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Putting more profits on the books
Inside a busy Borders Books store in Mount Prospect, Illi
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Bill Radke: Another major American retailer reports earnings today -- Borders Books. Its rival, Barnes & Noble, reported a loss last week. Borders is hoping some new managers, from outside the book world can revive its faded business. Marketplace's Amy Scott reports.
Amy Scott: Borders' fate rests in the hands of two finance guys. The new CEO comes from private equity. The chairman is an ex-hedge fund exec.
Lou Kasman: From the financial standpoint, hopefully these guys know how to turn around a business.
That's longtime Borders stockholder Lou Kasman. He's not convinced the new bosses know how to run a book business at a time when more people are buying at Wal-Mart or reading electronic books.
The new management plans to scale back music sales and slash costs. Analyst Michael Norris with Simba Information says that won't be enough.
Michael Norris: I just worry that they don't have, you know, their finger on the pulse of what book retailing and bookselling actually is. Because you can't cost-cut your way to prosperity in the book business.
Norris says Borders needs to take a page from independent booksellers. That may mean deploying weapons rarely used in the cutthroat world of high-finance -- down-home events like readings and cooking demonstrations that draw people into the stores.
I'm Amy Scott for Marketplace.
In reference to L. Eskildson's earlier comment--the changes he's describing sound like a lot of smaller, neighborhood bookstores like mine. I like to think we have a few of the answers. Michael Norris hit it on the head in this interview when he said you can't cost-cut your way to prosperity.
And we bricks-and-mortar retailers do not generally use Amazon.com (our competitor) to supply our stores. We get our books from the publishers and wholesalers, just like Amazon does. Amazon offers honkin' discounts for a number of reasons and through a number of mechanisms, but none of them have to do with having a bookstore where you can walk in, browse, and physically touch the books.
Borders bookstore has a better selection than most, but is miserably managed. They're frequently late stocking new works (if at all), spend way too much time shuffling stock from one area to another, have too much space devoted to music, videos, stationary and literary classics, and are underpriced by Costco (new books) and Amazon. Should lower inventory and use Amazon local centers for fast re-supply, reduce staff, and reduce rents or move to cheaper locations.
