The Brink Without Borders

and you're listening to Business on the Brain. Hey, Ariel, Hey Jonathan. So for once I wrote the intro we did. It was very funny. I didn't do as many puns. I just did a really dumb joke. I like it. I'm glad. I'm glad. So, yeah, we're gonna talk about borders. But there's a reason we're specifically talking about this topic because it was a request yes from Ashley. Hi, Ashley, thank you for listening. Yes, Ashley asks why did borders

fail when Barnes and Noble did not? As an excellent question, it is, And well we'll summarize that at the end. We're gonna we're gonna talk about the journey Borders takes to get there, to get there, because it's I mean, Borders was, it was a company that defined the modern bookstore in many ways. They were the trend setter. Yeah. To the point, where have you ever seen the series Black Books? That's that's a BBC series. I haven't, but

I have heard of it. Yeah. Dylan Moran plays a very grouchy bookstore owner in England and at one point one of those mega bookstore conglomerates moves in right next door and it's it's essentially a Border's type of place, and uh, and it really irritates him. Although everything irritates him. It irritates him when customers come into a shop, it irritates him when customers go into the next door shops. So, but that's beside the point. We're going to talk about

Borders and not Black Books. Um. I do want to say, though, I think it is horribly fitting that today our notes on the topic are on paper. Yeah. Yeah, Also a fun peek behind the curtain. We record this in the evenings and at my studio at my office, And by mine, I mean Hellsta works. It's not really mine. I just worked there and the day we're recording this is the same day that they're rebooting our network, so we had to go with the paper. But it fits. It fits

for a bookstore, specifically for Borders. So you're gonna hear some ambient sound effects that are just us turning pages. Like yeah, yes, we'll have to do an s MR Brink episode at some point. So one of you a SMR artists, really needs to, like seriously bring gett of the pack. We can do a whole episode on you. So here's the thing this episode. It turns out that we learned it's not as simple an answer as you

might imagine. I think most people would say that the Internet was the reason why Borders went out of business, and it was really just a small part of it. Yeah, that was that was one factor that was definitely important. I mean, yeah, it wasn't small, but it wasn't the only thing. Yeah, So we're going to look at the

entire journey of Borders. Also, this is an interesting story because we typically talk about companies that have a brink moment where they either get launched into the stratosphere and it goes from being a small operation into an enormous one or the reverse, where a big company has a series of misfortunes Lemony Snicket style and it plunges this This bat Dealer's story has both. It does it does. We're going to start with a h A little side

note here. Um, I love bookstores. I love going into bookstores and perusing the books and looking at the book covers and maybe looking at the back blurbs. Yeah. I like the physical experience of having actual books to hold. Yes, that being said, almost all the books I own now are electronic. I I don't own any reader. I do have a tablet and obviously my phone, but I I much prefer I get much better retention of the content I'm reading when I read it on paper. So most

of my books are hard copy. Yeah, dead Tree edition, dead Tree Edition. I'll say a lot of those are currently in the basement as we reorganize our house. But I do still really enjoy just crack and open a paper book. I'm about to go get another library card just for that reason. Oh nice. Now, were you ever the type of person who would go until I a Borders or maybe a Barnes and Noble and just park it on a wingback chair and read a book for

like six hours. No, No, neither was I. UM. I would sit on a chair and like peruce the content if it was something like an art book or novel or a recipe book, just so I knew the contents because it can vary so widely. Do you know if I actually wanted to buy it, But no, I won't. Even like I won't read magazines in the grocery line check out, I won't. I won't read books. If I want to sit down and read a book that I don't want to buy again, I'll go to the library.

