Borders Books To File for Bankruptcy & it's No Surprise

This week the business world is anticipating the official bankruptcy filing from Borders Group, Inc. Considering within the last two to three months the company has experienced financial problems, Bankruptcy is not a surprise All bookstores have experienced a loss in sales from the rise of the eBook market. Borders and Barnes & Nobles are considered the two major book retailers. Barnes & Nobles has been able to stay afloat and Borders has declined. I read “Borders Eyes Store Closings and Liquidations” by Tom Hals and Jennifer Saba and “Chapter 11 for Borders, New Chapter for Books” by Mike Spector and Jeffrey A. Trachtenberg.

Borders has not paid 6 major publishers and owes millions of dollars. Recently the company acquired financing but with tough stipulations that they would have to come up with some capital. The company’s idea was to ask publishers to turn their debt into loans. Now, the proposal has been denied and bankruptcy is the only option. The company will be able to operate after filing but will clearly lose stores and employees.

 From reading about the bookstore and my experience as an avid reader, three things have the hurt company: competition from major retailers entering the book market, the delay of the company entering the e-book market, and the change of executives.

The book market used to be Barnes & Nobles, Borders, and independent small booksellers. Now the market includes Amazon, eBay, Wal-Mart, Costco, and other major retailers who have entered the market. With the Internet helping people to find better prices and other locations for books, consumers can easily find other options for book retailers. Borders stays as the 2^nd book retailer because they still have a respectable brand. Unfortunately, they took it for granted; as more competitors entered the market, they lost consumers.

The biggest wound to the company is the eBook market. While it may seem that the eBook market has exponentially expanded, Borders had the time to evolve as book readers have. Now, the Borders stores have eCommerce stations, they sell an eReader and have an eBook market. All of this started within the last maybe 6 months; after the iPad, Kindle, Nook, and the multitude of e-book apps on smartphones. They are too late to have saved themselves from bankruptcy.

I read in the Spector and Trachtenberg article that Borders sold their internet services to Amazon in 2001. Borders started their website 7 years later, at a time in which Amazon blew up.  This mistake proves to me that Borders had no intention of evolving or changing as consumers did. Now 10 years later this bankruptcy is a consequence of the company’s stubborn refusal to move forward.

The last aspect of this bankruptcy is the changing of the executives. The company had 3 CEOs within 3 years. While it may not be the company’s fault for these changes, it made the company look bad every time someone left. Also without proper leadership, how could the company change for the better? The executives of Borders symbolically let the company down.

 Borders will most likely still be around, but with about 200 stores closing. This means thousands of people will become unemployed. This also means a Borders near you might soon have a liquidation sale. Hopefully, after filing, the company will get the correct executives in order and come up with a great restructuring plan to stay alive. They can come back but the lessons are that they must be aware of competition, they must evolve with their consumers, and leadership must be stable.