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Why Borders Failed While Barnes & Noble Survived

Yuki Noguchi

Borders Group Inc., the nation's second-largest bookstore chain, announced that it will liquidate the company. Justin Sullivan/Getty Images hide caption

It appears to be all over for the Borders bookselling chain. The company will be liquidated — meaning sold off in pieces — and almost 11,000 employees will lose their jobs. The chain's 400 remaining stores will close their doors by the end of September.

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.

Indeed, outside a Borders bookstore in Arlington, Va., shoppers say they rarely buy books the old-fashioned way.

"I'll go to Borders to find a book, and then I'll to go to Amazon to buy it, generally," customer Jennifer Geier says.

With so many people going online to buy books, Borders lost out. The last time it turned a profit was 2006. In February of this year, it filed for bankruptcy protection.

Those who bemoaned the rise of bookselling giants might see irony in Border's demise. With one of the major players gone, there might be some room, once again, for the little guys.

"I think there are a bunch of different niches around that can still be sustained, but I don't think there's a need for the mass-book seller to be as prevalent or as apparent as they were five or 10 years ago," Wahlstrom says.

Wahlstrom says Borders is disappearing at a time when, as consumers, readers are more empowered than ever. He says he still reads paper books but also reads on his iPhone, computer or tablet.

"Just as I'm probably device agnostic, I am supplier agnostic. I can go online, I can go to Barnes & Noble, I can go to Apple, or I can go to Google. Or I can borrow it from a friend or I can go to a library," he says.

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.

With Barnes & Noble staking its future on digital technology, Raff says, it's likely the big bookstore will only live on in big cities.

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Closing affects bookstores, writers and you, borders closing its bookstores after 40 years, the two-way, headed for liquidation, borders will close its doors, borders in bankruptcy. is your bookstore next.

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From Local, to Global, to Gone: On the Rise and Fall of Borders Books

Tom borders reflects on lessons learned in the world of bookselling.

The following essay by Tom Borders is excerpted from Among Friends: An Illustrated Oral  History  of American  Book Publishing & Bookselling in the 20th Century , edited by Buz Teacher and Janet Bukovinsky Teacher (Two Trees Press).

In 1970, Louis Borders was working in a bookstore in Boston while attending M.I.T. He suggested two start-up business ideas to his older brother, Tom, who had taught English in a small college and was on a sabbatical trying to write the Great American Novel. Tom dismissed Louis’s scheme to computerize the Daily Racing Form’s statistics so they could make an easy living playing the horses. Louis suggested their next best opportunity was to open a small used bookshop in Boston.

During the time they were drawing up business plans for the bookstore, a neighbor in Louis’s apartment building on Boylston Street was burglarized in the middle of the night. The brothers decided Boston was too fast for them—they needed a more manageable city for their little enterprise. Louisville, Kentucky, their hometown, was out of the question because they had never seen much of a bookstore there. Both had degrees from the University of Michigan, and loved the smart, hip, intellectual atmosphere of Ann Arbor.

After discussing the enterprise name for many long weeks, they decided to launch “Borders Book Shop” on a very modest scale, quietly and out of the limelight, in Ann Arbor. No employees. Not a corporate venture. Barely a business. They would keep it very simple. Originally, they thought they would both work half-time and have time to read and write, and become intellectuals.

That same week, Tom and Louis heard about a major estate auction to be held in Boston, with thousands of books as part of the sale. They planned to commit a good part of their capital, up to $3,000, to buy inventory there. At the auction house they spent hours going through the marvelous collection of a man who had been in the Massachusetts Senate in the early 1900s and whose estate had been in litigation for years: hundreds of leather bindings, fine illustrated editions, but best of all a well curated reader’s library.

On auction day, the last items to be sold from the massive estate were the books. The auctioneer apologized because the original intent had been to divide the books into a dozen smaller lots, but since time was so short “we will auction the books in a single lot. Do I have an opening bid of $3,000 dollars?” A dozen people raised their hands including the nonplussed brothers.

Deflated, the Borders’ bookshop fantasy had seemingly vanished. After the auction they met the renowned antiquarian dealer Richard Mills, who had purchased the books for $8,000. A Harvard graduate and World War II Navy submarine vet, he lived in Exeter, New Hampshire. Mills had a photographic memory; he was a true genius and a gentle soul. Somewhat unkempt, he had a bottle of Maalox leaning out of his wrinkled sport coat pocket. Tom asked him if he needed help moving the books, and was hired. Without much further discussion, Richard Mills walked out of the auction house with a small box of rare pamphlets under his arm. The pamphlets were worth the price of the entire lot.

Tom rented a truck and moved the books to Exeter, lured by the excitement of the antiquarian business. Richard Mills’ house was his warehouse, showroom and office. His kitchen table was his service counter and conference table. One day, Tom picked up a collection of about 100 antique duck decoys, which Mr. Mills sold in the next few days to other dealers. Another day, Mr. Mills sold the antique desk in his living room for $16,000.

Later, an 18th-century house full of antiques and collectables came to market. Tom followed Mr. Mills as he strolled through the house, opening a drawer here and there, looking closely at a map. After about 45 minutes of looking through a dozen rooms of antiques, three appraisers quizzed Mr. Mills about the value of the items in the estate. At one point, talking about a mahogany desk where he had opened a drawer during his stroll, Mr. Mills told the appraisers “that is not an antique but a very nicely done 1950’s fake.” All three wrote that in their notes.

After six weeks, Tom had finished sorting and cataloging the books. He was stunned when Mr. Mills gave the Borders brothers his entire garage full of books—a truck load of very good reading copies. They drove their precious first inventory to Ann Arbor, laughing at their good fortune and babbling about their future plans. That day Mr. Mills helped launch Borders Book Shop. It would have been wonderful if he could have lived long enough to see their bookstore ten years later.

In Ann Arbor, they leased part of the second floor of a retail building at 211 South State Street in the campus commercial district near the University of Michigan’s main quad. The former residence had been converted to commercial use. On the same floor were Suwanee Spring Leather Shop, where Tom bought a pair of handmade sandals, and Herb David’s Guitar Studio. Louis and Tom were shaggy-haired hippies who fit right in to the Ann Arbor scene in the early 1970’s. They built bookcases and display tables in the space for a month. They opened their second floor used bookstore in February, 1971, with the books from Mr. Mills and others that they had accumulated. It was tiny—two small rooms with a half bath. Hot tea was made every morning for the customers. The final floor plan included a service counter with the commode tucked behind it. The store had to close for a while if the commode was needed.

Since few customers came into that second-floor space, the brothers had time to learn and love the antiquarian book business in the coming months. Several collectors found them and the books from Mr. Mills’ garage quickly went to new homes in Ann Arbor. Nevertheless, Rookie Mistake #1: they realized that, with their wives in school, two families could not make a living from such a small, off-the-beaten-track, second-floor retail space. They realized that the store could never be very exciting given the space limitations.

