Borders owes Seattle's Best almost $5,000,000

The whole taste of "Seattle's Best Coffee" has always struck me as fucking awful.

At the Tacoma store when they hit 90%, there were sill a lot of quality classical music titles, & a TON of Susan Boyle........

I don't doubt that their management was incompetent, but even "good" management can't save a dead business model. The same fate awaits all walk-in stores which primarily stock physical media.

The physical book superstore model a la the Borders and B&N of the 90s and 00s may be dead, but we're going to see (1) mass market book sections in Target/Walmart/etc

Because print porno mags are capable of being physical artifacts of desire in a way that CDs and cassettes are not.

Susan Boyle ....the bane of human beings everywhere.

Borders Closing: Five Things Barnes and Noble Can Do to Survive

Analysis: With Borders Gone, All Eyes are Now Cast Upon Barnes and Noble. Can B&N Avoid the Same Fate?

By IB Times Staff Reports | July 19, 2011 10:18 AM EDT

America's second-largest bookstore chain is closing, and all eyes are now cast upon Barnes and Noble -- the nation's largest bookstore chain, with more than 700 stores -- to see if the company can avoid the same fate.

Borders is on the way out, and now all eyes in publishing are cast upon Barnes and Noble to see if America's largest bookselling chain can avoid the same fate. Here's five things Barnes and Noble must do to survive.Related Articles

Barnes and Noble's stock is trading up on the news of Borders' demise, climbing 3.09 percent to $17.76 per share on the day after Borders' closing announcement, but Barnes and Noble is losing money and the chain has been exploring its future options, including a possible sale.

If Barnes and Noble is going to survive, avoiding the fate of Borders, here are five things the national bookstore chain must do:

1) Continue expanding merchandise beyond books. Several years ago Barnes and Noble said it turned inventory in its superstores no sooner than once in a full year. That's very slow compared to most retail businesses. That's why the chain has already been expanding into children's toys and adult puzzles and gifts and gadgets areas to diversify beyond books. The company's prime real estate advantage gives the opportunity for doing just that, but Barnes and Noble must move quicker, and go broader in its product diversification endeavor so books can remain a part of the company's sales strategy.

2) Expand author events and charge admission for opportunities to meet and greet leading authors to get books signed. Independent book stores have already been experimenting with this strategy and some have found success. Leading authors can draw a crowd, but bookstores like Barnes and Noble need to get more in return than the sale of some hardcover books at a 50 percent profit margin. Superstores are expensive to operate. But showcasing more signature author events and charging admission for these, the company can promote and sell books more profitably, keeping traditional publishing in play for authors, readers and publishers.

3) Establish exclusive distribution deals with leading publishers and authors. Since Barnes and Noble has a strong online presence, the strongest brick-and-mortar store presence, and a strong presence in eBooks and eReaders with its Nook device, the company has an opportunity in a less-competitive environment to forge signature, exclusive publishing deals with leading authors and publishers. Want to read Nora Roberts? Come to Barnes and Noble, online or to a store, because that's the only place you can find those works -- is one example. Barnes and Noble doesn't have many deals like that, yet. But the company will have to forge such exclusive relationships into the future to survive, much less thrive.

4) Move away from costly superstores, expanding with more small, community-oriented niche stores. With less overhead, the Barnes and Noble name will do well in high-population, high-net worth communities that don't have any bookstore at all. The company does not need a superstore in such markets, but lower-overhead niche stores that focus on diversified product, customer relationships, and value-added propositions such as paid author events and books sold at prices above the deep discounts Barnes and Noble has employed in recent years, reducing important margins.

5) Gain more eReader market share by setting the trend instead of merely following Amazon's lead. Amazon is the eReader, eBook industry leader, and for good reason. That company has been setting the tone in digital books from the start. But Barnes and Noble now has the clout as the only remaining national book publisher to change that trend, if the company can act proactively, leaping ahead of Amazon to the "next big thing" in eBooks. Barnes and Noble already has a strong brick and mortar presence with college bookstores, and the company does well online with textbooks. But Barnes and Noble got trumped again recently when Amazon announced its new Kindle Textbook Rental program. Barnes and Noble needs to set the trend, not follow the trend, if the company is going to survive.

Readers Without Borders

What killed the big-box retailer? Hint: It wasn't the Internet.

Of course running a bookstore is a hard, hard business in the age of the Internet. Still, Borders' decision to liquidate, closing 399 stores and laying off 10,700 employees, seemed shocking. As George Mason economist Tyler Cowen observed poignantly: "Not one single investor, in the whole wide world, thought Borders had a real economic future."

The company itself gave three reasons for its demise in its corporate communication-cum-suicide note. "We were all working hard towards a different outcome," President Mike Edwards said. "[B]ut the headwinds we have been facing for quite some time, including the rapidly changing book industry, e-reader revolution and turbulent economy, have brought us to where we are now."

That is not a very satisfying answer. Other companies have adapted to the e-reader revolution, and even benefited from it. Other companies have changed to fit the new bookselling paradigm. And other companies are dealing with the drawn-out aftereffects of the recession. The better reason for its demise is that Borders had long lost its competitive edge on many fronts, from corporate strategy to coffee. It died by a thousand—OK, maybe just four or five—self-inflicted paper cuts.

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."

In the end, you could blame the Internet for Borders' downfall. Retail has become a challenging, if not outright terrible, business, regardless of what you are selling. But, again, other companies adapted. Borders just didn't. Barnes & Noble may well not be around in five years. But at least it has built a business that recognizes the trends in bookselling—toward the Internet, toward e-readers, toward a more boutique retail experience, away from big-box stores. It is remarkably similar to the strategy Borders laid out in its bankruptcy filing. The company's management said it wants to "aggressively [grow] borders.com and eBook market share" and "[expand] the company's overall retail mix … to improve profitability and offset the digital effect." Alas, that strategy came too late.