a world without borders

I remember back in the late 90s and early 2000s when Borders outperformed Barnes & Nobel (B&N) on sales per square foot on a per store basis. B&N is doing fine. Borders is tottering on the edge of bankruptcy. What in the world happened over the past decade?

Borders canceled today's auction to keep a smaller but still significant retail concern going. (It's hard to have an auction when there are no bidders.) That means the 399 stores on the "short list" for a leaner and meaner Borders will be liquidated. Landlords and other creditors protested plans to save the company and are now protesting the plan to close the company's doors, so there may be some death throes - but sadly, it looks like the end is here.

Company President Mike Edwards said “We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, eReader revolution, and turbulent economy, have brought us to where we are now.”

If B&N is doing great - or at least holding their own in the same turbulent conditions - what happened to Borders?

A few quick and far from authoritative conjectures on my part include:

1. inventory management - every retailer has to carefully management open-to-buy dollars and inventory turns (how often a particular item sells out and has to be re-ordered) but from the publisher side of the table I thought Borders got too tight on order policies and left money on the table. A lot of people who are smarter than me will disagree with this. But I'm simple-minded enough to believe that if your business is book sales, you better make sure you have books on hand. Manage, yes. But don't squeeze the life out of your product.

2. too much emphasis on "new" - publishers and book retailers have to (and love to) create new titles, but the most successful companies don't forget about previous successes and find new ways to promote and re-introduce perennial sellers. This is the biggest advantage Amazon has - a catalog of 8 million titles, many nearly forgotten. B&N has had a much more robust in-house publishing program built around classics - and carried both more front and backlist titles per store. Even signage has indicated Border's over emphasis on the new. I once spent a couple hours studying the signs the chain had placed in it's "power corridor" in the front of their stores. Of 22 signs, 18 had the word "new" on it. I know "new" is a powerful word and I'm all for new titles. I LOVE new titles. I'm simply stating that in my opinion Borders didn't emphasize backlist enough.

3. the electronic revolution - Amazon introduced the Kindle, Apple the iPad, and Barnes & Nobel the Nook. Borders did a great job with email specials and coupons (there's that emphasis primarily on what's new again) - but never established itself as a destination for online sales of physical books or electronic books.

4. coffee - I think Borders coffee is fine but their cafes have never seemed to pack the punch of the "Starbucks branding" that B&N built their cafes around. Many people still don't know that the Barnes & Nobel Cafe is not a Starbucks!

It's easy for me to throw out ideas while good friends and a valuable publishing partner has fought for its life. Anything I've noted is not intended to be a casting of the "first stone." Retail in all categories is a tough and tumultuous world.

And bottom line, I feel rather sad about a world without Borders ...

print sales continue to drop for books

Publisher's Weekly just reported:

The total unit sales of print books sold through the outlets whose sales are captured by Nielsen BookScan dropped 10.2% in the six month period ended July 3, falling to 307.1 million. Among categories, the biggest decline came in adult fiction with units off 25.7%, while mass market paperback had the steepest decline among formats with units down 26.6% in the period. BookScan totals cover about 75% of the outlets where print books are sold.

Is this yet another signal that the book is dead or should at least be placed on the endangered species list?

As someone who makes a living in the book publishing industry I continue to maintain an optimistic position on the future of the book, in part, because I don't define the book as a physical object.

I see no reason for hand wringing. Publishers need to keep their focus on what they can control and what matters most: great content. The distribution medium matters but is not paramount. The music industry fought Napster (rightfully) and electronic distribution (wrongly) for most of a decade - and lost control of its own packaging and pricing. I think the book publishing industry has maintained a much healthier point of view toward electronic formats from day one.

I like physical books - actually, love is the better word for it - but I'm not going to lose sleep if we sell more books as electronic editions and kill fewer trees in the process. One of the biggest benefits of selling e-books for publishers is fewer dollars tied up in paper and ink with all the inventory management issues surrounding that. The amount of time it takes to recoup a dollar of the investment that goes into publishing a book is long enough without making the irreversible commitment to a print quantity that may not dovetail with real demand. (Many publishers have built financial models around a certain percentage of their unit sales coming from higher priced hard cover releases, and that is changing the assumptions for other formats, so I'm not saying this change makes things easier in all ways. Change is hard.)

I'm strictly describing what I think is - not proscribing what should be. And no matter how strong Amazon is as a bookseller, I still hope the market will support a robust brick and mortar retail environment. (Borders might not agree that is possilbe - but we should know if their reorganization is Chapter 11 or Chapter 7 within days - or even hours.)