Six months later, Tom and Louis moved to a first-floor location on Williams Street: 800 square feet. The additional space was an improvement, but it wasn’t a good location for retailing. They wanted more. They moved for the third time in two years to a prime location at 316 South State St. where Wahr’s University Bookstore had been located “since 1892.” That building was three times larger with a full basement for storage and overstock and an office on the second floor. Neither Tom nor Louis were morning people, but their first employee, Doris Becker, was and she opened the store most mornings. Doris was motherly and very protective of the boys.

Rookie Mistake #2: they ordered some new books and mixed them with used books on the same shelves. Customers were confused, not knowing if a slightly worn new book was “used,” or if a gently used book was “new.”

Rookie Mistake #3: They finally understood that Ann Arbor was a readers’ town and that antiquarian books were of marginal interest to the local avid readers. All the used books were culled from the shelves. After surviving three moves in two years, Borders Book Shop was in a good location with enough space to make a splash, and selling the kind of books people wanted. Their ambitions were rekindled.

That year, Joe Gable, fresh from Madison, Wisconsin, swaggered into Borders Book Shop. During a stand-up job interview in front of the fiction section Tom asked him “What do you know about books?” Sounding a bit like Marlon Brando, looking straight into Tom’s eyes, Joe said humbly: “I know more about books than anyone in this store.” Tom was momentarily stunned by the hubris of the comment. But he took the insult like a man, and after a few pointed questions, he hired Joe on the spot. In fact, Joe did know more about books than anyone in the store. And he proved it over the next quarter century.

The auto industry and the Michigan economy were tanking badly in one of their periodic nose dives in 1974. Several commercial stores were vacant in the campus area. In that down economy, the Borders brothers were able to secure a very favorable lease for a large prime space at 303 S. State Street where Wagner Men’s Clothing had recently closed—10,000 square feet on two levels with an escalator and a full basement!! All new inventory would be ordered for the new store. In preparation for the move, Tom started organizing a clearance sale of everything in the old space.

Louis was mumbling something about “developing a system”—he took several yellow legal pads and went to the basement. Tom was immersed in running a frantic three-month long clearance sale to generate the cash needed for the move; he tried to get Louis to leave the basement to help on the busy sales floor. Louis refused—he was working on designing a “system” for inventory. Glancing at the legal pad, Tom scoffed at a 6-page list which included RANC, RANP, RANM. Tom admits that he did not understand the scope and importance of the momentous project Louis was undertaking. In the next months, Louis designed what was one of the first and likely the best computer system for a retail bookstore in the country. To get the computer system written, tested and running, computer time was rented at night on an IBM System 3 computer in the portable trailer of a massive auto junk yard, with howling guard dogs. The junk yard’s system kept track of auto parts (mostly still on the cars); the Borders’ system would keep track of books.

The store’s book buyers ordered an ambitious selection of books for the 10,000 square foot store. It was a chaotic time, with a clearance sale to the bones going on in the old store while Rudy Fink and his carpentry crew built and varnished solid hardwood bookshelves in the new space. All the while Louis and his buyers were placing huge orders, and he was frantically trying to get the computer system ready to receive a tsunami of books. Occasionally they needed to phone Rudy to get him out of bed in the mornings to manage his bookcase-making crew. In a panic, they hustled to open the store in November, 1974, a few days before Thanksgiving. Two days later, it snowed eight inches which virtually shut down retailing in Ann Arbor. Cash was very tight and Tom was often on the phone with publishers wanting payment.

What seemed like a disaster was averted when, during a booming December, their dream came true—they had a vibrant, exciting bookstore. Joe Gable trained and managed a young, smart staff to provide a specific “Borders Brand” of service: never pushy, cool, friendly, casual, bright. Joe’s crew knew their books, the customers quickly came to rely on the staff and everyone enjoyed the interaction.

They were in their fourth location in three years!! When space became available in an adjacent building, the new space was absorbed. Book titles were added to improve every category throughout the store. They created new categories: Women’s Studies, Gay Studies, and Ecology. Every time they improved a book subject area, such as linguistics, sales in all subjects tended to increase: a customer comes in because she heard about an exceptional selection of linguistic books and she buys a science fiction novel as well. Customers were voracious, and most had never seen such a collection of books. The number of titles in the store increased towards 150,000.

Borders was then larger than most bookstores in the country. Though the brothers had not planned a superstore, their original tiny second floor space had grown in size by a factor of 50, and the quality of the store (selection and service) had increased proportionately. Though a well-run, small, quaint bookstore could still find a place, the high-traffic, high-volume Borders Book Shop in Ann Arbor with its vast selection helped redefine what a bookstore could be in the United States. By adding to the store space piecemeal, the brothers had drifted into the “superstore” concept quite by accident. Mathematically, the formula they discovered was astounding (and over simplified): as their bookstore became larger with better selection, it drew from a larger radius, and it became more exciting, and the sales per square foot increased!

Rookie Mistake #4: Louis and Tom realized that operating a full-blown computer system and employing the specialized subject book buyers and programmers required to maintain a built-from-scratch, one-of-a-kind, stand-alone, sophisticated buying system for over 150,000 book titles was not affordable for a single bookstore. So, in 1976 they started a new company called Book Inventory Systems. The Borders brothers helped individuals open their own stores using their own store name in their own cities and supplied them with a central buying and consolidated shipping. With two shipments a week from Book Inventory’s central warehouse in Ann Arbor, those independent stores often became the best bookstore in their market. Within a few years, in addition the Borders Bookshop in Ann Arbor, Book Inventory System had helped locate, design, and supply stores in East Lansing, Kalamazoo, Toledo, Louisville, Lexington, Cincinnati, Nashville, Memphis, Grand Rapids, Cleveland, and Lexington.

The second Borders Book Shop opened in Birmingham, Michigan in 1985. Joe Gable’s brother, Tim, moved from Montana to Michigan to manage the Birmingham store. Tim, like Joe, was a natural in a bookstore. Borders Book Shop in Birmingham was an instantaneous cultural center in that remarkably literary Detroit suburb. The level and sophistication of sales in the store were a tribute to the affluent community and its education level and value systems. Within two years, sales caught up with the 14-year-old Ann Arbor store. Traveling publishers’ sales reps remarked that both Borders stores were certainly among the top 10 bookstores in the country.

In keeping with Ann Arbor’s egalitarian environment, the Borders brothers installed a company-wide profit-sharing system. While modest at first, good years yielded significant additional pay for the young staff at the stores, which also helped create an esprit de corps, and a sense that this team was doing something important and different.

As they developed the inventory control and distribution systems further, their goal was to have all stores on the system be the best bookstore in their respective markets: best in selection and in service. Inspired by a seminar given by Edward Deming, they strove for continuous improvement.

