Borders Redux and more

Let’s start with the “and more”.  Today’s guest post by Sarah A. Hoyt is going to be delayed a bit…possibly longer than a bit.  Sarah has decided to mirror my life for the past 20 hours or so when I was without internet service.  She called a few minutes ago to let me know that her internet is now down.  So, as soon as it comes back up, she’ll send me her post and I’ll put it up.  In the meantime, more news on the Borders debacle.

I’ve read two reports this morning stating that Borders has gotten a commitment from GE Capital for a $550 million credit facility.  Now, this isn’t a done deal yet.  Before receiving the lifeline, Borders is going to have to meet certain conditions.  According to Shelf Awareness, “the credit is contingent on Borders securing $175 million of senior credit facility with other lenders as well as $125 million of junior debt financing with other lenders or “certain vendors”–that is, publishers, who surprisingly enough do not seem interested in taking on Borders debt instead of being paid.”

In order to get this loan, there are certain things Borders will have to do.  One of the requirements is that it will have to close under-performing stores.  But wait, shouldn’t they have already done that?  This is a company that has been in trouble for years, not just weeks and months.  If there are stores that aren’t paying for themselves and don’t look to be able to recover, why are they still operating?  At some point, management has to recognize that you can’t continue operating in the red.

Other requirements are getting concessions from vendors and landlords.  But the most important one is convincing publishers to take on part of the debt load, something I wouldn’t expect them to want to do.  Why take on more debt from a company that, at the moment, is unable to pay you for stock you’ve already sent them?

Also from the Shelf Awareness articleBorders’s plan for the future has five key parts, it said, including expanding and enhancing the Borders Rewards Plus program; “aggressively growing” Borders.com and e-book market share; expanding the retail mix, “including non-book offerings”; “aggressively” reducing costs “across the business, including costs in the supply chain network and store portfolio”; and making “strategic investments in IT to improve the customer experience.”

So, let’s see, they want to expand a reward program that isn’t working because most people don’t want to pay to get discounts.  While I agree growing their e-book market share is a reasonable goal, it is probably too little, too late.  They waited too long to get into the market.  They don’t have an easily navigable site for e-books.

The expansion of their retail mix, “including non-book offerings” is what really boggles my mind.  Already when you walk into any of the Borders stores in my area, you are struck, not by the books they have to offer, but by how few books when compared to non-book items.  There are toys.  There are gadgets.  But there are fewer and fewer  books.  There is also a much smaller collection of music — if any — and it is the same with videos. Basically, when I walk into a Borders these days, it’s like walking into a modified Walmart or Target.  The only thing missing are groceries and diapers.

The last two items in their plan sound good but I am not going to hold my breath.  This is a company that has failed to cut costs as needed, running full tilt toward bankruptcy.  Now it wants those companies it owes money to to forget about bad business practices and to invest even more money into what is, in all likelihood, a failing venture.  This truly is a no-win situation, or has the potential of being one, for publishers and readers alike.

For more information on this, check out this article as well.

In other news, Amazon’s sales for the last quarter rose 36%, but their profits increased only 8%.  That sent stocks down last night but, iirc, they are back up this morning.  Amazon also reported that they are now selling more kindle e-books than paperback books.  This is despite the fact paperback sales continue to increase.  According to Amazon, they now sell 115 kindle e-books for every 100 paperbacks.   Amazon had predicted this would not occur until the second quarter of this year.  It is, in my opinion, another indication that the e-book revolution is here to stay.

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2 Comments

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2 responses to “Borders Redux and more

  1. warpcordova

    According to my stats, I’ve sold ebooks to paperback books at something like a 25:1 ratio. 25 ebooks for every print book, which is great and terrifying all at the same time.

  2. Pingback: It’s Monday & Borders has done it again « The Naked Truth

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