Borders to liquidate in spite of experienced, well-compensated management

I don’t have much to say about this, but I wanted to put something up here, on the front page, in case people wanted to discuss the fact that Borders, unable to find a buyer, is liquidating.

In real numbers, that means:

• 10,700 people, 450 of whom work in Ann Arbor, will lose their jobs
• 399 stores, 26 of which are in Michigan, will close

Governor Snyder, for what it’s worth, says it has nothing to do with the company being headquartered in Michigan. “Borders has a very important Michigan history,” he said through spokeswoman Geralyn Lasher, “but this has to do with the changing dynamics of the book business as opposed to doing business in Michigan.” Others would argue that inept management also played a role.

Speaking of management, does anyone remember that, as recently as just three months ago, they were trying to secure enormous bonus checks for themselves? Here’s a clip from an article dated April 23, 2011:

A judge on Friday signed off on Borders Group Inc.’s plan to pay executives and other high-level employees more than $6 million in bonuses, after the bookseller worked to satisfy both his concerns and those of the Office of the U.S. Trustee.

Judge Martin Glenn of U.S. Bankruptcy Court in Manhattan said the amended bonus packages, which tie the $6.6 million in payments closer to the financial performance of Borders, were needed so Borders could “maintain its experienced work force.” …

I don’t know that this last round of bonus checks ever got issued, as I believe they were supposed to be contingent upon the sale of the company, but I think it’s telling that management was focused on lining their own pockets as the company went down, instead of fixing what needed fixing. But, as Snyder said, this was just a matter of changing market dynamics – nothing more.

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16 Comments

  1. Posted July 18, 2011 at 10:46 pm | Permalink

    Since Borders stores were not unionized, I have to wonder what our anti-union folks will blame????? (I don’t even think the downtown store was union any more, was it?)

  2. Tiny Violin
    Posted July 18, 2011 at 11:35 pm | Permalink

    Having spent so many years hating Borders for what they did to small, independent booksellers, I’m having a hard time working up tears for what massive, online retailers have done to a massive, offline retailer.

    If only there were a movie, that could help me realize that all the female Borders’ employees will find ultimate fulfillment by packing books in a male dominated, visionary Amazon warehouse. Well then, I might shed a tear … of joy!

    Thank God all those lovely Border’s ladies have finally found a man!!!

  3. Done Waiting
    Posted July 19, 2011 at 3:36 am | Permalink

    Patti, simply based on your statement… the fact that employees were not unionized is what unions might point to as the problem… right?…that without the protection and solidarity of a union the employees were left hung out to dry, disregarded as an element of decision-making, and removed as a cost as quickly as possible.

    Were any of you around any of the stores as they closed? The employees were being pecked at by frustrated and greedy consumers, while struggling to maintain some order among the stock, and being picked off & “let go” one-at-a-time as sales dwindled to a sad, garage-sale atmosphere.

    Unions do not provide all the answers and have not, historically protected every worker, but the simple premise of “safety/strength/power in numbers” is a concept worth having on one’s side – the pocket-liners at the top certainly stick together and manage pretty darn well.

  4. Edward
    Posted July 19, 2011 at 7:34 am | Permalink

    I may have misread your comment, Done Waiting, but I think that you and Patti are in agreement. If I’m not mistaken, she was saying that, in many cases where this happens, people blame the unions. Here, though, there wasn’t a union. I believe you both agree that unionization is generally a good thing

  5. Posted July 19, 2011 at 9:19 am | Permalink

    This is really sad to me. I remember the original store on State St. Borders became a huge chain, but the store in downtown Ann Arbor held on to many of their employees from State for years.

    At the time, they treated their employees fairly, paid a fair wage, offered health insurance and profit sharing, something not many other retail stores were doing.

    I don’t know if that changed in later years, but early on, they were a good company, assuming the information I have and my memory is correct.

    I am sure that Barnes and Nobles will buy the downtown store. It would be horrible if that building became an empty husk.

  6. Mr. X
    Posted July 19, 2011 at 9:28 am | Permalink

    While I’ve got my issue with Borders, and what their existence did to independent book stores across the country, I’m sad to see them go. Those new to the area may not remember, but, for a while, they were one of the few places where smart UM graduates in the liberal arts could get a job making a living wage. Believe it or not, Borders hired people who loved books and knew their authors. The company tested people extensively before they hired them. That changed, though, as they sought to grow fast and increase profits. The standards fell along with the hourly wages. This is how capitalism works.

  7. Mr. X
    Posted July 19, 2011 at 9:28 am | Permalink

    And we have all become empty husks, Mr. Larson.

  8. Posted July 19, 2011 at 1:04 pm | Permalink

    Yeah, Edward is right. Sorry I didn’t make myself sound better. I could blame the beer but I wasn’t drinking last night (!). Thanks for helping a sister out, Edward :)

  9. K2
    Posted July 19, 2011 at 1:26 pm | Permalink

    Your numbers above don’t reflect all of the people who lost their jobs over the past eight years or so, as the company went though layoff after layoff. At their height, in 2003, the company operated “1,249 Borders and Waldenbooks, but by the time it filed for bankruptcy protection in February that had fallen to 642 stores and 19,500 employees.”