Potential staff in the stores were given a test to assess their literary acumen, to find out if a potential staff member was a “book person” who could help customers and who could contribute to the delicate literary atmosphere. If he didn’t know who Norman Mailer, Frank Lloyd Wright, Julia Child, and Andy Warhol were, should he be working in a bookstore? The staff needed to be well read, communicative, and bright. They needed to offer a high level of service to the customers to compliment the complicated selection of books, without showing too much ego. Often the staff were specialists in certain subjects, such as art, science, literature, or history, allowing them to be more helpful to the customer. Those specialized staffs brought more to the table than typical retail clerks: they were smart, eager to learn and eager to share their knowledge. Furthermore, they helped the buyers improve the selections by adding titles for the system to their assigned subject area. A good bookstore is a glorious business with terrific people.

Borders Book Shops and its affiliated stores were well stocked and well-staffed, and created a refreshing, almost intellectual atmosphere—like a library but with classical music playing in the background, and with the stimulating excitement of discovering and buying a stack of books. The newer stores had coffee shops, and sold CDs and DVDs as an integral part of a very energetic environment.

Book buyers extraordinaire Phyllis Lambert and Robin Wagner, each ran Book Inventory System as interim president for several years. In 1988, Robert DiRomualdo, an Air Force veteran with a degree from Harvard and a strong marketing background, joined Borders as its first outside CEO. DiRomualdo brought enormous energy to the company, and under his leadership, store openings increased rapidly.

In 1992, after 21 years in the business, the Borders Brothers sold Borders Book Shops and Book Inventory Systems, Inc. At that time, the central buying and distribution system supplied about 20 Borders Book Shops and a dozen affiliated independent stores. They sold the businesses to K-Mart, which owned the Waldenbooks chain of bookstores, most located in enclosed malls. Waldenbooks was an asset on Kmart’s books, but was not sexy or profitable. K-Mart was looking for a way to dress up and bundle the Waldenbooks operation to make it saleable.

Borders Book Shops and Waldenbooks were quickly spun off as a single public company on the New York Stock Exchange as “Borders Group Inc.” (BGP) in 1995, with Goldman Sachs as the lead banker. It is curious and significant that combining 1,000 Waldenbooks with a handful of Borders Book Shops and Book Inventory Systems into a public company would be called “Borders Group, Inc.”

At the time they sold, the company had developed a powerful inventory and distribution system, highly effective in allowing the stores to carry more titles and to replenish them more efficiently than most other stores. The “system” had some early characteristics of artificial intelligence to help the book buyers manage the periodic replenishment of the thousands of titles in inventory.

When it became a public company, Borders Group, Inc. continued to be led by Bob DiRomualdo. The Borders brothers were not on the board and had no further input into the operations of the company. Bob had stimulated and managed much of the growth from 1988 to the time of the sale. He retired in 1998 and a bizarre succession of CEOs took over to head up Borders Group, Inc: Phil Pfeffer (1 year); Greg Josefowicz (7 years); Ray Marshall (1 year); Mike Edwards (1 year), and Bennett LeBow (1 year).

In 2011, nineteen years after the Borders brothers sold the business and sixteen years after becoming a public company, Borders Group Inc. filed for bankruptcy. All of the stores were closed. Thousands of booksellers lost their jobs. It was a very sad day in America when over 1,000 bookstores, each a mini-cultural center, a source of wisdom and good, healthy information and entertainment, shuttered their doors. And the closings felt like a kick in the stomach to the brothers.

There are many theories about what went wrong. But a series of non-Rookie Mistakes occurred: a far too rapid expansion in United States (40+ superstores were opened in 1998 alone, the year DiRomualdo left the company); a confusing international expansion (London, Singapore, New Zealand, Australia) and lack of control of the supply chain; changing leadership too often as each new CEO jerked the fast changing company in a different direction; poor financing machinations; poor real estate decisions; lack of understanding of the delicate nature and required quality of a great bookstore: the company forgot that selling books is not the same as selling sausage or socks.

At its peak, Borders Book Shop was a beautiful exhibition of the great freedoms Americans enjoy, with a broad selection of American publishers’ offerings, without a single government comment. It was also a bold experience in aggressive capitalism mixed with a strong dose of intellectual endeavor to create a unique setting for the American public.

Though gone, Borders Book Shops are still remembered by some. Their absence has left a hole in the fabric of society in many American cities.

__________________________________

This is one of more than 100 essays by prominent industry figures in Among Friends: An Illustrated Oral  History  of American  Book Publishing & Bookselling in the 20th Century , edited by Buz Teacher and Janet Bukovinsky Teacher (Two Trees Press). Illustrated with vint age  book jackets and period graphics from Publishers Weekly, Among Friends is a deluxe limited edition that pays homage to the creative and entrepreneurial spirit of the  book business during a time of great change in American culture.

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Borders' rise and fall: a timeline of the bookstore chain's 40-year history

This timeline provides a historical perspective of the rise and fall of Ann Arbor-based Borders Group Inc. from its inception in 1971 to its liquidation announcement this afternoon. It is based on AnnArbor.com research, interviews, Securities and Exchange Commission documents, archived news reports and information from Borders.

1971 : Brothers Tom and Louis Borders open an 800-square-foot used bookstore called Borders Book Shop at 211 S. South State St . in Ann Arbor.

The first Borders store at 211 S. State, now the site of a CVS store under construction.

Ann Arbor District Library

1988 : In an effort to import business leadership, Borders recruits Robert DiRomualdo to lead the company's expansion. DiRomualdo is later credited with leading the company's rise to national prominence in the 1990s.

1991 : Borders starts integrating music and movies into some of its stores.

1992 : Kmart Corp., which bought Waldenbooks in 1984, acquires Borders and creates the Borders-Walden Group. At the time, Borders had 21 large stores and had valued itself at about $190 million, the New York Times reported at the time.

1994 : Borders' flagship store moves from 303 S. State to the ex-Jacobson's department store on East Liberty. The bookseller is the largest retailer in downtown Ann Arbor.

1995 : The book store chain, renamed Borders Group Inc., spins off from Kmart and goes public on the New York Stock Exchange (Ticker: BGP) under CEO Robert DiRomualdo. At the time, Borders' innovative inventory management system was considered " the envy of the industry ," as one publisher put it, and was a catalyst in the forthcoming boom in the company's superstore footprint.

1995 : The company's Waldenbooks division moves to Ann Arbor after receiving a $7.7 million tax credit from the Michigan Economic Development Corp.'s Michigan Economic Growth Authority board.

1995 : Borders headquarters moves to a renovated, abandoned downtown retail destination on Washington Street called Tally Hall. A few years later, the company moves to its current headquarters on Phoenix Drive on the city's south side.

Feb. 4, 1997 : Shares close at an all-time high of $44.88.

March 11, 1997 : Borders executes a 2-for-1 split on its stock.

