Quote:
Originally Posted by Kumabjorn
Thank you for all your input, QI reading.
From your input I get the impression that Borders was burdened by some heavy fixed costs in the form of long leases with prime rent rates, and thus margins so small that the initial paradigm shift towards electronic reading, although a small straw, was more than enough to brake its camel's back. I would imagine it stands as a dire warning for other booksellers, no matter where.
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Mostly correct.
But if you're looking for lessons for other booksellers there is more to the story than high fixed costs.
The consensus on Borders is that the switch to digital was the final push on their unstable house of cards. What destabilized it in the first place was online book retailing.
The big "warehouse" model of store needs high traffic, often from relatively far away, just to pay the rent. That works if there is no closer aternative. Borders (and other big box retailers) relied on its depth of inventory to atract customers from far and wide.
A trip to Borders could easily eat an entire saturday afternoon for a person 50 miles away and result in $100 or more in purchases. (Say, 10-20 paperbacks and discounted books.) Plus gasoline and ancilliary purchases. For most people, something to do a few times a year.
Enter online book purchases: deeper catalog, free shipping, no travel time.
The further away from the big box retailer, the more attractive online becomes.
Strip away the long-range customer and each store needs to sell more to the remaining *local* customers or *reduce* their costs. Borders couldn't do anything about their rent, they didn't know enough to reduce logistics costs, and their suppliers were not about to give them any special treatment, so they could only reduce inventory depth and personnel costs.
(Towards the end, Borders' staff in most stores was generally perceived to be... not very helpful...)
Those changes made online purchasing attractive even to people living within walking distance of a Borders.
(It also didn't help that 75% of all Borders were within a couple minutes of a B&N.)
And then, on top of all that, ebooks became mainstream.
Suddenly, the most avid readers (the core customers of any book retailer) started switching to ebooks. Borders was no longer just losing sales, they started losing their best *customers*.
The company that hadn't caught up to the *last* retailing revolution got steamrolled by the new one. They were *two* paradigms behind the rest of the market.
RIP.
High rents were a component of their failure but what really did them in was their business model of having the customer come to them. Of thinking their product was special and would sell itself. That customers would go to any distance, bear any cost to get their books. Not true, is it?
I'm of the opinion that B&M pbook retailing can and will survive but it needs to completely ditch the current business model and go to the one in use by other retailers that are weathering the online sales challenge a lot better; smaller stores more broadly distributed. Instead of focusing on the product, they need to focus on the customer. Instead of making customers go to the store they need to take the store (closer) to the customer. Radio Shack, Payless, Gamestop, Starbucks all do this; their stores run 1500-3000 square feet versus the 30000 square feet of the typical Borders and B&N. And instead of locating them in or near big regional Malls, they are located... well, everywhere. Big malls, small malls, downtowns and strip malls. Books *used* to be sold that way... they need to go back to it, but with modern logistics. Online buying with ship-to-store, in-store kiosks for online and digital purchases, regional warehouses for next-day special orders.
Here's an old report on Gamestop's strategy:
http://www.icsc.org/srch/sct/sct0304/page45.php
And a newer one on how they intend to deal with *their* looming digital threat:
http://venturebeat.com/2010/08/24/ga...-threat-looms/
Booksellers could learn a lot from other retailers, if only they would stop pretending that "Books are special".
They're not.
Books are just another consumer product subject to the same consumerist rules that have evolved over the past 50 years.
Consumers now have the real power; ignore it at your peril.