Same here, same here. Yeah. I remember going through very important books just to make sure I wanted to buy them, mostly dungeons and dragon source books. That is important. So let's talk about the history of the Borders Store. It was founded way back in nineteen seventy one by the Borders brothers. The name comes from the brothers who founded the store, Tom and Lewis Borders. Yes, and they we l O U I s. So some of them are Lewis's, some of them are Louise Luis Laois Borders Borders from

ann Arbor, Michigan. Yeah, and originally it was a used bookstore. They didn't they didn't come out the gate with a mega ya mega bookstore. These were two guys who were still attending the university over at Ann Arbor and they, you know, the University of Michigan. So they didn't have a huge amount of money to just drop on a on a bookstore. And it's funny because it kind of came out of necessity because so Louis Borders comes to

do some postgraduate work at the University of Michigan. He's studying mathematics, by the way, and he gets an apartment and the previous inhabitant of that apartment who had left left behind up apparently a bunch of books. So Louis and Tom De said, well, I don't want to hold on to these. I mean, but they could have poor college students need things like furniture and just come together and you get a two by four and you gotta put it on top of that, and you got yourself

get yourself a dining room table. Yeah, but they decided they would sell the books. But they had apparently so much fun doing that that they thought, why not make a business of this and actually make a used bookstore, because being so close to the University of Michigan. They knew that they could have a pretty healthy business just catering to students, so they made that decision, and then

they opened up their first location. What their first location was specifically is something that I actually had trouble tracking down. There's a lot of conflicting information about which location was in fact the very first location. I guess bookstore owners are better at reading information than recording it. Yeah, that's the nineteen and he's no one bothered to, you know,

to keep track of that. But the various addresses I've seen are two eleven South State Street and three eleven Maynard Street, which are two different addresses I looked in Google Maps and everything, um, and so there's some disagreements about which of those stores was first, but the Maynard Street location was frequently cited as the company's flagship store,

so whichever one was their first one. They ended up settling at another location at three oh three South State Street, and all of these were an easy walking distance of the campus of the University of Michigan. But this is when they started selling new books. Yes, they decided to switch from used to new, and I also decided to go from a modest bookstore to a larger storefront, not as big as what they would ultimately go with, but you're talking about ten thousand square feet. That's pretty big

for a bookstore. It is it is a good, healthy bookstore. Yes, they kind of got addicted to big books stores too, though, didn't they, because they bought also bought a like an old department store, Yeah, Jacobson's, which was a really old chain up in the Michigan area, not something that we would see down here in Atlanta, and another fairly big space, so yeah, they got that one too, also still not

far from the campus. And that was one of the ways that they were able to really differentiate themselves from a lot of the other bookstores, which tended to be those small storefront like shops you go in and you know, they fact that they had so much spaceman that they could end up having a larger inventory, like a greater

variety of books than what their competitors could have. So you might walk into a little bookstore and have to put a book on order, but at their bookstore, because they had much more space, they could order a greater variety of titles and have more there was a more likely chance that the book you wanted was already installed, and then this was a less calm and occurrence, so

it gave them a leg up. Now, later on people would gravitate back to the as we get to the millennial age, back to the smaller, more um niche feeling bookstores for for big bookstores. But at this time, you know, bigger was better. Yeah, yeah, And it was something that again was really appealing to the population of ann Arbor in particular, they were known as sort of a literary crowd.

And then Louis Borders put his degrees in mathematics and his knowledge of computer science to work because he designed a inventory management system and it was away a book inventory system or b i S is what it ended up being called, and it was a way for them to track not just what was in stock, but what

was selling. And it got to a point where they realized something that would later become a big deal for big data, which is, if you look at information and you look at it carefully, you can start to identify trends.

So they could look at book sales and start to predict which books were going to become popular before it actually became a trend, which meant that they could be proactive and order more of those titles so that they could meet the demand as it rose up, so they could actually start to predict trends as they were developing. And that's amazing, it is. I wouldn't I wouldn't initially think, hey, guy with a degree in mathematics would be the best person to run a bookstore. I would think his brother,

who's who is a teacher, would be. But apparently it was a match made in heaven. They also did something really smart, and they took this b I S and they sold it to other bookstores as well. Right, So it wasn't like they had no, this is our secret saace and you can't have our secret solace. They said, no, no, this is a very useful system. It will come in handy and they that was another business. In fact, they operated it as a spinoff business this for a while.