January 1998 to January 1999 : Borders expands its store footprint by 25.5 percent, adding 52 superstores in the biggest one-year expansion in its history. By January 1999, the company has 256 superstores averaging $256 in sales per square foot.

May 1998 : Borders launches an online retail presence for the first time at Borders.com.

Nov. 12, 1998 : Philip Pfeffer is hired to replace DiRomualdo.

Greg Josefowicz was CEO of Borders Group from 1999 to 2006.

Photo courtesy of Borders

November 1999 : Greg Josefowicz becomes Borders permanent CEO. August 2001 : Borders contracts with online retailer Amazon to sell products online -- a relationship later blamed for making Borders late to the emerging web retail segment.

July 2004 : Borders buys United Kingdom-based Paperchase Products Ltd. The company also starts branding some Waldenbooks stores as Borders Express.

August 2004 : Borders signs deal with Starbucks Corp. to run Seattle’s Best Coffee cafe operations in its stores.

2005 : Borders posts its most recent annual profit: $101.0 million.

February 2006 : The company launches a loyalty program called Borders Rewards.

July 2006 : George Jones replaces Josefowicz, who had led Borders since November 1999. At the time, Borders had nearly 36,000 employees worldwide and more than 1,200 in Ann Arbor.

September 2007 : Borders sells its U.K. and Ireland subsidiaries.

September 2007 : Stock hits then-six-year-low $12.28 a share.

The Borders store on Lohr Road in Pittsfield Township was created as the chain's new "concept" store when it opened in 2008.

Lon Horwedel | AnnArbor.com

March 28, 2008 : Stock closes down 28.5 percent to $5.07 after Borders says it lost $157.4 million in 2007.

March 2008 : Borders puts itself up for sale and accepts $42.5 million loan from New York hedge fund Pershing Square Capital Management to boost financial position.

May 2008 : Severing ties with Amazon, the company launches a new Borders.com.

June 3, 2008 : Borders’ shrinking Ann Arbor personnel count hits 1,000 after 156 job cuts are announced as part of a $120 million cost-cutting plan . At this point, the company still has 30,000 employees overall.

June 10, 2008 : Borders sells off its business based in Australia, New Zealand and Singapore.

Former Borders Group CEO George Jones speaks to employees in February 2008. He was fired less than a year later.

File photo | AnnArbor.com

Jan. 5, 2009 : CEO George Jones is fired and replaced with Ron Marshall as global financial crisis raises questions about Borders' viability.

March 2009 : Borders cuts costs, conserves cash in effort to avoid bankruptcy in the aftermath of the financial crisis.

March 30, 2009 : Borders, despite posting a $187 million loss in 2008, gets some breathing room after receiving a one-year extension on a loan from Pershing Square Capital Management.

Nov. 5, 2009 : Borders announces plans to close 200 of its small stores and cut 1,500 jobs. By February 2011, the number of small-format stores is about 170, down from more than 1,100 in 1995.

November 2009 : Investors criticize Borders' sluggish approach to the emerging electronic books market.

Borders started selling the Kobo e-reader in its stores in summer 2010.

Jan. 18, 2010 : Executives say they're “ disappointed ” with 13.7 percent decline in holiday sales.

Jan. 26, 2010 : CEO Ron Marshall resigns to become CEO of the Great Atlantic & Pacific Tea Co., which files for bankruptcy later in the year after Marshall’s departure. Borders executive Mike Edwards is named interim CEO of Borders Group.

Jan. 28, 2010 : Layoffs hit 10 percent of the Ann Arbor corporate staff.

Feb. 3, 2010 : Hedge fund investor and Borders shareholder Bill Ackman says bankruptcy is unlikely .

March 31, 2010 : Borders pays off $42.5 million loan to Ackman, renegotiates credit agreement with lenders.

April 1, 2010 : Executives describe strategy of " transforming the Borders brand ."

May 21, 2010 : Tobacco executive and activist investor Bennett LeBow invests $25 million and is named chairman.

Borders liquidating

• Borders plans to liquidate, ending 40-year-old bookstore chain
• Column: Borders' expansion hastened its implosion
• Borders' rise and fall: a timeline of the bookstore chain's 40-year history
• What's next for downtown Ann Arbor Borders store after chain closes?
• Downtown store closure also means a loss of arts and music venue
• Expected closure of Borders superstore in Pittsfield Township leaves shopping center with vacancy
• Disappearing act: Borders brothers nowhere to be found
• Residents express disappointment and sense of inevitability at closing of flagship Borders store
• Read Borders CEO Mike Edwards' letter to employees announcing liquidation
• Media watch: What other news sites are reporting on the Borders liquidation 
• Share your memories of Borders' 40-year heritage in Ann Arbor

July 2010 : Borders launches e-book store, starts selling e-readers, sets strategy to get 17 percent market share in e-books within a year.

July 31, 2010 : Borders sells Paperchase unit for $31 million.

Aug. 11, 2010 : Borders lays off more Ann Arbor workers. About 600 workers left.

Sept. 1, 2010 : Borders posts $46.7 million loss in second quarter, eyes " non-book products " like games and toys.

Nov. 15, 2010 : Borders launches redesigned website.

Dec. 6, 2010 : Ackman says he’d be willing to finance a Borders bid to acquire Barnes & Noble and merge the retailers.

Dec. 9, 2010 : Borders posts $74.4 million loss for third quarter, acknowledges possible cash crunch in early 2011.

Dec. 30, 2010 : Borders confirms that it’s delaying payments to some publishers in hopes of reworking vendor financing arrangements.

Dec. 31, 2010 : Stock plunges 22 percent to $0.90 a share.

Early January 2011 : Publishers weigh whether to agree to short-term debt in exchange for giving up immediate cash payments for book shipments.

Jan. 6, 2011 : University of Michigan expert says Borders likely headed toward bankruptcy or merger.

Jan. 12, 2011 : Borders announces plans to cut 300-person Tennessee distribution center .

Jan. 17, 2011 : Borders lays off another 40 employees at its corporate headquarters, leaving about 550 workers there.

Jan. 24, 2011 : Company sells off Day By Day Calendar unit in bid to raise cash.

Jan. 27, 2011 : Borders announces tentative financing deal with GE Capital but acknowledges possibility of "in-court restructuring."

Jan. 30, 2011 : Borders announces decision to delay payments to more partners, including some landlords.

Feb. 1, 2011 : Reports indicate bankruptcy filing may come with weeks.

Feb. 3, 2011 : New York Stock Exchange warns Borders that its stock could face delisting if it doesn't rise above an average monthly price of $1 within six months.

Feb. 11, 2011 : Ackman acknowledges $125 million loss on Borders investment.

Feb. 16, 2011 : Borders files for Chapter 11 bankruptcy protection with plans to close 30 percent of its stores.

March 25, 2011 : Borders asks court to approve executive bonus plan contingent upon a successful exit from bankruptcy.

