article. Had not heard this. I love shopping at borders. I much more prefer being able to read an actual book over sseing it on computer screen. Why does everything have to go to computers?


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Rogue73, thanks for your comment, and I do understand how you feel. I like real books, too, and prefer to hold a printed copy in my hands, rather than see something on a screen. But I don't like paying more than I have to, or having to spend gas money on getting there, or having to wade through crowds to get to the bookshelf. And I definitely don't like having my own books turned down by big publishers.

My press, Inverted-A, puts out actual physical books using print on demand. You can buy them online, but once you get them, they are as real as anything!


Ginn Navarre profile image

Ginn Navarre 5 years ago

Aya,in the past I had to drive 40 miles to enjoy Borders books. The (GOLDEN GOOSE)technology stepped forward and moved us forward. That is what makes America great!

At this time, Kindle is my best friend and all my favorite authors and new authors do not have to run the gauntlet of the publishing industry.

In the future that (GOLDEN GOOSE) will have many different names. Thanks for this great read.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Ginn Navarre, I, too, live way out in the country and cannot get to a bookstore. Amazon and the new technology have been a great gift for me. I haven't tried Kindle yet because I am so stingy that it seems like a big expense, but I'm beginning to see that I would do well to make all my titles available in Kindle form, too.


EmpressFelicity profile image

EmpressFelicity 5 years ago from Kent, England, UK

I love your comment about "abstract management". It's something I've ranted about for years, but have never come up with (or found) a shorthand phrase for lol.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

EmpressFelicity, thanks! I didn't coin the term "abstract management" myself. I think I heard it from my father back in the 1980s, but I'm not sure whether he coined it, either.


Jay 5 years ago

I too have a Kindle which has introduced me to authors I might never have known about and I no longer have to trek around looking for the latest 'whichever'. My worry though is that once Amazon have no competitors left, we will be left at their mercy, in the same way Tesco has dominated the grocery shopping in the UK


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Jay, thanks for sharing your experiences with Kindle. As a publisher, I definitely see that I cannot ignore Kindle as a publishing outlet. I do plan to look into it for the adult books I am planning to publish this year.

But as a reader, a book collector and an archivist, I see serious problems with the idea of a book that only exists electronically, can't be copied, and can be taken away from you by the click of a button someplace far away.

I think that the books we really want to keep need to be bought in hard copy or in a pdf file or text file that we can backup. But... as a way of sampling new books, just like watching television, with no pretense that we get to own them and keep them forever, this seems to be a good medium.


robie2 profile image

robie2 5 years ago from Central New Jersey

I am so happy to see that the day of the mega bookstore is coming to an end--and I think it is ironic that on demand publishing, Amazon and the internet are what have done it. Fascinating info on the history of Borders.

I have always loved small, independent bookstores and happily there are some that have survived the big box bookstore onslaught.

I too have a Kindle and love it, but I also love books and I don't see this as an either or thing....Kindle has expanded my reading reach but I don't use it instead of, but in addition to old fashioned books.

One way or another, isn't it wonderful that we have more ways to read, write, and distribute our work these days? Hooray for the internet.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Robie2, I share your feelings about the big box stores. I like small independents, too, and I was always visiting obscure little stores looking for out-of-print books that I wanted, when my contemporaries were having lattes at Borders. I haven't adapted to using a Kindle myself yet, but I will definitely be open to publishing on Kindle, as this is just another opportunity to get the word out. I agree. It's wonderful to have choices!


btom profile image

btom 5 years ago from Chicago

Robie2, very good point. There is no need to prioritize one or another. Ebooks are saving so much time as we can search them much faster. If you read and research a lot, it can almost be argued that by the use of ebooks you are able to read more regular books. There is nothing like the feel and the smell of a paper book, I hope that won't be replaced one day...


MazioCreate profile image

MazioCreate 5 years ago from Brisbane Queensland Australia

As I live near Brisbane, Australia the Borders' experience only started a couple of years ago. It's a great set-up & when in Brisbane I always pay a visit. I love the whole tactile experience with books and I love ownership of these great resources. Have't been into the city where the store is for a couple of months and hope my next visit will be rewarded with the store still be open.


MPG Narratives profile image

MPG Narratives 5 years ago from Sydney, Australia

I really enjoy browsing in bookstores, large and small. There is a large borders in Sydney which was always teaming with people so I think that one will stay. Ebooks are an alternative to reading physical books and I agree with Robie2 as well, the two versions can be used together. Thanks for a great article on the history of Borders, Aya, well cone.


crystolite profile image

crystolite 5 years ago from Houston TX

Nice article,very informative and thanks for sharing.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Btom, thanks for your comment. You have good point about search. It's easier to search an electronic text. Of course, you can also scan a book you own into your computer using ocr software and then search it, but who has the time? So maybe the safest thing is to buy the ebook and the hard copy both.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

MazioCreate, perhaps the store in Brisbane will still be open, but under different management. Bankruptcy is a funny thing. It doesn't always mean total annihilation.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

MPG Narratives, bankruptcy isn't always caused by a lack of customers browsing your wares. It has more to do with not making a profit and operating so far in the red as to be beyond redemption, so just because a store is teeming with customers doesn't mean it is not in trouble. On the other hand, I don't know what the corporate structure for the Australian Borders is, and possibly it's sufficiently independent from the US company to be entirely unaffected.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Crystolite, thanks for your comment.


