Why did Borders Tank and B&N not? | Hacker News Reader

Why did Borders Tank and B&N not?

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114 pointsThomPete70 comments

I think the common answers to this question are a good illustration of people inventing logical reasons post factum for something they don't understand, much like described in the Black Swan.

My experience is exactly the opposite to what most people are saying. I know of plenty of Borders locations, and almost no Barnes & Noble location. Borders stores are always excellent - well stocked, pleasant atmosphere, etc. The checkout lines are always full, people browse for hours and buy a ton of stuff.

I suspect the problems have much more to do with the economics of running their operations which you can't see with a naked eye. Their customer experience is top notch - they just couldn't do it in a scalable way long term.

BTW, what exactly is Barnes & Noble's eBook strategy? How many people do you know that bought a Nook?

I know nearly as many people with a color Nook as I do that own a Kindle. But I know probably three times as many people that own an iPad.

I own a Nook. I don't know anyone with a Kindle, and one person with an iPad.

I'm a 4th-year Software Engineering student at a pretty Linux-heavy university.

1. How many people do you know that bought a Nook?

2. [reply with numbers and context]

3. [downvoted]

The economics of their operations was a common thread in the #1 answer:

* costly rent

* costly operations

* slow restocking

I guess you know so many Borders locations because they picked great locations in expensive malls. That's not a great way to run a glorified distribution centre.

I actually know more people with Nooks than with Kindles. Most of them have color Nooks and most use them to read books and boot into Android to get a cheap, color, wifi-enabled tablet.

See my post below. I don't think it was just behind the scenes "operations" stuff but mostly had to do with "finance" ... Bill Ackman's hedge fund was involved.

I don't think Barnes & Noble is out of the woods yet. While the company has certainly fared better than Borders, the company is going to face a difficult road going forward.

First, the company is still heavily dependent on its brick and mortar retail operations, but the demand for physical media (including books) is declining rapidly. Second, the company's future depends on its ability to transform itself into a digital distributor of content. In digital distribution, B&N must contend with Amazon, Apple, Google, and others (e.g., Sony). These competitors have significant advantages in the areas of economies scale and scope and technology.

Borders bankruptcy will give B&N some reprieve, allowing the company to direct cash flow from its bricks & mortar operations to its developing digital strategy (e.g., BN.com, Nook). Nevertheless, I think B&N will face a rocky future. Investors seem to agree, with B&N trading at close to a 5-year low.

Current trends are supposedly looking better. I saw an article last year that claimed 1 million sold before Christmas and continuing to trend upward:

He is also forecasting that 2.4 million Nooks will be sold this year, and more than 3 million in 2012.

http://www.crainsnewyork.com/article/20110215/FREE/110219913...

I think the key difference between B&N and Borders is that BN actually had a digital strategy long before Borders ever did. According to this article they were already dabbling with ebook delivery in 2001:

http://pocketnow.com/software-1/the-bn-ereader-remembers-my-...

Right now though, I think one of the best things is they have the cheapest Honeycomb capable tablet in the Nook Color (with some hacking). The screen is IPS and the processor is a 800Mhz A8 ARM, capable of overclocking to 1100Mhz. It's effectively a scaled down IPad in terms of processing/screen. From a hacking perspective it's more interesting than anything Amazon has shown.

http://www.engadget.com/2010/10/28/nook-color-processor-reve...

I think the real problem is that Borders is trying to pivot on a dime. They saw the .com implosion and assumed the digital revolution was hot air leaving their position unassailable.

I really think the impact of having a Starbucks in every Barnes and Noble is huge.

Every Australian Borders store has a Gloria Jeans... And they independantly went into recievership 2 days after the US company did.

I think the Australia situation is actually worse, they don't even come close to competing on price, given their volumes aren't high enough compared to big US operations. So at the high prices stocking the long tail isn't very appealing at all now, you can usually get books from the book depository for a heap cheaper within a week, and that's before you factor in ebooks.

Starbucks is not the only coffee chain on the planet. Are people really that addicted to Starbucks coffee specifically?

Here in Germany a big chain, Hugendubel, partners with "World Coffee" (I think), and imo they are actually better than Starbucks. In any case they are sufficient to provide a cosy atmosphere for checking out some books.

Also, how difficult is it to get a Starbucks, don't they jump any opportunity for opening another Starbucks, even if there already is one across the street?