April 6, 2011 : Executives reveal plans to move Borders out of its corporate headquarters building on Phoenix Drive on Ann Arbor's south side, saying they would consider the metro Detroit region. Later, the company identifies the former Visteon Village complex in Van Buren Township as one possible destination.

April 22, 2011 : Judge approves bonus plan with several strings attached.

May 5, 2011 : In an interview , Borders CEO Mike Edwards says the company could emerge from bankruptcy by September if it gets support from publishers. He also says the company has fewer than 400 workers left at its headquarters.

May 19, 2011 : In a filing, Borders asks the court to approve the severance of its deal with Seattle's Best Coffee , a subsidiary of Starbucks Corp.

June 1, 2011 : A Los Angeles-based private equity firm named Gores Group , which is led by the brother of the billionaire who recently bought the Detroit Pistons, is reported to be considering an acquisition of Borders .

June 7, 2011 : Phoenix-based private equity firm Najafi Companies is reported to be considering a bid to buy Borders. Najafi owns Direct Brands , which operates the Book of the Month Club and the Doubleday Book Club .

June 30, 2011 : Najafi submits a tentative bid to buy Borders for $215.1 million in cash and the assumption of $220 million in liabilities. Borders asks the court to establish Najafi as the "stalking-horse bidder" and to approve a $6.45 million breakup fee for Najafi if Borders chooses another buyer against Najafi's will.

July 13, 2011 : A committee of unsecured creditors — namely, publishers that ship books to Borders — file an objection to the proposed sale, saying that nothing would prevent Najafi from liquidating Borders on its own and pocketing valuable intellectual property. The creditors said that if Borders was to be liquidated, it wanted the Borders-approved liquidators to handle the process.

July 13, 2011 : Najafi says it cannot proceed with an acquisition of Borders under the terms it previously laid out — a development believed to be related to the publishers' objection.

July 14, 2011 : A bid by a team of liquidators is established as the top bid in an auction tentatively scheduled to take place July 19. Without another bid, the company would have to start liquidation sales as soon as July 22.

July 17, 2011 : Deadline for bids passes without any new possible acquirers emerging.

July 18, 2011 : Borders announces plans to liquidate . Some 10,700 people will lose their jobs, including 400 in Ann Arbor.

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or [email protected] . You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.

Tue, Jul 19, 2011 : 6:02 p.m.

A few more dates to bear in mind, when Border's downtown store added music in 1991, Schoolkids, SKR Classical and Discount Records each closed. Capitalism and legacy don't have a lot to do with each other. Pay attention to your customers and innovate or die. I do mourn the early days of Borders when I could walk into the computer book section on State St. and have the buyer steer me to just the book I needed. My career benefited markedly by that guidance. But its hard to pity serial bad management decisions and repeatedly turning their back on the roots.

Joe Bavonese

Tue, Jul 19, 2011 : 12:30 p.m.

I was disappointed that the original Borders store on State St was not given more space in this timeline. To those of us who remember it, it was like going to a shrine - the first bookstore where you could sit down, relax, not feel pressured - and measure your time in dollars per minute. It was a destination and part of what made the Ann Arbor book scene unique.

Tue, Jul 19, 2011 : 10:24 a.m.

This should be a warning to the bookstore business. Borders reckless expansion caused much of its problems, but online innovation could also be the next knockout blow. Barnes and Noble should be cautious in their approach. While they are much better managed than Borders and wisely did not purchase the latter company; they are not immune to the online onslaught.

Tue, Jul 19, 2011 : 12:10 a.m.

A couple of important milestones that would be interesting (and relevant) to include would be: Beginning sales of eReaders (such as Kindle) Arrival of Napster Launch of iPod and iTunes Launch of Netflix Launch of Amazon All of those events helped to act as killer technologies for all of Borders sales channels.

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The Rise and Fall Gazette

Borders Book Shop: An Iconic Brand's Journey from Rise to Fall

With 8 lessons for today's retailers.

The Beginnings

In the realm of bookselling, Borders once held a special place in the hearts of book lovers everywhere. It was a cherished destination, known for its extensive book selection, cozy atmosphere, and inviting cafes. However, despite its initial triumph and widespread popularity, Borders eventually met an unfortunate end. This article aims to explore the factors that contributed to the fall of Borders bookstores, shedding light on the challenges presented by the digital age, mismanagement decisions, and shifting consumer preferences.

Borders Group, Inc., originally named Borders Book Shop , was founded in 1971 by brothers Tom and Louis Borders. The first store, located in Ann Arbor, Michigan , stood out from traditional bookstores of its time due to its focus on providing an extensive range of titles across various genres, friendly staff, and the innovative combination of a traditional bookstore with a cafe. This fresh approach resonated with readers, quickly catapulting the store's popularity.

Borders expanded rapidly, opening new locations across the United States. Its success stemmed from its unwavering commitment to customer service and pioneering approach to book retailing. The company introduced groundbreaking concepts such as the "inventory management system" which enabled efficient sales and inventory tracking.

In the 1990s, Borders ventured into e-commerce, launching an online platform known as Borders.com . This move not only expanded its reach but also appealed to tech-savvy customers. Additionally, strategic partnerships with music retailers and the establishment of the Borders Rewards loyalty program solidified Borders' position as a leading bookseller.

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Where it started to fall apart

Despite experiencing considerable success throughout the 1990s and early 2000s, Borders encountered a series of challenges and missteps that eventually contributed to its downfall. The rise of online retail giant Amazon and the increasing popularity of e-books posed significant obstacles for traditional bookstores like Borders. Initially, Borders relied on a partnership with Amazon for its online sales, but this decision proved to be a strategic blunder as it essentially empowered its biggest competitor.

Moreover, Borders struggled to adapt to the digital revolution, making slow progress in developing its own e-book platform. Unfortunately, this delay in entering the e-book market proved to be a costly mistake, as e-books gained traction and began dominating the publishing industry.

Financial difficulties also plagued Borders due to its ambitious expansion plans and the high costs associated with maintaining large physical stores. The company accumulated substantial debt, and its financial troubles were further exacerbated by the economic downturn in 2008.

In 2011, Borders filed for bankruptcy and announced the liquidation of its remaining stores. The closure of Borders evoked sadness among book lovers and industry insiders alike, signifying the end of an era in the bookselling landscape. Countless employees lost their jobs, and numerous communities bid farewell to a cherished gathering place.

The fall of Borders offers valuable lessons for traditional retailers grappling with the challenges posed by the digital age. It underscores the importance of embracing technological advancements, recognizing shifting consumer preferences, and maintaining a competitive edge. While Borders faltered in adapting to the changing industry dynamics, its legacy lives on, reminding the retail world of the profound lessons it imparted.