They sold it off I think in the nineties, but they were still you know, and this is still in the seventies too. That's that's an era where there's still babies. Yeah, well they're giant giant babies. Yeah. Personal computers are not really even a thing yet. If you're buying a computer, you're buying a very expensive large machine, right, because this is not this is not yet the era of the Apple two or the IBM PC. This is just before that.

So yeah, they were using these larger systems in this this custom made inventory system, and it was really going well. I mean, I think they could have probably just moved over to this b I S system, selling it to other places, updating it to keep up with the times, and been successful, but they didn't do that. They also expanded their bookstores as well. They opened in other locations. So they opened some in Michigan, but they also expanded

beyond Michigan. Uh. They opened up one in Indianapolis and another one in an odd location considering that their home base was in Michigan. Do you know where that is? Atlanta? Yeah, it's right in our hometown, I mean in the Atlanta's big So it's a good hub. And and believe it or not, we know how to read. We do. In fact, we're doing it right now. Yeah. So they opened up

a store in Atlanta. And the nice thing was that this b I S system proved to be incredibly useful in each of those locations, and it proved that if you knew how to use the system, you could customize that stores inventory for that particular population. It showed that different populations wanted different books. So the books that were being sold that we're doing really well in Atlanta might not be the same ones that are doing well in Michigan.

But the system lets you predict which ones you need to order, so they were always on top of things. That's pretty cool. The next really cool thing in in Borders history is when they did in their first superstore. This is the one that you probably associate with Borders when you think of Borders or Barnes and Nobles that had the coffee shop in it. It was Giant Um and they hired a professional to help them expand this business, Robert d Romualdo. Robert d ra Mualdo. That's a heck

of a name, it is. I had to keep going back and looking at it to remember how to spell it, you know, I I when I look at de Romoaldo, I'm convinced I'm not saying it correctly, but I will keep trying. I probably won't say the same way twice. And he helped them grow this superstore model and it was very successful, and by nine he was the CEO of the company, and he incorporated new things into their superstores. Now they didn't just have all of the books ever,

and some coffee shops. They also had music and movies and things like that. Yeah. I remember walking into these big bookstores and seeing like the entire section set aside for music and film and thinking that's odd for a for a bookstore. I loved it. Well, I mean, yeah, we will talk a little bit more about the music and movies stuff a little later, because it's another one

of those factors. Yes, yes, but you know I loved it at the time because I could go find the book and then I could go find the VHS of the movie version, yeah, of the bus, right, so you can you can read The Princess Bride while you watch The Princess Bride. That would be a sobering experience. They don't exactly match up. Is pretty close though, I mean

Golding also wrote the screenplay. But in the early nine nineties, at this point, Borders is doing well and starts to head toward an initial public offering to go from being

a private company to a publicly traded company. So under the proposed I P O, the company they had not yet launched an I P O. But they were in the preparation for it, and that that involves a lot of work, a lot of very technical legal work, to to set what the stock price should be, what you think the opening price is going to be, how many shares you plan to offer? That in turn tells you

how much you think your company is worth. Right, because if you say we're going to open at twenty dollars a share and it's going to be X number of shares, then you multiply those two numbers together and say, oh, so you think your company is worth blah blah blah. It's like you're going on shark take, except for you're

already established. Yeah. So they had estimated that they were going to have three point six million shares of stock, and at the stock price they were looking at, uh, that would have given the company of value of one hundred ninety million dollars. Not too shabby. But they didn't end up doing the I p Oh. Something else happened. Another company swooped in. Yeah, of all things, Kmart swooped in and they said, hey, we're going to buy borders.