> Starbucks is not the only coffee chain on the planet. Are people really that addicted to Starbucks coffee specifically?

In most of America, sadly, the answer is yes.

What people are addicted to, is a menu they know at a familiar place. Starbucks wins because it's familiar, not because it's any better; it's the brand, not the coffee.

Also, coffee and tea are drinks that people will accept even if they aren't exactly a person's preferred style/flavor.

People will order and drink coffee at any restaurant when the choice is generic coffee vs. decaf. Brand certainly helps but many people, even picky, will drink a brown liquid called coffee anywhere, if the primary objective is conversation, reading, etc.

I agree, and I'm assuming you actually mean that the impact of having a coffee shop in each location is huge. Borders failed at this, they originally ran their own coffee shops, then outsourced it to Seattle's Best. BN outsourced coffee while Borders outsourced the web business.

I have never been able to understand the fascination with Starbucks in BN. At my local BN, it's noisy, small tables, and no power outlets available. Can't do that.

Also, Peet's is so much better than Starbucks.

> Also, Peet's is so much better than Starbucks.

This is only relevant if there's a Peet's anywhere near you. This is untrue at the majority of places I've been to with a BN.

The irony of this is that Starbucks, in a way, owns Seattle's Best.

Granted, it's about brand attraction, but eh, funny nonetheless.

I asked this same question to a tech analyst at an investment bank I used to work for. He said the Internet was a big one, of course, but he also pointed to the music sales and said that Borders went heavy into that market at the height, whereas BN had largely stayed out of it. He said the music commitment was the big resource drain that put Borders at a huge disadvantage.

Chairs. B&N has comfy chairs where I can peruse a pile of books. Borders doesnt. But Amazon won for us. We live 40 miles from either so my GF gets everything from Amazon or other Internet sites. Even though I work not far from both, free 2 day delivery has won me over for anything other than the occasional mass market paperback.

How far away is Walmart?

Walmart actually has a large book section, but a small variety. Vampire romance, cooking, religion, diet, self-help, and pseudoscience relating to dietary supplements and the like. Also, a huge number of useless magazines.

Hrmm. Thinking of the impulse-buy tabloids in the checkout aisles, I wonder what would happen if they were to put a magazine of substance, a literary magazine or accessible scientific journal of some sort, amidst those tabloids. If one out of every thousand people who bought a tabloid instead opted for the better books, what would be the long-term gain of society?

If I were a dictator, I would require such experiments.

For what it's worth, I don't subscribe to any magazines, but I'll frequently impulse-buy an Economist, Atlantic Monthly, or Scientific American at the airport, or if I find myself near a decent newsstand.

I asked because I wanted to gauge value of store placement. Walmart does a ton of research on where to place their stores and was just curious. People have ditched mom and pop stores for Walmart. Little book stores struggle because of selection as well.

There's an independent bookstore not two miles from my house. It's been in business at least twenty years (that's as long as I've been aware of it) but they might have some advantages that other bookstores don't.

1. It caters to the nearby university by selling text books.

2. It also sells used and rare books. It's not uncommon to see books from the late 1800s/early 1900s on the shelf.

3. It's large and well lit (no chairs though; nor is there a cafe; nor is there free Wifi---it's just shelves and shelves of books).

4. It's in a city known for its wealth (Boca Raton, Fl).

I don't see it going away any time soon, but I do fear what will happen once the original owners are no longer there.

What I really fear for this kind of store is, what percentage of their books were bought new at Borders?

If the new book supply goes away in favor of eBooks, used book stores are in a tough spot.

I think that kind of is the future of retail books, a relatively small selection of mainstream books which they can buy in bulk for cheap and they sell well.

Given the kinds of changes Wal-Mart demands of music, I wouldn't trust them to sell any of the more interesting books unaltered.

http://www.pbs.org/itvs/storewars/stores3_2.html

free 2 day delivery has won me over

I like it too, but it's not really free. It's $79/year for an Amazon Prime membership.

You could use John Dvorak's trick--buy all your Amazon items through an affiliate link for an affiliate you own. If you purchase enough, your affiliate rewards will cover your Amazon Prime membership.

I tried this a long time ago -- maybe 10-12 years back, not long after they first introduced the affiliate program -- and got a friendly but pointed letter from Amazon to knock it off. Have they changed the rules?