Lessons from the Rise and Fall of Borders Bookstores:

1. Adapt to the Digital Revolution: Borders' downfall can be attributed, in part, to its failure to effectively adapt to the digital revolution in the book industry. The rise of e-commerce and e-books disrupted the traditional bookstore model, and Borders' slow response to these changes proved detrimental. This serves as a reminder for businesses to stay abreast of technological advancements and be willing to adapt their strategies to meet evolving customer preferences.

2. Embrace Innovation: Borders initially stood out in the bookstore landscape by introducing innovative concepts, such as extensive genre selections and comfortable reading areas. However, the company's innovation eventually stagnated, particularly in the realm of digital offerings. It is crucial for businesses to continuously innovate and explore new avenues for growth to stay relevant in a rapidly changing market.

3. Nurture Customer Loyalty: Borders' introduction of the Borders Rewards loyalty program was a smart move, fostering customer loyalty and incentivizing repeat purchases. Building strong relationships with customers is vital for sustained success. Implementing loyalty programs, personalized experiences, and excellent customer service can help foster long-term loyalty and positive word-of-mouth.

4. Strategic Partnerships: Borders initially partnered with Amazon for its online sales, but this partnership ultimately backfired as it empowered its biggest competitor. This serves as a lesson for businesses to be cautious and strategic when entering partnerships. They should carefully consider the potential impact on their competitive positioning and future growth.

5. Manage Expansion Wisely: Borders' rapid expansion and the maintenance costs of large physical stores contributed to its financial woes. While growth is important, it must be balanced with financial prudence. Businesses should carefully manage their expansion plans, considering factors such as market demand, profitability, and financial sustainability.

6. Stay Agile and Responsive: Borders' downfall illustrates the importance of agility and responsiveness in a rapidly changing market. Companies must be willing to pivot their strategies, experiment with new approaches, and swiftly respond to emerging trends and customer demands. The ability to adapt and respond effectively can be a key differentiator in the face of evolving industry dynamics.

7. Focus on Financial Stability: Borders faced significant financial challenges, worsened by its debt and the economic downturn. Businesses should prioritize financial stability, maintain a healthy balance sheet, and exercise caution when taking on debt. It is crucial to have robust financial management practices and contingency plans to weather potential economic downturns or industry disruptions.

8. Preserve the In-Store Experience: Borders' physical stores were known for their inviting atmosphere and in-store cafes. While digital advancements are essential, preserving and enhancing the unique in-store experience can be a competitive advantage. Offering a welcoming and experiential environment that encourages customers to browse, linger, and engage with products can help differentiate brick-and-mortar retailers from their online counterparts.

In summary, the rise and fall of Borders Bookstores provide valuable lessons for businesses across industries. By embracing technological advancements, fostering customer loyalty, staying innovative, managing expansion wisely, and maintaining financial stability, companies can position themselves for long-term success in a rapidly changing market.

Ready for more?

What Happened To Borders Bookstores?

You might remember Borders bookstores. They were all over the country in the early 2000s, selling all kinds of books and even multimedia like CDs and movies. Their stores ranged from small outlets in shopping malls to huge buildings packed full of books. In 2003, according to NPR , there were more than 1,200 of the stores nationwide. But by 2012, the chain had liquidated and closed all of its locations.

Bookstores like Barnes & Noble still hold ground in the bookselling market, and the oldest bookstore in America is still standing after more than 150 years. Clearly, people are still reading, and they're going to bookstores to discover new favorites. Borders, a familiar sight and staple storefront for more than four decades, faced plenty of problems in its final years. But what was the final straw for the bookselling giant? Was it a shift to online sales and e-readers, or something else?

The store didn't have great online sale strategies

When Borders first entered the scene, there wasn't really an online marketplace. It made its name by being a big box store where everyone could find something they wanted, according to NPR . But when the internet came around, customers found other ways to get their reading fix.

Other retailers created websites to help move products along. But Borders opted to go a different route. The store actually opted to use Amazon to sell its online products, according to Time , instead of creating its own online marketplace. Time reports that the decision meant Borders handed over control over its online presence and that the lack of cohesive branding likely hurt the store in the long run.

Borders did have its own website for a while. Surprisingly, it was actually hurting the company, and according to Lit Reactor , that website cost the company $20 million to maintain even before it started working with Amazon. That's not exactly a recipe for success.

E-readers and digital books were more popular

The creation of the internet marketplace led to another trend that hurt Borders' prospects. On top of buying physical books online, readers started to shift to electronic books (via Time ). Over the early 2000s, e-books outpaced the sale of physical books, according to Time.

Other outlets saw the change coming and adapted. Barnes & Noble created its Nook e-reader to compete with Amazon's marketplace, according to Time, but Borders never created its own e-reader. In an online essay about the bookstore's closure, former Borders Director of Merchandise Planning and Analysis Mark Evans in part blamed the slow adaptation to e-books.

"[Borders] also dropped the ball on e-books," Evans wrote. "But by the time this became an issue they were just trying to figure out how to keep the whole house from burning down around them, so I find it more understandable."

Without a place to direct people interested in e-books, Borders missed out on a market that could have brought in more sales.

It invested too much in selling other media

Borders might have started out as just a bookstore, but it didn't stay that way. The stores later shifted to selling DVDs and CDs and opted to heavily focus on that market in the 1990s, according to Time . But ultimately, it wasn't as great a success as business executives might have hoped for. The iPod and other MP3 players came through shortly after the shift, and it drew customers away from the physical media Borders was selling (via Time).

According to Lit Reactor , Borders filled almost half of its retail space with CDs. That left them with a lot of empty or underutilized space later on when CDs fell out of fashion, including warehouse space. According to Evans, it took a lot of resources to fill the empty space and the loss of revenue that came around when CDs fell out of fashion.

Their troubles with real estate strategy

Another issue that pops up during a Borders post-mortem is somewhat  easier to understand. The hypothesis is that Borders went on a commercial retail buying spree and bought up too many storefronts — and simply didn't have enough money to support them. According to Time , a vast majority of its stores were also in close proximity to other booksellers like Barnes & Noble. So on top of the shift to online sales and e-books, there were too many physical bookstores (both other stores in the chain and competitors) around wherever a Borders was operating.

According to NPR , Borders bought up plenty of real estate in the 1990s when the business was doing well. It might have been that they couldn't sustain that level of expense , and eventually it caught up with them. That theory is backed up by former employee Mark Evans , too according to NPR . He says they didn't do as well with relocating stores to better locations, and their storefronts couldn't compete with other stores in the area. The company was also trying to recover from massive debt, according to Time, even before the market crash in 2008.

The workplace atmosphere might have played a part

The issues with online sales and real estate were all pretty visible from the outside. But there's also some commentary on the differences in workplace atmosphere between Borders and other retailers. Barnes & Noble, for example, gave its employees an opportunity to try other things. According to Lit Reactor , some were able to work as baristas or fill other roles in addition to cashier or bookseller duty. And a different seller, Half Price Books, also offered better policies for workers, including paid hour-long lunches, full benefits, and better wages. Those factors probably didn't lead directly to Borders' closure, but they didn't help them, either.

