ORIGINALLY PUBLISHED AT INSIDE.COM (10/16/00)
For years Borders has been known to publishing folk as a well-run but insular company located in the wilds of Ann Arbor, Mich. It tends to be publicity averse, even secretive in its dealings. Though it had been every bit as aggressive as its main competitor, Barnes & Noble, in creating superstores with their own cafes, selling a wide range of music, and pushing its Walden stores into every mall in America, there has been no showman like B&N’s Len Riggio to tout its achievements. Worse, though management has been generally stable under chairman Bob DiRomualdo, several presidents have come and gone in short order (Phil Pfeffer lasted only five months; current CEO and president Greg Josefowicz is a month shy of his first anniversary).
So when the online revolution came along and Borders had little to say about its strategic e-vision, everyone — including Wall Street — assumed the company’s lost opportunity online signaled trouble for its core business too. An attempt at a leveraged buyout that was announced in March and aborted in July (after a $16-a-share offer was purportedly turned down) did nothing to help that perception, and the market reacted by doing more of what the company doesn’t like: It lowered Borders’s value again. Shares dropped almost 15 percent to just over $13 in heavy trading, and three months later, the stock hasn’t made much progress.
But it now seems that the rumors of Borders’s demise may have been greatly exaggerated. Or, at least, that the company’s conservative approach is looking more and more canny when measured against other retailers’ mad dash to e-tail revenues. For one thing, though its stock still languishes, its competitors’ stocks have had a much more tumultuous year and land not far from where Borders is.
And anyway, says Borders.com‘s content manager and sometime spokesman Rich Fahle, ”We’re all about something different from our competitors.” What he claims Borders is about: Logging on from your home computer to find whether your local bookstore has the copy of The Crucible your son forgot he needed for tomorrow’s English test and, when it does, arranging immediate home delivery of the book; Visiting friends in another part of the country, going into their local bookstore, picking out some books, and arranging to take one with you and have some delivered to your home, then creating and printing out a list of the others to be saved — with reviews — in your personal file on the bookstore’s server for subsequent retrieval; Picking up some CDs, and with a wireless gizmo, scanning in the bar code and choosing which cuts on the album you’d like to preview before buying the recording.
Like other retailers, Borders is, of course, in search of the perfect ”convergence model” of a seamless retail and online customer experience. And while it’s on its way, it’s not quite there yet.
Though a customer can go into any Borders and check for a book, recording or movie that might be available in the store, in the company’s warehouse, or could be ordered, that database cannot yet be accessed from home. And those personal files of your favorite books can’t yet be stored on Borders’s servers. In fact, so far only about two-thirds of Borders’s 300 stores have the necessary kiosks from which customers will be able to access information about individual titles, order out-of-stock books, create a wish list of books, sign up for e-mail newsletters on a range of topics from business books or science fiction, or find which aisle carries a particular category or title. What they do all have now is ”Title Sleuth,” the database of three million books, CDs and videos, which was introduced this summer. And coming to a kiosk near you soon is the ability to search beyond that database, using the well-known Internet search engine, AltaVista.
Though Borders.com may not outshine its competitors — especially Amazon in terms of customer experience — the Borders strategy is to deliver an online experience that is simply ”as good as” Amazon’s because the online does not supplant, but rather complements, the store experience. To this end, and unlike its obvious competitor Barnes & Noble, both online and retail are run by CEO Josefowicz. There is, to hear Fahle tell it, no competition between the retail and the virtual Borders. And each store gets to customize its own kiosks, emphasizing regional books and music, posting a map of that specific store, highlighting upcoming events, and choosing what seasonal merchandise to feature.
So while it may be awhile before this tortoise takes the lead, the numbers are reasonable, and promising. Borders reported $2.9 billion in revenue for 1999, as opposed to say Barnes & Noble’s $3.486 billion. And even when you fold in barnesandnoble.com’s revenues — $202 million — the two retailers don’t seem so far apart. (Important point: All of Borders’s initiatives are being funded out of operating earnings.) Still, some of Borders’s bolder initiatives are still on the drawing board and others — like the promise of a robust print-on-demand program in conjunction with Sprout (in which it owns a 20 percent share) — are in limbo. Also, unlike its competitors, it has few affiliate relationships and no formal partnerships with any of the e-book or e-publishing players. In fact, it has no proprietary publishing program of any kind, reportedly a $100 million plus business for Barnes & Noble.
Maybe what it needs now is some good buzz to get and keep people talking, not just at Borders itself — which has endless official and unofficial boosters now that secrecy is no longer the watchword of the company — but in the industries that sell to the company, and the media that covers it. What next: Greg Josefowicz on the cover of New York Magazine? Maybe it should happen.
