5 Things Borders Is Finally Learning

Borders had a tough fourth quarter, announcing a 14.2 percent decline in music sales, flat book sales and the chain's towering $554 million debt looming over all. And now they're "exploring strategic alternatives," never a good sign.

You might blame the standard "Americans don't read" whinge, but you'd be wrong, says WSL Strategic Retail's "How America Shops" study, which found that 26 percent of Americans shop at bookstores every quarter.

Here are five things Borders (and Barnes & Noble) should have learned by now, but didn't.

1) In a tough economy, we borrow instead of buying.
Library use increases when the economy sags -- a trend that covers not just books but music, periodicals, movies and Internet access. In the month after Sept. 11, 2001, the American Library Association found that library use increased 11.3 percent. The ALA's 2002 study confirmed what librarians have long reported, and when gas costs a fortune, Borders' 1,100 stores can hardly compete with 16,000 libraries. We may hit the bookstore every quarter, but we're at the library 13 times a year, the ALA says.

2) Sometimes you're the windshield, sometimes you're the bug.
Chain bookstores won by discounting bestsellers. Now the superstore chains are finding it hard to compete with Amazon's bulletproof business model of discounts plus huge selection. And along come Wal-Mart and Costco, beating Barnes and Borders at their own game with an even smaller list at even bigger discounts.

3) You can't just sell the same stuff everybody sells.
Borders' new "concept store" reduced its book inventory by 20 percent by switching to faced-out presentation. Customers love it, CEO George Jones said at the February ribbon-cutting for the 29,000-square-foot Borders in Ann Arbor, Mich. "It's running substantially ahead of our (sales) plans," he said.

Music sections have already been downsized, and Borders plans to reduce the number of titles it stocks in its DVD department, which lost $20 million last year to shrink, i.e. theft. They're going to secure the DVDs better, Jones said in a conference call.

So now they're selling more copies of the same 10 books everybody's buying at Wal-Mart, Costco and the grocery store -- and asking $18.99 for a movie you can rent by mail or download from iTunes for two bucks. Is this a sustainable strategy?

4) It's not enough to know what the customer likes, if you really don't care.
Along with 25 million other Americans, I have one of those little red Borders Rewards cards, and they send me e-mail. The latest promoted Disney Fairy books, Jonathan Kellerman's new murder mystery and Oprah's latest pick.

Why doesn't Borders know that my kids are too old for fairies, I never read mysteries, and I hate that self-actualizing stuff? Jones says they'll be sending personalized customer communications real soon now -- the same suggestive selling that Amazon's done beautifully for, oh, 10 years.

4) A bookstore is a refuge from the real world.
What's left for brick-and-mortar bookstores? The surprise and delight of browsing. Independents like Powell's Books in Portland, Ore., have kept the Amazon wolf from their doors by making oases of their stores -- places where a reader can always stumble across something new. Earlier this year, Powell's launched a subscription club, Indiespensable, which ships a limited edition every six weeks along with surprise bonuses (a CD, a magazine, a cookie) for $39.95.

Even as it downsized into a new building, the Tattered Cover in Denver retained its intimate feel, with shelf units creating nooks to escape into. The Freudian analyst's couch is still in the psychology section.

What will Borders do in the 13 new concept stores it plans to open this year? Judging from the Ann Arbor pilot, they will be too large, too open, too brightly lit. Round fixtures "will encourage exploration" -- but the titles on the table will be more of the same, Anthony Bourdain's "Kitchen Confidential" and "1,000 Places To Go Before You Die." They also put in more computer kiosks and video screens so that people can download books and research genealogy. Kind of like the library.

Oh, and couches.

Again, they're all worthy ideas, just 10 years too late.