They had already bought Walden Books, and they had bought that back in the eighties. Yes, yes, and now they wanted to buy Borders as well. They were hoping that uh, merging these large bookstores would bring them a lot of extra revenue. Yeah, they were looking at Walden Books, which had a lot of like mall locations. That's where I always remember Walden Books, not as a standalone but as a mall bookstore, more of an express experience. Yeah, and

then you had Borders the larger bookstores. And then they also owned a few bookstores that were connected to Walden Books but were called Bassett Books. That was largely in the Northeast. There are all books about dogs, yes, the Bassett Hound Books. No, it was it was another chain of a small chain, like a regional chain of large bookstores. So yeah, that was kind of there. There um their strategy moving forward. And and at that point Borders consisted

of twenty one bookstores. Yes, and in after Kmart bought them, they became the Borders Walden Group. And things look pretty good. But things we're about to change. Musical sting. Yeah, so we'll explain how they're about to change in just a moment, But first we're going to take a quick break. All right, now, Ariel, you were saying things were about to change. What did

you mean by that? Well, I meant that things were actually going to get a little bit worse than a little bit better, and then pretty better and then a lot worse. Okay, could you perhaps elaborate? Yes. So Kmart, like we said, bought borders they expected to bring an extra revenue, and it did. Under their their first year under Kmart, they brought in about two d foot eight million dollars profit. Nice. Yeah, And in ninety four they reached one point five billion dollars in sales. That's also

pretty nice, but surprisingly not enough. So Kmar was struggling. They were having some financial troubles and borders Walden was not helping as much as they had hoped. So there's there's some slight variation in reports. Some people say that kmars like, uh, we're gonna we're gonna ditch these bookstores and let them become their own thing, and some some reports say that these bookstores are like, hey, we're gonna

become our own thing later. Yeah. Whether or not it was a decision made internally from the book side of things or internally from the Kmart side of things, the result was the same. Kmart did spin off the Border's Walden Group, although at that point it had become the Borders Group. So Borders Group gets spun off into its own company and gets put back on track for that I p O that was so hoping for. They finally

get their public offering UM. Now right afterwards they bought share that came it still had in them, so Kmart had retained at ownership and then decided that or at least the Borders Group folks decided to purchase that back from their former parent company. Yes, and in seven they had really good luck with their public offering. They ended up closing at forty four eight cents of share. That's that's a pretty healthy per share price. Yeah, it was

healthy enough that they did a two for one stock split. Yeah, we talked about those in the past. It's where you double the number of shares, but you have the value per share and it helps it helps inspire liquidity, it helps inspire smaller investors getting involved. Yes, and and all of the success UM encourages them to expand into Europe and Asia, So now they're starting to open international locations there.

Their first store was opened in Singapore and they opened up forty more stores, so rapid expansion of this point, and their plans were for an international superstore chain with a thousand locations. Yeah, and at that point they had just a little more than two hundred locations. So a lot of people also point to this era as being in retrospect a dangerous one for Borders in the fear that they were trying to expand too quickly and too aggressively.

There are a lot of stories that talk about Borders the company that was opening up stores like crazy in the nineties, Like, there are a lot of stories about that. Yeah. However, in two thousand's now at this time, Amazon's also become becoming big. Yeah. This is a right around the time where Amazon was. They hadn't yet become profitable, but they were becoming more of a player in especially in the

I mean Amazon started in the book business. Yeah, they were just a bookstore, and to be fair, they weren't profitable, but they were bustling. Like from the get go, Amazon had high, high traffic. Yes. Yeah, so while while it wasn't yet the goliath of goliaths that Amazon is today, it was, it was doing well enough where it could survive the dot com crash that was on the horizon and make it through the other side and actually start

to turn a profit. And de rom Nualdo knew he could see that this was this could be a big threat, and he decided that Borders needed to adapt to meet this threat, and so they created Borders Online. Yeah, so important step that he recognizes that the internet is going to be a really pivotal thing for commerce in the future. However,

launching an online presence is sometimes more difficult than it sounds. Yeah, it takes a while to get notice, it takes a while to get traffic, it takes a while to become muscle memory for your consumers, and it takes a while just to work out the kinks so that you've created an experience that people enjoy. Yeah, and so when they launched this site, they had some initial losses and the investors freaked out and they said, nope, we're shutting it down. Yeah,