Borders closed its doors for a variety of reasons. Some of those were due to management, while others were the result of a changing market. But the bookselling industry is still going strong. From at least some analyses , Borders' disappearance even allowed independent booksellers to expand and flourish in different parts of the country. But for many, the loss of the traditional big-box storefronts is still a sore subject.

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Borders Group, Inc. is the nation's second largest retailer of books, music, and other educational, informational, and entertainment products. Its Waldenbooks bookstores were in over 1,000 mall stores by 1995. Furthermore, it owned the rapidly expanding Borders Books & Music superstores and Planet Music stores. Throughout the country, the Borders name is associated with superstores catering to book and music lovers, with a wide selection of hard-to-find titles and tapes as well as a growing number of varied forms of electronic media. These superstores, which numbered 116 in early 1996, provided customers with plentiful sitting and browsing areas, a well-versed customer service team, and even espresso bars featuring live entertainment.

Borders Group, Inc. came into existence following the spin off from its parent Kmart Corporation in May 1995. But the Borders name dates back over two decades. Borders began as a single used bookstore in Ann Arbor, Michigan. The shop was founded by Louis and Tom Borders in 1971. Serving the bustling academic community of the University of Michigan and Ann Arbor's smaller colleges, the store held its own and became a popular neighborhood hangout. Within the next several years, the Borders brothers opened two more bookstores in Michigan, one in Atlanta, and another in Indianapolis. In addition, Louis and Tom started a wholesaling business they called BIS (Book Inventory Systems), which experienced healthy growth.

Toying with the idea of a "superstore," the brothers opened their first prototype in 1985. Its success and the rise of similar competing stores set the retail book industry on its ear, shifting sales away from mall-based stores and into busy suburban areas (the areas that the Borders' bookstores had always targeted). By 1988, with their five Midwest bookstores and BIS's bustling service numbering 14 bookstore clients, the brothers' enterprise was bringing in a net income of $1.9 million from sales of $32.3 million. But the brothers wanted to expand in a big way.

To achieve their dream of taking the Borders name national, Louis and Tom put their faith in a young man named Robert DiRomualdo, a graduate of the Drexel Institute of Technology with a Harvard MBA. DiRomualdo had worked his way through several merchandising and marketing positions at Acme Markets and Little General Stores before becoming president and chief executive of Hickory Farms, the prominent food shop chain.

When DiRomualdo joined the Borders brothers' enterprise in 1988, the industry was ripe for the kind of expansion Louis and Tom had hoped for. The late 1980s and early 1990s were a time of unprecedented growth for book retailers, as industry sales mushroomed from $59 million in sales for the top two superstore chains with only 31 units in 1989, to nearly $1.4 billion by 1994 from 350 units; an astounding 87 percent compound annual rate. Taking advantage of these circumstances, DiRomualdo, who was named president and chief executive in 1989, opened 14 new stores in the next three years. Within a few short years DiRomualdo had turned Borders into a household name in the Midwest, and analysts considered Borders the premier book superstore chain of the 1990s.

By 1992, Borders had quadrupled its size and was beginning the complicated process of going public. Around the same time, the retailer attracted the attention of the huge Kmart Corporation, which had bought Waldenbooks in 1984 and was looking to expand its book retailing segment even further. In October of 1992, Louis and Tom Borders sold their business (though they remained investors), and Borders became a wholly owned subsidiary of Kmart. Sales from Borders' operations for 1993 reached $224.8 million, a 15.8 percent increase in net sales over the previous year. Several changes were implemented in 1993, including modernized cash registers, a human resources department, formal training programs for employees, and the introduction of music to the stores' stock.

In August 1994, Borders and sibling Waldenbooks formed a new company called Borders Group, Inc., with plans to eventually break free from Kmart. DiRomualdo joined with George Mrkonic, who ran Kmart's specialty stores division for four years (which included Builders Square, The Sports Authority, Pay Less Drug Stores, Waldenbooks, Borders, Kmart's in-store Reader's Market shops and others) and had jumped over to the Group in November. He had helped shape the company into a mechanized book and music mecca. By the end of the year Borders had acquired five CD Superstores and one Planet Music outlet. The company went on to add four Planet stores and 32 new Borders superstores.

The Group's overall sales for the year reached $1.5 billion. With what some analysts have called the industry's most sophisticated computer inventory management and sales system, Borders not only possessed the highest sales-per-foot ratio in the industry, but was able to track popular titles by selling season. Borders had identified as many as 55 separately defined seasonal patterns and programmed these into the computer system to keep better track of seasonal and regular bestselling titles, and to help maintain a supply of such titles with little or no interruption in prospective sales.

Though Kmart's ownership of Borders (and Waldenbooks) was to end with the formation of the Borders Group, Inc., finances were settled with the proceeds of a public offering of the new company's stock in May 1995. Two months later, Borders announced it would purchase Kmart's 13 percent stock share. DiRomualdo was installed as chairman and chief executive, while Mrkonic became vice-chairman and president. After a one-time write-off of $182 million, the Borders Group announced second quarter (1994) sales of nearly $364 million, representing an 11.7 percent gain over the previous year's posted sales of $327 million.

Though Borders' transition from small retailer to national chain wasn't completely smooth, many long-time employees remained with the company and were rewarded for their loyalty by generous benefits worked out during the Kmart acquisition. One sore point arose in 1994 with the proposed closure of Louis and Tom's original Borders store in Ann Arbor, set for relocation into an old department store building. Not only was the new store slated to be a Borders Books & Music (the previous was books-only), but its spacious 45,000-square foot interior (four times the size of the original) could in no way maintain the homey atmosphere of the first Borders book shop, despite the added benefits of much more space and extras like the popular new espresso bars.

Nevertheless, Borders new format was obviously giving customers what they wanted and needed. In addition to its unique, state-of-the-art inventory and ordering system, Borders' employee base was another of its major boons; most employees were full-time and college-educated, and all were tested for their knowledge of literature and music prior to hiring. Additionally, the bookstore chain prided itself on first-rate customer service, offering patrons a wide range of services from locating out-of-print titles to community activities like children's storytelling hours and poetry readings.

Rounding out Borders' offerings were growing varieties of alternative educational and informational media, from videos to CD-ROMs, a relaxing and comfortable environment which encouraged customers to linger, and the ubiquitous espresso bars. An industry-first that was quickly copied by competitors, Borders' espresso bars grew from a store add-on and overhead cost to a $20 million per year venture. 82 of the company's 88 superstores had espresso bars in 1995, and all new stores were scheduled to have them.

The Borders superstore prototype in 1996 was 30,000 square feet of space, substantially larger than major competitor Barnes & Noble's megastore. Averaging 128,000 book titles and about 57,000 prerecorded music titles at an initial cost of $2.6 million, most Borders superstores became profitable within 12 months of business. Since the majority of Borders' superstores were built following the early 1990s, the company's success by 1996 had been swift and immediate.