My personal prediction - more gut than numbers at this point - is that five years from now 35-40% of all books sold will be e-books (digitally distributed), which would mean the majority of books consumed would be on the ink and paper medium. I also think that projection would leave sales space for a strong retail store presence for those chains and some exceptional independents that incorporate an e-book strategy into their overall sales mix.

"The reports of my death are greatly exaggerated," said Mark Twain after hearing his obituary had been printed in the New York Journal.

The same can be said by and of the book.

different or alike?

One of my favorite weekly newsletters is written by Roy Williams of Wizard of Ads fame. If you are in sales and marketing and don't subscribe to the MondayMorningMemo, I highly recommend it. But this week's edition has life application beyond any advertising campaign you might be developing.

I think Mr. Williams' message has insight on how we interpret and present ourselves to the world as individuals - not just for businesses. His question of whether to "differentiate" or "conform" can be used to to evaluate how we see and relate to others. In other words - how we get along with those around us. The person who insists on always being different and "special" might take heed that there is a cost of not fitting in. The person who always conforms to his or her surroundings might be reminded that each of us have a uniqueness accompanied by gifts that are meant to season the world around us.

But I'll let the true Wizard speak from his observations as an advertiser.

Differentiate or Conform?

Chronic problems in business are usually the result of binary thinking. “It’s either this way or that way. It can’t be both.”

Strangely, the answer is almost always “both.”

“Should I try to attract the price-driven (transactional) customer, or should I go for the (relational) customer who cares about something other than price?”

Both. Create and schedule ads that speak convincingly to the question of price. Create and schedule other ads that speak of important matters beyond price. Just don’t try to do both in the same ad.

“Should I manage with strict policies, procedures, methods and systems, or should I empower my employees to make decisions on their own?”

Both. Systematize the 90 percent of your company’s activities that are recurrent so that your employees have the freedom to humanize and customize the 10 percent of your activities that are ever-changing and unusual. A company without freedoms is a sweatshop. A company without policies, procedures, methods and systems is a country club for unproductive employees.

“Should I promote an exclusive brand and risk the manufacturer betraying me by allowing my competitor to sell that brand for which I’ve created all the demand, or should I create my own in-house brand so that I can remain in control of it?”

Both. You need the credibility of established brands to lend strength to the new brand you will introduce. Advertise both, but never in the same ad.

“Won’t this make me seem unfocused?”

No. You must get on board with proven procedures. You must also do your own thing and go your own direction. It’s not only possible that you do both, it is essential.

Mechanics across Europe began building cars in 1886 and each time they built a car it was different. More than 2,000 different garages built and sold cars one-at-a-time before Henry Ford’s 1913 introduction of the first moving assembly line employing conveyor belts. Henry popularized the concept of interchangeable parts. It was efficient. It also made him the richest man in the world. By 1923 Henry Ford was personally earning $264,000 a day. He was declared a billionaire by the Associated Press.

More than 17,000,000 Model T’s rolled off Henry’s assembly line and you could have any color you wanted as long as it was black. The inefficiency of building cars one-at-a-time forced the other 2,000 garages to sell their cars at about $2,500 apiece while the price of a reliable, new Model T was only $849.

Soon the other carmakers got on board and America became an automotive Wonderland.

But we always take a good thing too far. Fifty years later, General Motors decided to take this idea to the next level. “Instead of designing 5 different brands each year and retooling our machinery to build Chevrolets, Pontiacs, Oldsmobiles, Buicks and Cadillacs, why not just put a different interior package and grille and taillights in the same, basic car and sell that car under 5 different names?”

A Chevy Cavalier is a Pontiac Sunbird is an Oldsmobile Firenza is a Buick Skyhawk is a Cadillac Cimarron.

A Chevy Nova is a Pontiac Ventura is an Oldsmobile Omega is a Buick Apollo is a Cadillac Seville.

A Chevy Caprice is a Pontiac Catalina is an Olds 98 is a Buick Electra is a Cadillac DeVille.

On the surface, this looks like exactly the same idea that made Henry Ford rich. The problem with the “platform engineering” introduced by GM in the late 1970s is that it eroded the distinctiveness of their brands. Two decades later GM was forced to close Oldsmobile and a few years after that, Pontiac fell as well. Analysts speculate whether Buick or Cadillac will be next.

Conformity is essential or you will not be efficient. Differentiation is essential or you will not be special.