we're gonna we're gonna remove this. It's a drain on our attention and our money and our time, so we're going to close it off. And I would say this was their first really big mistake. Yeah, they gave up too quickly. Yeah, because a lot of and we have more into it later, but a lot of analysts say that them committing to the market late was what really contributed to Yeah, and it's interesting because they didn't really

commit to it late. They well, I guess you could say they committed to it late, but they carefully they attempted it earlier. Yeah, I was. I feel a lot of sympathy for for Borders at this time because you're talking about again. In hindsight, it's so easy to say, right, because the Internet has become such an enormous powerhouse in commerce, But in the late nineties, everyone was pretty sure the Internet was going to be really important for commerce, but

no one knew how. Yeah, and so it's kind of callous to dismiss a company for saying, all right, well, this isn't working for us, because it wasn't working for a lot of people. Only a few companies had really started to hit on that that method that would make online business work, and Amazon was one of them. Yeah. But it also it also did another thing. So not only did this the initial losses freak out the investors and get Borders Online shut down, it also meant that

they were looking to replace de Romoaldo thank you. Yeah, yes, Um, so they did. Yep. So he gets he gets the boot and gets replaced, and is replaced by Philip Feffer, who ends up transforming the company and leading it for the next decade, right, just for a few months. But he just leads it for a few months. I don't know if he transformed the company at all. Reign he resigned. Usually if you transfer, if you leave, if you resigned after a few months, if you've done any transforming, it

is not the good guys. I mean, maybe he won the lottery and like piece gays them out. So who do they turn to when Feffer leaves? You know why I'm asking you that, right, because it's a horrible name to say, Jonathan, You're very mean. De Romoaldo he comes back first. Yes, then you get the other names. See now I said the hard one, Now you get the easy one. Greg Joseph Owitz, thank you. Yeah, Joseph Owitz

comes in, So Di Romaldo steps back in temporarily. But then Greg Joseph A. Witz comes in and becomes the new CEO. And this is the transition from the nineties into the two thousand. Yes, there there is one side note before we get fully into the two thousands. Which is border Spot a toy company called All Wound Up. Yeah, I had never heard about this. I hadn't either. It's another bad decision, I feel, because they didn't even look at adding toys to their superstores until the later later

in the two thousands till two thousand ten. Yeah, and so they sat on a company for a decade without incorporating it into their their major brand. Yeah. And maybe All Wound Up was doing fine on its own. I mean, we did a whole episode about toys r US. We know how toy companies weren't doing so great in the Yeah,

but it's it's a missed opportunity. Yeah, I agree. So this is another one of those moments where people point to and say this, this might be Yeah, okay, it was bad that they didn't commit to e commerce early enough, But then they point to this decision coming up that they say, no, no, that was really what killed him. And that was when they decided to make a deal

with Amazon to sell their books. Yeah, so all right, again, I feel sympathy again in hindsight, saying, handing the keys to your car to a to a person who's dressed in a shirt that's got black and white stripes and they're wearing a mask and they have a ball and chain hooked up to one ft. Maybe that wasn't the best idea, Like, hey, that guy just stole my car, that's what That's the way a lot of people paint this is. Like, so Amazon's and online bookseller borders ends

up handing over their online business to their their online competitor. Yeah, they decided to outsource their online sales. Yeah, But on the flip side, like we were saying earlier, establishing a web presence is tricky, even today when people think that they have a real good handle on how online works, right,

