The Egatz Epitaph

Our favorite of the rapidly-thinning herd of massive chain bookstores, Borders, is still on the ropes, and barely able to protect itself from body blows raining down on it.

One month ago, the former CEO of Borders U.K., Philip Downer, published a point by point dissection of how management ran Borders into the ground. His three charge indictment:

1. Regarding the Internet, Borders let the cluetrain leave the station without hopping aboard.
2. The internal hardware and software Borders used for tracking inventory was antiquated. Penny wise, pound foolish.
3. Excessively rapid expansion. Too fast in too many countries.

Downer’s blog is worth following, but it appears too late for the management of Borders to learn the lessons he offers. Bankruptcy was declared February 16th, and BusinessWeek just pointed out Borders will be closing 25 stores in 14 states. Other sources claim 28 stores. The bankruptcy paperwork claims assets of $1.275 billion, liabilities of $1.293 billion. They owe $302 million on inventory. That’s a lot of books waiting to be paid for, not to mention authors waiting for checks. Those pesky authors—always looking to get money, always the last in line waiting for the trickle-down.

With 200 stores already liquidating by the end of April, 28 more on the way, and the Ann Arbor headquarters up for grabs, things are bleak for the monster from Michigan.

Peter Osnos, writing in The Atlantic, claims the real trouble with Borders began in 1991, when Tom and Louis Borders cashed out to Kmart for $125 million. As we’ve documented here before, Borders has suffered a series of management shuffles, which is rarely a good thing. Osnos claims executives were brought in “from supermarkets and department stores.” This isn’t unlikely, and again, isn’t a good move. Widgets are not widgets, particularly in the red herring industry known as publishing. This fact is something countless beancounters at multinationals have been unable to balance both on spreadsheets and in their own minds after their parent corporation has gobbled up a publishing company.

Meanwhile, on the other side of chain bookstore saga, embattled Len Riggio and his team have been unable to find a buyer for Barnes & Noble. The vultures are circling, but the price is still to high to start nibbling. Even Ron Burkle, minority shareholder and ever-present millstone around Riggio’s neck, isn’t buying more shares, according to sources. With the Nook e-Reader claiming 22 percent of the e-Reader market, the hopeful are praying the device will save Barnes & Noble from collapse.

The end is not in sight for book buyers just yet. Sure, it looks like the big chains will, sooner or later, go by way of Tower Records, but there may still be hope for the long-suffering independent bookstores. You remember those? The ones where the clerks cared about what they sold, and knew their regular customers’ reading habits? Check out Edward McClelland’s insightful piece on the matter at Salon. Like the moon and tide, these things return. We can only hope so.