Borders Is Dead, and Are eBooks to Blame?

As you may remember, back in February Borders filed for Chapter 11 bankruptcy. This, in theory, would have let them reorganize, deal with their debts, and potentially walk away leaner, meaner, and ready to throw down against B&N, Amazon, and the rising ebook threat. In theory. The reality has turned out to be much, much sadder, as Borders will be liquidated, all 11,000 or so employees will be laid off, and a once-powerful bookstore will be a footnote in history.

Needless to say, I’m very sad to see this occur, but I’m also not surprised. This was a long time coming and was not just the result of the booming ebook market. Borders was weak long before ebooks struck the killing blow, and I think that’s a very important distinction to note. If ebooks had not come along Borders might have limped along a bit longer but their grasp of the book business (or lack thereof) goes back far deeper. Businessweek has a great article on what I have said for years; that handing Amazon the keys to Borders.com was probably the first of many fatal blows, even if it took ten years to actually kill the company.

As Businessweek explains:

 Borders Group Inc.’s almost certain liquidation may have begun with a toast a decade ago celebrating its decision to pay Amazon.com Inc. to run its website.

At an August, 2001 party near Borders’ headquarters in Ann Arbor, Michigan, then-Chief Executive Officer Gregory Josefowicz brandished a bottle of champagne and said Amazon founder Jeffrey Bezos had sent a case to show his gratitude.

“I remember thinking this is the weirdest thing that we’re drinking champagne bought by Jeff Bezos, and it was the last thing we wanted to do,” Manish Vyas, who was then a manager at Borders’ online unit, said in a telephone interview this week. “It ended up being a customer-harvesting vehicle for Amazon.”

The book-selling industry would undergo a revolution. Amazon’s online store was already giving consumers an excuse to avoid physical locations. Then in 2007, Amazon introduced its Kindle e-reader, followed by Barnes & Noble Inc.’s Nook two years later and Apple Inc.’s iPad tablet in 2010.

Borders never recovered its momentum, posting five straight years of losses* totaling more than $900 million. In February the chain sought bankruptcy protection. After finding no bidders that creditors would approve, the company agreed to sell its assets to liquidators.

(*Coincidentally, I just passed the five-year anniversary of quitting Borders. Clearly, my brief shining career as a low-level sales manager was more important than I thought. ;-))

All joking aside, Businessweek nailed it. Borders didn’t want to actually muck around with running a website, they outsourced to the competition, and by the time they realized their mistake, it was much too late to repair the damage. And the worst part is that they didn’t learn from their mistakes! Instead, they turned around and partnered with Kobo on their branded eBookstore, effectively doing the same thing! As soon as it was clear Borders bankruptcy filing was not going well, Kobo and Borders rolled out a tool to move all of Borders ebook customers over to Kobo (more on that in Kobo’s press release below). Borders never owned their ebook customers, any more than they ever owned their Borders.com shoppers in the Amazon days. Isn’t the phrase “The definition of insanity is doing the same thing over and over and expecting a different outcome”? Hmm…sounds an awful lot like our friends at Borders.

So ebooks were the last time Borders made the “monkey see, monkey fail to do properly” strategy, but they certainly weren’t the first time. Between that fateful Amazon.com partnership and the Kobo one, Borders made the same mistake over and over and over again. B&N has a cafe? We should have a cafe! B&N has incredible levels of customer loyalty from their membership cards? We’ll roll out a super complicated and confusing (but free!) membership card! And bring in a series of CEOs from the grocery and clothing world! How hard can it be to swap fruit or t-shirts for books?

In the end, ebooks were probably the final straw. Borders was caught off guard and scrambled to partner with Kobo over creating their own eBookstore. On top of that, they offered a lackluster series of ebook readers (if only the Kobo Touch had come out sooner!) and spent money they probably should have used paying their creditors to build new ebook displays in their stores. Instead of clearly carrying JUST the Kobo Readers and focusing their training and marketing dollars, Borders took a “throw it against the wall and see what sticks” approach. Apparently, nothing did.

Blaming ebooks is easy, but the truth is, if your house is a smoldering pile of tinder and dry wood, more than the match is at fault when it all goes up in flames.

What’s your take on the final death of Borders? Leave your thoughts in the comments, and be sure to hit the link below to read Kobo’s official “We’re here and we’re not impacted” press release below!