I've seen it. I've been in companies that have been a part of that where a big company comes in and rather than developing their own platform, which is hard to do, like for the same reasons we were talking about earlier, they'll go and they'll look for another company to either purchase that company and just have them handle that part of it. Like it might be a smaller company that already does online stuff and say, well just buy them and they'll be our online presence, or they'll

contract it out. Like I get it, because if your business isn't already natively the Internet. You have to learn all of that in order to operate in that space, and that's a lot to learn, and it could be very different from the business that you typically handle. And also you look at some businesses when they try to diversify what they do too much, it causes fairly or

they stretched themselves too thin. So maybe keeping those resources to what is really your your core competencies as we would say in the old consulting days that I I don't talk about very much. But yeah, yeah, so I feel sympathy for this, but I also admit, Yeah, this ended up being a pretty big miss. Borders had a lot of pride in their name, in their brand, and

this really deluded it. Yeah, I think there was still a belief at this point that the real world experience of walking into a bookstore could have enough of a draw on its own that they weren't going to cannibalize they're in store sales by partnering with Amazon. As it turns out, that was a hope based on dreams. Also, around this time, they their investors were not very happy with how management was working. Obviously, they had a CEO resigned after just a few months. Yeah, that that doesn't

look good. They hired those investors, hired Merrill Lynch to look at how to move the company forward, how to make sure it was profitable and being managed correctly. They looked at recapitalization, They looked at a leverage buy out. They looked at having a company acquire them, or acquiring another company and doing a merger um and they decided to stay independent. At the time, so Borders wasn't it

was coming and going. They weren't always meeting their projections, but they were still they were they were money, Yeah they weren't. It wasn't like hitting that long decline yet. Yeah. Yeah. So then two thousand four they hire a new chief marketing officer named Michael tam in order to rebrand and too really to position the stores as being like the center of a community experience, like that idea that it's

separate from something you would get online. You can go and separate from something you could get in a small bookstore. So you could go, you could eat your lunch, you could have a feet, you could read a book. You need a muffin the size of a child's head, Yes, those are the best muffins. Childhead sized muffins. Yeah, marketing them is a little tricky, but they are tasty, yes, So,

so they focus on the community. They do some brand repositioning, They acquire a company here too, They make some Walden books, some Borders expresses. Uh. They make a deal with Starbucks so they can sell Seattle's Best Ye in their bookstore. This triage looked like it was successful. Um. In two thou five, they posted profits of a hundred and one million dollars and they launched their Borders rewards program. Yeah yeah,

which I was a part of back in the day. Uh. And in two thousand six, Josepha Witz announces that he's going to retire, and well, they've already chosen his successor, a guy named George Jones. And they do something that we have always stressed as being a very important thing in any kind of corporate structure, which is having a solid transition plan so you can have that transition not just of power, but of knowledge. Yeah. When JOSEPHO Witz said that he was retiring, he said, I'm planning to

retire in about two years. So they didn't wait for the end of those two years to bring Jones on. Yeah, which a good idea. Yeah. Also at this time, Pershing Square invests in the company for an eleven percent stake. But not all good news, because while this year would be a good one for them, it would also be their last good year. Yeah, it's the last time that they would turn a profit. Jones comes on border stock plummets, yes, to twelve dollars and twenty eight cents of share. Oh

that's a big drop. Yeah, that was a serious fall from grace. So they quickly react by selling off some of their subsidiaries. And I like in your notes here because I couldn't help but make a snarky joke based on it, so aerial. Don't they get rid of England and Ireland and the rest of the UK? So I wanted to reassure my listeners out there, England, Ireland and the UK are still their borders. Just got rid of

their subsidiaries in these countries. Yes, they lost around a hundred and fifty seven point four million dollars, but this isn't about about like, here's as bad as it ever got. We're now at the brink of true disaster, which we will get into in greater detail in just a moment. After this break. We left off with the shares dropping down to twelve dollars and twenty eight cents. And we wish we could tell you that's as bad as it got,

but it just got worse. Yeah. In two thousand eight they went down another to just five dollars and seven cents of share. Yeah, and it's still not as bad as it would get, but I can't bring myself to get there that quickly. So at this point they take a loan from Pershing Square, who's already an investor. Yeah, they had taken that eleven percent steak earlier. Yes, And they take four two point five million dollars, and then they put themselves up for sale. Yeah, they might have