No. It has always been against the rules.

Any clues on how Amazon identifies this kind of behavior?

It's the same Amazon account for Associates and purchases... It's quite simple to match up. You may able to sneak around with different email and mailing addresses, but you still have cookies to deal with.

Unless you are a student (http://www.amazon.com/gp/student/signup/info) or a mother/father/grandparent/aunt/uncle/... (http://www.amazon.com/gp/mom/signup/info).

Funny, my Borders has comfy chairs, a (crummy) coffee bar and wifi.

Yeah, all the Borders I go to have nice chairs and a decent atmosphere; the only BN that's anywhere near me doesn't have much to sit on and feels like a two-story version of a mall bookstore.

This question is probably premature to ask. B&N hasn't tanked...yet. Their future existence is far from guaranteed.

Well, Borders did just file Chapter 11. That's not really "tanking" in the sense of going out of business, but it's tanking in the sense of appear to be on its way down.

Their Ann Arbor store has been a dump for months at a time as they reorganized and relocated books. Seems like a third of the store is just paper goods--cards and wrapping paper crap. 5 miles from HQ and they still couldn't figure it out.

And yet their new flagship store on Lohr Road by Best Buy is pretty gorgeous, well staffed, and well laid out. Just gotta get in the car and drive, unfortunately.

Wow, we need an Ann Arbor HN meetup!

Censorship.

While not THE answer, it's why this longtime faithful Borders customer quit cold turkey.

When the "mohammed cartoons" flap broke, Borders responded by refusing to carry issues of magazines which printed the images. In a market where "banned books" are celebrated as an exercise of rights, this act of censorship alienated more than just this customer. The competition did not so violate this basic principle, and with B&N and others just as easy to visit, we took our business to where we could trust that discussion of controversial content would not be suppressed.

Trust is hard to build and easy to lose.

Poor real estate location. This killed them in my area. They built two Borders near me, each so close to an existing Barnes and Noble that I swear you could stand at a spot across the street and see both competing stores. Meanwhile, new malls and complexes of big box stores were built with no booksellers in the area at all.

The broader selection than Barnes and Noble was one of the things I loved about Borders - in 1995.

But the K-Mart acquisition and subsequent management team deserves a lot of the credit for this disaster.

Fumbled early Internet strategy. Amazon and B&N both had affiliate programs - Borders wanted to keep control.

i think rather more fundamental was the years they spent with borders.com basically pointing to amazon.com.

Probably - but I think that was itself symptomatic of the fact that they Didn't Get the Internet.

I wanted to affiliate with them, back when - I always preferred them to B&N and Amazon was still nearly unknown - but couldn't. I didn't expect it to bring down their bricks and mortar stores, but I'm not surprised.

It's hard to quantify, but personally, I never found Borders stores that pleasant, whereas B&N was overall much more appealing to go to.

My feeling is exactly the opposite. B&N feels generic to me, a larger version of a crappy mall bookstore. Borders always felt more like a real bookstore. Plus: you can search Borders store inventory before actually visiting the store; you can apparently now do this with B&N but the B&N website keeps this quite hidden -- I only know it's there because if you search for "barnes noble store inventory search" it leads you to:

http://search.barnesandnoble.com/booksearch/store.asp?EAN=97...

which is the result page for a PHP book including store inventory search option. I've then been able to manipulate this into a general store inventory search with some success. Completely ridiculous that you cannot find this easily. No, it's beyond ridiculous.

Edit: apparently most -- but not all -- book results pages do have a "pick me up" slot where you can search a local store. Not exactly intuitive, but at least it's there now.

I used to find the similar thing, but then all the borders near me removed all of their seating (this was probably 6 or 7 years ago). That was pretty much the only reason I ever went to borders instead of buying stuff off Amazon.

(well, that and their air-conditioning on hot summer days when I didn't have any. Of course, with the amount of money I always spent there during those days I could have bought a window-unit AC in two visits, but I like books...)

Funny -- I always thought of Borders as a "bookstore for people who like books" compared to B&N, which I consider a "bookstore for people who don't like books."

Neither holds a candle to, say, The Tattered Cover, but unfortunately there's no Tattered Cover where I'm living now... :(

Borders was my first big bookstore. The Chestnut Street store in Philadelphia near Rittenhouse Square, when I went to college. It was practically a religious experience. Growing up in Connecticut I only ever had the crappy mall stores like B Dalton and Waldenbooks, and a rare visit to the Yale Co-Op. Borders was multiple stories, a huge computer section with lots of academic books, it was awesome.

