Borders: An Open and Shut Case

The book-reading community isn’t what it used to be. And from what we can glean, things aren’t going back. The technological developments of the last century—and the resultant dwindling of our attention spans—have safely secured this truth. 

Of course, reading hasn’t died out entirely—it’s simply, erm, changed area codes. Or whatever the f*ck. Today, the majority of people do their reading on digital devices. Phones, tablets, and laptops have become the dominant means of receiving information of any kind, making physical books a less desired commodity.

But there’s still a healthy chunk of people whose idea of a good time includes snuggling up with a good book. And niche markets can still yield great gains. Similar examples can be seen in the music community, where, after years of physical mediums dropping in popularity, artists have again found vinyl to be a viable option.

No one’s getting rich off these things, but there is a market. And if you’re (at least partially) doing it for the love of it, that’s usually enough.

Introduction

A certain generation remembers Borders as the worthy competitor of—and, at one time, a superior to— the massive bookseller Barnes and Noble. But while the latter has since developed into the monolithic purveyor of all things media,, the former has been reduced to a relic of a bygone era. 

But let’s go back to the beginning when Borders was in its infancy, and dissect the fall of the once-great bookseller.

Great Expectations

Borders began as a family venture, founded in 1971. Brothers Tom and Louis Borders opened an 800-square-foot used bookstore called Borders Book Shop at 211 S. South State St. in Ann Arbor, Michigan.

Aided by Louis’s development of a software system that helped the store manage inventory and accurately project sales, Borders enjoyed a competitive advantage lasting two decades. The brothers, who graduated from the University of Michigan, used this inventory tracking system to their advantage, eventually licensing it for commercial use. 

By 1975, the brothers added to their burgeoning brand when they bought out Wahr’s, an aging bookstore down the road from the Borders flagship store, and stocked it with rare books. Borders’ prominence began to build, but the company was still firmly rooted in Ann Arbor. 

Arch of Triumph

Borders began to rise through the bookselling ranks in the late 80s. Much of the progress made during this period would be attributed to new recruit Robert DiRomualdo, who would go on to become chairman, president, and CEO of Borders Group, Inc. Under his leadership, the company expanded.  

In 1991, Borders started integrating music and movies into some of its stores. Through this diversification, the company successfully widened its audience and bolstered its position as a top-level retailer.  The following year, Borders was acquired by Kmart Corp, creating the Borders-Walden Group, which Kmart Corp bought in 1984. 

At the time, Borders had 21 large stores. The New York Times reported that the company had valued itself at about $190 million. However, the marriage was short-lived, and in 1995, Borders split entirely from Kmart. That same year, Borders— now named Borders Group Inc. — went public. 

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.

By the mid-90s, under the leadership of CEO Robert DiRomualdo, Borders had reached its peak of popularity and profitability. In 1997, its stock price hit an all-time high at $44.88. It was a period marked by prosperity in growth. 

Borders expand its store footprint by 25.5 percent, adding 52 superstores. By January 1999, the company has 256 superstores averaging $256 in sales per square foot.

Death of a Salesman

Borders embraced the internet age in 1998, making its internet presence known with the launch of Borders.com. It would be the final glorious plateau of Borders’ existence. 

Leadership would soon become muddied. In 1998, Philip Pfeffer replaced DiRomualdo— a decision that lasted less than a full year. In April of the following year, Pfeffer resigned and was replaced on a temporary basis by DiRomualdo. But by November 1999, the carousel would halt, and Greg Josefowicz would become Borders’ permanent CEO.

Borders contracted with Amazon to sell products online in 2001. During the early 2000s, Borders was still deploying a tactic of growth through acquisition, buying United Kingdom-based Paperchase Products Ltd. 

In 2005, Borders posted $101 million. The following year would be it’s last to make a profit.

George Jones replaced Josefowicz in 2006 as CEO after 7 years of holding the office. Borders’ stock price hit a then-six-year-low $12.28 a share. The company would sell its U.K. and Ireland subsidiaries in the same year.

Parade’s End

In 2008, Borders put itself up for sale. The company accepted a $42.5 million loan from New York hedge fund Pershing Square Capital Management to boost its financial position. All the while, the Ann Arbor personnel shrunk down to 1,000 after 156 jobs were cut as part of a $120 million cost-cutting plan.

Around this time, Barnes and Noble—the major competitor of Borders— was actually considering acquiring the company. Barnes and Noble would eventually rule out this possibility.

The following year, in the midst of a global recession, Borders’ viability officially gets called into question. Investors would criticize the company’s sluggish approach to the emerging electronic books market.

On the last day of 2010, Borders’ stock plunges 22 percent to $0.90 a share. It would be a sign of the year ahead. Early 2011 was wracked with layoffs and financial reports indicating that bankruptcy may be on the horizon. 

Things Fall Apart

Borders officially filed for bankruptcy in February of 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. 

During the subsequent few months, a number of tentative bids were made by companies looking to acquire the hemorrhaging Borders brand. Unfortunately, all bids would fall through. 

On July 17th, the deadline for bids passes without any new possible acquirers emerging. The following day, the company announced its plan to liquidate, laying off 10,700 people.

Its primary rivals, Barnes and Noble and Amazon, both succeeded in transitioning to the digital market and pivoting towards newer, more electronic forms of media.