Revenue figures for year-end 1995 were just shy of $1.6 billion for the Borders Group as a whole, with Borders Books & Music stores contributing over $622.6 million (a 63.4 percent increase over 1994's sales). The superstores contributed a healthy 39.6 percent slice of the Group's overall sales, a welcome and expected 12.2 percent increase from their share in 1994. Analysts predicted 1996 sales to reach more than $2 billion, with Borders' superstores division hitting $950 million.

Second only to Barnes & Noble in sales, Borders' superstores were chosen over Barnes' by analysts as having a better variety of products, and most expected the bookseller to overtake its rival in the near future. Additionally, Borders planned to take advantage of Waldenbooks' status as a cash cow to finance expansion across the nation. Scheduled to open between 30 and 35 new Borders superstores in 1996 and to continue the trend (from 35 to 40 new superstores per year) until the end of the 1990s, Borders hoped to not only prove its mettle but to become the country's top book-retailing chain.

Principal Subsidiaries: Borders Inc.; Waldenbooks; Planet Music, Inc.

Source: International Directory of Company Histories , Vol. 15. St. James Press, 1996.

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When Borders Book Shop (as it was once known) opened in Ann Arbor circa 1971, selling both new and used books, it was far from the behemoth it is today. Since then, however, they’ve sold out to Kmart, merged with Waldenbooks, bought themselves back from Kmart, and now have stores in Singapore, Dubai and Kuala Lumpur. In its current manifestation, Borders can special order out-of-stock titles in about a week, and unlike its even bigger brother, Barnes & Noble, it will special order out-of-print titles. They have thousands of CDs and DVDs, and everything is organized on shelves; no tubs or stacks on the floor here. The coffee in their cafés is provided by a Starbucks subsidiary, and their stationary company is a leading brand in the U.K. But this slightly-upscale motif is more appearance than anything—while a Borders manager may tell you that the store’s employees are more knowledgeable and bookish than those of other big chains, a Borders employee will just as soon tell you that it only looks that way because of the stringent dress code. — Ben Perkins

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What happened to Borders?

Borders Group Inc. was a book and music retail chain founded by brothers Tom and Louis Borders in 1971. Acquired by Kmart in 1992, Borders was slow to react to the boom in eCommerce and it continued to open new stores with high overheads as Barnes & Noble developed an online presence and e-reader. It also sold books through the Amazon platform for seven years instead of developing its own site.

Table of Contents

Borders Group Inc. was a book and music retail chain founded by brothers Tom and Louis Borders in 1971.

From a single store in Ann Arbor, Michigan, Borders operated 1,249 stores at its peak in 2003 with a presence in the United Kingdom, Singapore, and Australia. 

No more than eight years later, Borders filed for Chapter 11 bankruptcy protection and was unable to find a buyer. The last stores closed in September 2011 with rival Barnes & Noble acquiring Borders’ trademarks and customer list. 

Borders was an early innovator in inventory management with passionate store managers who believed in book-selling. Its stores also had extensive selections with adequate browsing space, cafés, and community outreach programs. 

So what went wrong? Many will assume Borders was just another victim of the Amazon juggernaut. But the story of Borders’ downfall starts much earlier and is more complex.

Kmart acquisition

Borders was acquired by Kmart in 1992 for $125 million, with the Borders brothers leaving the book business for good. 

This is when the trouble started for the company. Kmart had purchased the mall-based book chain Waldenbooks eight years previous but was struggling to make it profitable. Essentially, Kmart hoped that Borders senior leadership could somehow turn Waldenbooks around.

Waldenbooks and Borders were not a good fit culturally or commercially, and many senior Borders staff resigned as a result. This further exposed Kmart, ill-equipped to deal with a division experiencing competitive pressure from Barnes & Noble and Crown Books.

Borders was eventually spun out in 1995 and renamed Borders Group.

Store merchandising

As the eCommerce movement gathered momentum, Borders Group continued to open new brick-and-mortar stores. The company also added CDs and DVDs to its stores just as iTunes and file-sharing networks became popular.

At the same time, Barnes & Noble began focusing on its online presence and developed an early e-reader called the Nook. The failure to develop an e-reader would prove to be a significant missed opportunity for Borders.

Amazon affiliation

Borders eventually started selling online by outsourcing its operations to Amazon. Essentially, visitors to the Borders website would be directed to the Amazon store.

As a seller of books itself, partnering with Amazon did not make sense financially. When customers were interviewed outside a West Virginia store, one reader admitted she browsed books in Borders stores and then ordered them straight from Amazon.

Too many stores and too much debt

Borders operated hundreds of stores at its peak but they were big and had high overhead costs. This left the company financially exposed at a time when consumers were moving online. Furthermore, an estimated 70% of all Borders stores were in direct competition with a Barnes & Noble outlet.

Debt was also a problem for Borders, with the company restructuring twice after the GFC to manage the $350 million it owed.

In its February 2011 bankruptcy filing, the company cited its expansion strategy as one of the key reasons for its demise.

Borders noted that many stores were simply unprofitable and that it had signed too many 15 to 20-year leases which made them difficult to sell.

Key takeaways:

• Borders was an American book and music store chain founded in 1971 by brothers Tom and Louis Borders. After almost 40 years in business , Borders filed for bankruptcy in 2011.
• Borders was acquired by Kmart in 1992 and joined Waldenbooks under the Kmart Umbrella. Borders executives were then instructed to resurrect Waldenbooks, but the two subsidiaries were not a good cultural or commercial fit.
• Borders was slow to react to the boom in eCommerce. It continued to open new stores with high overheads as Barnes & Noble developed an online presence and e-reader. It also sold books through the Amazon platform for seven years instead of developing its own site.

Quick Timeline

• Borders Group Inc. was a book and music retail chain founded in 1971 by Tom and Louis Borders.
• It was acquired by Kmart in 1992, leading to cultural and commercial clashes with its subsidiary Waldenbooks.
• Borders continued to open new brick-and-mortar stores and added CDs and DVDs as digital music and video distribution gained popularity.
• The company failed to develop an e-reader, missing out on the growing e-reader market that Barnes & Noble tapped into with the Nook.
• Borders partnered with Amazon to sell books online, which led to customers browsing in stores but purchasing from Amazon instead.
• The company had too many large stores with high overhead costs, and around 70% of its stores were in direct competition with Barnes & Noble outlets.
• Debt also became a problem for Borders, leading to two restructuring attempts after the Global Financial Crisis.
• In 2011, Borders filed for Chapter 11 bankruptcy protection, citing its expansion strategy and unprofitable stores as key reasons for its downfall.

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This location has been flagged as "Closed".

Borders Books & Music

4555 E. Cactus Rd. Phoenix , AZ 85032

North Phoenix

602-953-9699

www.borders.com

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