MPG Narratives profile image

MPG Narratives 5 years ago from Sydney, Australia

Hi Aya, I have heard on the grapevine that the Borders in Sydney's CBD is going to stay so I guess they are sufficiently removed from the US company. Mind you, "teeming with people" doesn't necessarily mean they are buying anything either, many are just browsing.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

MPG Narratives, I'm glad your Borders isn't closing. Perhaps they understand better how to stay competitive in today's market than the American Borders.


SweetiePie profile image

SweetiePie 5 years ago from Southern California, USA

For those who have the kindle or the nook, the book reader Barnes and Noble created, you can even download digital books for free from the library. There is usually a limit to how many times you can do this, but is a good option if you are not sure you want to purchase a book.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

SweetiePie, that is good to know. I have very limited library privileges at the moment, because I don't have a university affiliation. There are certain ancient manuscripts that are available only on microfilm, and without interlibrary loan privileges I can't have access to them. I welcome the day when all such manuscripts are available for download for everyone, and then all researchers, affiliated and unaffiliated, will be truly equal.


Journey * profile image

Journey * 5 years ago from USA

Wow, I really like Borders and had not heard about this. Thanks for sharing the information.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Journey, thanks for your comment. For a lot of people, Borders filled some important needs, including a place to buy books, sample music and socialize. Unfortunately they didn't keep up with trends in the industry, and they failed to meet the needs of a lot of other people.


David Warren profile image

David Warren 5 years ago from Nevada

Great hub, thank you. I have put a lot of thought into technology and its effect on language in general. I have the "free" Kindle application on my phone which is quite convenient if I choose to read in the middle of the night without leaving the bedroom or disturbing my wife. Many of the classics are free downloads. As an older person that will always prefer turning physical pages it is nevertheless a good reminder that age should not be an excuse to keep up with the world and technology.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

David Warren, thanks for your comment. The effects of technology on language, and of language on technology, are indeed very interesting. It's good to have the classics as free downloads. It sounds as though you are having no trouble at all in keeping up with technology. I have yet to use any form of kindle, but the time is soon approaching when I may have to do that. ;->


skye2day profile image

skye2day 5 years ago from Rocky Mountains

Blessings aya,It is really odd that borders did not know amazon was their biggest competitor. Hello?? Well times are changing and many more business's will likely go under. Not to be all pessimistic but people will go and purchase the easier, softer, cheaper route. Lets face the music people are spending allot less on luxury items. A Hard back book for me today is a luxury. Thank God for technology because many more can enjoy reading, movies, music, research, shopping so on for allot less money or in may case noneon line. The good writers will still get out there and be published. Everything changes all the time except God. He is the same yesterday today and tomorrow. He is in control. He can work all things for the good for those that love him. Thank you for the interesting read. Cheers to you aya. Keep the faith sister, always.


Aya Katz profile image

Aya Katz 5 years ago from The Ozarks Author

Skye2day, thanks for your comment. Borders were indeed short sighted. In fact, I love hardback books and can afford to buy many more of them on Amazon than I could when I had to walk into a brick and mortar store to get them. Many sell in mint condition but as a used product for pennies, and the only real expense is paying Amazon to ship them.


SweetiePie profile image

SweetiePie 4 years ago from Southern California, USA

I was rereading this hub, and thinking this may eventually happen to Barnes and Noble because a lot of people are moving to owning nooks and kindles. A lot of reviewers of our local Barnes and Noble were complaining how the area promoting the nook section has taken over the actual book areas, but I am not surprised. Barnes and Noble probably knows if they do not promote their digital services as much as they can now, they will suffer the fate of other book stores that have become obsolete. I love looking at books in person, but with the digital capabilities it is just becoming more out moded.


Aya Katz profile image

Aya Katz 4 years ago from The Ozarks Author

SweetiePie, yes, I think you are right. For Barnes & Noble to survive, they will have to pare down their bookstores and concentrate on Nooks and online marketing. Eventually the bookstores will be obsolete.

Personally, I still enjoy reading books where I turn the pages by hand, but they can be bought online. I used to hang out in used bookstores a lot, but I was never one of those who fit the profile of a Borders customer sipping fancy coffee. Many readers actually prefer reading books electronically, these days, and they socialize more and more online, too. The ability to write customer reviews was not something the old bookstores allowed us. So there are good things about the new model.

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    Borders Bankruptcy Petition

    The first page of the Borders bankruptcy petition
    The first page of the Borders bankruptcy petition | Source

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