    The quote comes from the LA Times:
    http://www.latimes.com/business/la-fi-borders-20110718,0,4318265.story

  10. Posted July 19, 2011 at 1:50 pm | Permalink

    Mostly, the problem was that it was too damn expensive. I wouldn’t buy books there simply because I could get at a cheaper price at Better World Books or Amazon.

  11. wetdolphinmissile
    Posted July 19, 2011 at 2:03 pm | Permalink

    loved Borders but they grew too fast, going international and then everything changed…the whole business changed…a bit of future shock?

  12. Your Mother
    Posted July 19, 2011 at 8:18 pm | Permalink

    Mark, if I find the picture of you in the brown shirt, will you PLEASE change your picture at the top of the blog? I’ll tear the house apart until I find it!

  13. Marissa Jefferson
    Posted July 20, 2011 at 12:23 am | Permalink

    Growth isn’t always good. Capitalism demands it, though. And a lot of good people get hurt in the process.

    As for the space downtown, I think Barnes & Noble will likely take it.

  14. Chairman Meow
    Posted July 20, 2011 at 7:35 am | Permalink

    Fuck Borders. It’s great news they’re shutting down.

    And fuck Amazon, too, for reveling in the bloodbath.

    Nicola’s is where we all belong.

  15. Art
    Posted July 20, 2011 at 5:56 pm | Permalink

    Don’t change the image, Mark. When we cater to the lowest common denominator, we fill our spaces with crap that people can always get cheaper somewhere else.

  16. Meta
    Posted July 21, 2011 at 12:41 pm | Permalink

    From Slate on the mismanagement at Borders:

    First, Borders famously flubbed its relationship with the Internet. From 2001 until 2008, it outsourced its online sales to Amazon, essentially handing customers over to the bigger, better site during the formative years of e-commerce. How on earth did that happen? The company’s 2000 annual report explains: “Our online investment will be channeled to support our in-store platform, while Borders.com will continue to be utilized as a convenience retail channel,” the report reads. “We have targeted loss reduction as a major goal in this area.”

    Translation: Borders decided to channel its “online investment” not to its website but to its “in-store platform”: Title Sleuth, “the innovative self-help computer stations in Borders stores.” The next year, to get the “loss reduction” it sought—that is, in an effort to lose less money—Borders tossed the keys to its website to Jeff Bezos. The company finally got them back in May 2008.

    Contrast that with Barnes & Noble’s digital strategy, as outlined in its 2000 annual report. The company noted that its website might be eating away at its brick-and-mortar business. Still, it doubled down. “Our position has always been that if we pay a visit to our customers at home through Barnes & Noble.com, they will return the favor at our stores,” the report says.

    Second, Borders neglected e-books, fast becoming as popular as their paper cousins. The Amazon Kindle came out in November 2007. Barnes & Noble debuted its Nook, now sold in Walmart and Best Buy as well, in November 2009. Apple’s iPad came out in April 2010. Borders’ Kobo (ever heard of it?) came out last, just a year ago.
    Though the Nook is less popular than the Kindle, it is competitive in the e-reader market, and moreover drives healthy e-book sales. Indeed, Barnes & Noble’s share of the e-books market is bigger than its share of the paper books market in the United States. And the company loves touting its success.

    Third, Borders did not diversify well. In the 2000s, it generated hundreds of millions of dollars in sales of CDs and DVDs, and it expanded those sections in its stores. By 2006, sales of music and video generated about one in five dollars for the company. But the same forces killing the bookstore also killed the record store and the video store. That revenue dropped off a cliff when iTunes, Netflix, and file-sharing networks became popular in the mid- to late aughts. Borders also failed to generate robust additional revenues through coffee shops or alcohol sales, the savior of many a bookstore. Barnes & Noble picked up the big, exclusive Starbucks contract. Borders got its cheaper subsidiary, Seattle’s Best.

    Fourth, Borders mishandled its big-box strategy. It opened far too many stores, including several overseas, despite lackluster sales. The stores tended to be too big and too expensive, in terms of overhead. The company cited its expansion strategy as problematic in its February 2011 bankruptcy filing. It noted that it had signed too many 15- to 20-year leases, making it harder to shed unprofitable locations. And there were many. The company “still [has] a sizeable core of profitable stores,” it said. “However, in analyzing their cost structure, the Debtors have found that they also have a number of stores which are simply unprofitable and are substantially impacting the Debtor’s overall performance and ability to pay their debts.”

    The justification for all those big stores proved faulty too: The Internet is far more adept at offering a huge selection of books. “The very large assortment size was an advantage early on before Amazon,” says one former director of merchandise planning. “However, by its very nature the ‘internet’ was better at quickly and efficiently connecting customers with obscure titles and bringing the ‘long tail’ to market. Thus, competing on assortment size was especially vulnerable to internet retailing and Borders suffered disproportionately as the ‘long tail’ customers abandoned them.”

    http://www.slate.com/id/2299642/

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