LOS ANGELES — Starting off as a used-book store in 1971 in the Michigan college town of Ann Arbor, Borders grew into a successful nationwide chain of superstores, widely castigated at one time for helping stamp out many small, independent stores around the country.
But after a series of
competitive blunders and missteps in the past decade, Borders Group Inc. itself is now under siege, cutting staff, shuttering stores, shaking up top management and flirting with bankruptcy.
Critics said the company botched its move into the digital age and instead saw sales drop and earnings plummet.
“The superstores were viewed by the independent bookstores as dinosaurs that came to kill them — and they did,” said Al Greco, a book publishing expert and professor of marketing at Fordham University’s Graduate School of Business Administration. “Today, it looks like the big bang has hit and now the dinosaurs are in peril.”
Last week, GE Capital threw a lifeline to the company in the form of a $550-million line of credit, dependent on publishers’ agreeing to convert the company’s delayed payments into loans, among other requirements.
In a Jan. 27 statement, Borders President Michael Edwards said the company was “doing everything possible” to maintain relationships with vendors and publishers and viewed the refinancing as the most practical solution, but also noted that an in-court restructuring was a possibility.
On Friday, the company disclosed that it no longer complies with New York Stock Exchange rules that require it to maintain a minimum average trading price of $1 a share over 30 days.
The price dropped below $1 on Dec. 31 and has continued to fall. It closed Monday at 37 cents a share.
As the company scrambles to restructure the debt to vendors and lenders, its customers are coping with fewer stores and worries about the chain’s future.
Borders, along with Barnes & Noble, thrived in the 1980s and 1990s as the superstore trend caught on. “They became a destination,” Grego said.
But by 2000, the bricks-and-mortar booksellers began a collective decline because of competition from online vendors.
In 2001, just as Internet commerce was beginning to thrive, Borders made the mistake of turning its online sales over to Amazon, a competitor, which gained vital customer information such as purchasing habits. “It’s unheard-of,” Greco said. “It’s as if Coca-Cola asked Pepsi to distribute Coca-Cola.”
Amazon was able to lure those serious readers away by prompting them with suggestions of related books based on their purchase. “That was their target customer,” Balter said. “If you’re a serious book reader you can now go online, see similar books and you don’t have to go through shelves … . It’s more convenient.”
In 2008, the company ended its relationship with Amazon and rolled out its own online sales operation, but it trailed behind the more seasoned online operations of Barnes & Noble and Amazon, Greco said.
Greco said he expected the company to seek bankruptcy protection soon. “It’s pretty clear they will file for bankruptcy; it’s just a question of when,” he said. “Borders at one time was an unbelievably impressive bookstore chain — people loved it. The day they go into bankruptcy will not be a happy day for publishers, authors and readers.”
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