There I saw Douglas Adams read from 'Last Chance To See', and saw Ally Sheedy read from her crap poetry book, which I bought and had autographed.

The Rittenhouse Square store closed at some point and moved, I think to a location on Broad Street.

Well this is timely. For anyone near San Jose, the Borders at Santana Row has "store closing" signs out today. Most things 20 to 40% off.

That's one disappointing thing: the closing "sales" give you the same discount you can get with a coupon any day of the week. San Mateo's closing, too; quel dommage.

The problem is 20-40% off is still basically the same as ordering from Amazon.

I picked up a couple of travel books at my local 20%-off going-out-of-business Borders today. Hefted them in my hand. Then looked them up on my iPhone and found that their Kindle/iBooks price was 50% lower than the Borders retail price.

So I left the store with no books, but with a pretty good idea of why Borders is bankrupt.

A wistful day to be sure. I remember twenty years ago, when the arrival of Borders in my midwestern city was akin to a religious experience.

I remember reading that bookstores don't actually pay in advance for their inventory, they pay only when a book is scanned and sold.

So, it's unsurprising that the discounts on many of the books won't get too large, as they are likely not even the property of the company.

Went into the Borders in North Bethesda, MD today to see what they had on sale. Lots of STORE CLOSING! signs and various sections of the store were on sale from 20-40% that I saw. However, every book I thought interesting, I compared to Amazon on my iPhone. Amazon beat the Borders sale price every time, sometimes by a significant margin (up to 50% less). This was for new books! I could get things even cheaper if I bought from Amazon used. I gave up after a while and left, totally unimpressed and not wondering why they were closing now. There were a LOT of people in there though and long lines at the checkouts.

In the long run they are all dead. Look at the financial ratios http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratio...

EBIT -0.2%.

Borders dying makes me a bit sad. These four years I've been in university, I've watched our B&N's tech book section shrink and convert to "iPads for Dummies" books, and the manga section go down to a quarter of the previous size. Our Borders does tremendously better on both these sections.

Amazon's cheaper, sure, but I only tend to buy things there when I'm looking for them, while physical stores get me to browse (and allow me to read samples!). Since I got a Nook for Christmas, though, I'm starting to use its samples to browse books from the comfort of my home, which is certainly leading to more money going to B&N.

I wish they pivoted into being a small purveyor of eclectic, non-bestseller books, almost like a Trader Joe's of bookstores. But no one seeks little-known books like they do with music or even food.

Or partner with Apple like Best Buy did. Seems like a perfect replacement for the huge CD areas they ripped out.

That's not the problem. The problem is that there's no way they can compete with Amazon in the eclectic book market.

As I see it, Borders lost its volume business to Barnes and Noble, and then lost its eclectic book business to Amazon. Between those two companies, there just wasn't a niche for a semi-specialty bookstore.

Bill Ackman, uber hedge fund manager, lost $125 million on Borders. Sounds like his plan was to fund a Borders + B&N merger.

So I suspect Borders tanked because Bill Ackman or some other hedge fund wanted it to tank to get out, cut loses, or some other behind the scences financing deal they had in mind such as sell off the commercial real estate "closed borders stores"

Wonder how many of the Borders stores now become B&N stores? You never know.

I'm curious if there is any model at all under which bookstores will survive. Presumably, used bookstores can hang on for a while. Perhaps the future is some sort of mix of new and used books, along with a coffee shop and diversified inventory (games, for instance).

There was an interesting post when news hit of borders woes stating their real estate was valued at something like 5 figures per store. Can't remember where it was though

Was Borders as widespread as B&N? I've lived in Arkansas, Ohio and DC and I've only seen a Borders in DC, while I've seen and shopped at a lot of B&Ns.

When I lived in Cincinnati, 95-97, there was a Borders near where 75 meets 275, in the Tri-County mall area. Looks like it's still there and is staying open.

Quite a few Borders stores in Illinois.

Amazing content:

It's 'business news' and a 'business case study' and for business better information than on Bloomberg, Forbes, Fortune, etc.

So, generalize and formulate the implications for the future of media?

Reply on news.ycombinator.com