KOBO COMMENTS ON BORDERS’ LIQUIDATION

TORONTO – July 19, 2011 – The management of Kobo, a global leader in eReading with over 4.2 million users in more than 100 countries worldwide, has issued comments relating to the ongoing liquidation of Borders to clarify misconceptions about Kobo that have been inaccurately reported by the media and misunderstood by consumers.

Kobo management provides the following facts regarding the company:

  • Kobo is a privately-held company that offers over 2.4 million eBooks, newspapers, and magazines — one of the largest eReading catalogues in the world.
  • Readers from over 100 countries across the globe download and read using Kobo’s top-ranked eReading applications for iPad, iPhone, BlackBerry, Android, Windows and MacOS.  Kobo is the eReading application of choice for leading tablet OEMs.
  • While Borders is one of the early investors in Kobo, it holds only a minority stake in Kobo, approximately 11 percent. The Borders shares are subject to the terms of the Kobo shareholders’ agreement which, among other things, restricts their transfer or disposition.
  • Borders serves as part of Kobo’s distribution in the U.S. along with Best Buy, Walmart, Sears and other top retailers.
  • Kobo does not rely on Borders for content.  Kobo owns the publishing agreements and has direct relationships with all major publishers, including Random House, Simon & Schuster, HarperCollins, St. Martin’s Press and many more.  Kobo is solely responsible for payment to publishers for eBooks sold through the Kobo platform and publishers will continue to be paid on time as usual.
  • For some time, Kobo and Borders have been in the process of transitioning Borders’ customers’ eBook accounts to Kobo, in order to provide such customers direct access to the most up-to-date eReading functionality, apps and devices. All Borders customers that have transitioned to Kobo shall enjoy uninterrupted access to their e-Reading accounts. Kobo shall continue to work with Borders to transition customer accounts to Kobo.
  • For those Borders customers who haven’t transferred their eBook libraries to Kobo, the process is quick and easy.  Borders customers can visit kobo.to/bmigrate to transfer their Borders eBook library to Kobo. No additional steps are required to continue reading on your Kobo eReader. For those Borders customers that are using Borders apps to access their eBook libraries, visit kobo.com to download a free Kobo eReading app for your computer, smartphone or tablet.
  • Owners of Kobo eReaders will continue to use their Kobo eReader as usual, and be able to browse and shop for new titles in the Kobo Store with no interruption or change in service.
  • Kobo continues to grow in the U.S. and around the world.  Kobo is very pleased with progress of the launch of the new Kobo eReader Touch Edition which is available at leading retailers including Indigo, Walmart, Best Buy and WH Smith.
  • Kobo continues to build international growth with the successful launch of Kobo in Germany, the first rollout of several planned international launches.

As an interested party in the Borders bankruptcy proceedings, Kobo has made certain filings with the court to preserve its legal rights moving forward.

Kobo offers their support to the Borders’ community of employees, families and friends.

Statement from Michael Serbinis, CEO, Kobo, Inc:

“As one of the early investors in Kobo, Borders has a minority stake in our company and serves as part of our distribution in the U.S. along with Walmart, Best Buy, Sears and other leading retailers.  As a member of the broader book publishing and retailing community, we are watching Borders’ story and will offer our support to Borders and their employees.  Kobo will continue to serve Borders customers – in this time of transition as well as moving forward – to provide the ultimate eReading experience and one of the widest selection of eBooks available to the eReading community worldwide.”

About Kobo, Inc.

Kobo is a global eReading service with more than 2.4 million eBooks, magazines and newspapers – one of the largest eReading catalogues in the world.  Kobo believes consumers should have the freedom to read any book on any device and has attracted millions of readers from over 100 countries across the globe.  Kobo has top ranked eReading applications for iPad, iPhone, BlackBerry, Android, Windows and MacOS, and is the eReading application of choice for leading tablet OEMs.  The Kobo Wireless eReader and the new Kobo eReader Touch Edition are available at leading retailers, including Indigo, Walmart, Best Buy and WH Smith.  Kobo’s innovative Reading Life is an industry-first comprehensive social eReading experience – Kobo users can earn awards simply for time spent reading and encouraging others.  Kobo is backed by majority shareholder Indigo Books & Music Inc, Cheung Kong Holdings, and institutional investors.


About the Author

Carly Z
Carly has been a gadget fiend for a long time, going back to her first PDA (a Palm M100). She quickly went from researching what PDA to buy to following tech news closely and keeping up with the latest and greatest stuff. She loves writing about ebooks because they combine her two favorite activities; reading anything and everything, and talking about fun new tech toys. What could be better?