even entertained. In fact, I'm sure they would have entertained and offer from their arch nemesis, Barnes and Noble. Yeah, Barnes and Noble was looking at if they wanted to put in a bit, and they declined. Then they did some more restructuring. They cut ties with Amazon, and they made borders dot com. Yeah a little too little, too late as an and then they cut a hundred and fifty six jobs, which saved them a hundred million dollars. Yeah, but they also sell off all their stores that are

over in the South Asia area, like in the Australia area. Yeah, and then they lost more money. So by the end of two thousand and eight, they had lost a hundred and eighty seven million dollars and that was not great news, great news. Great news for George Jones was terrible, terrible smell. And George Jones got the boot. So he had come

into a pretty tough situation. It had gotten tougher, but the Border Directors was not going to try and wait and see if George Jones could turn things around, so instead they replace him with a guy named Ron Marshall. Ron Marshall, I feel bad for him. He didn't come into at a bad time. He came in at a worst time, the worst time because was the company doing badly. Pretty soon, all of North America and by extension, the rest of the world was going to have a real

tough time. Yes, we were hitting the global financial crisis and a great recession, and so Border starts closing their wild and books. I get it, because you know that's not their flesh and blood. That's just yeah, this is too anecdotal. I don't go to malls anymore. The few times when I go to malls, I definitely don't see the type of stores that were around when I was. When I did go to malls, I mean I do shoe stores, shoe stores, Claire's. If I want to get if I want to get stuff pierced by a gun,

game stop Malls. Yes, just stands listen. I I do go to malls, and and there's a lot of clothing stores and some food stores, and a couple of electronic stores as usually either an Apple or Microsoft. I'm getting off topic. I really just want to go shopping at this moment. Well, let's get back onto onto the track here. Yeah, there's there's a few there's a few little book stores, but they're more like calendars and games. Yeah. So they continue trying to to cut huge amounts of costs. They

end up closing two hundred stores. They lay off another fire people. They had gone from having more than a thousand stores at their peak to fewer than two hundred. So you know that the arrow we talked about where they were really focusing on expansion, they're back now below where they were at that point. Yeah, and now they're also fighting e books. The rising popularity of e books, which means that their two thousand nine holiday sales were

not great. They dropped thirteen from their norm. Yeah. This would have been also the era where all the bookstores were trying to come out with their own branded, proprietary e readers. That was that was rough times too. It was just after a year Marshall gets kicked out. Didn't last very long at all. Yeah, Mike Edwards comes in as interim CEO. More layoffs occurred, They pay back some of their loan and they restructure the rest. So that's

that's a good step. Maybe things are looking up. Then they get their more permanent CEO been at Le Beau or Labao, and Edwards moves to being CEO of their subsidiary branches. And that was after Bennett had invested about twenty five million dollars in the company. And so then they say, all right, what can we do to address this? Beyond closing locations, they decided to try and update their yes. So they do things like start selling e readers, but instead of having their own one brand of e reader

like the Barnes and Noble Nook, they still six different kinds. Yeah, this was where we started getting into that brand confusion stuff. And by then, but then the Nook in the like the Kindle, the Kindle was really the ruler of the roots because Amazon had really positioned the Kindle for success and would continue to do so. As Amazon would unveil new programs like the Prime Membership, they would throw in incentives like, you know, a discount on a Kindle reader.

And so Amazon was absolutely determined to dominate that space and they that's what they did. And Barnes and Nobles did all right, because Barnes and Nobles jumped on it immediately. Borders was a little late to the game once again. They launched an e library, which Barnes and Nobles also did, but Barnes and Nobles did it eight months earlier. Yeah, so their Borders is running a year late on all of this technology. Um, they sell off their paper Chase acquisition.

They had bought paper Chase a while ago, and they lay off more workers. Yep. They end up losing more than forty six million dollars by that second quarter. So they say, all right, well, let's keep on trying to fix this. Uh. They start trying to put those toys and games in their stores. Like we had mentioned earlier, they launch a new website. They make another attempt at saying, Hey, Barnes and Noble, how about maybe now pretty please, like

we look real, real cute. Yeah, And and Pershing Square, who was owned by Bill Ackman, who was kind of helping trying to help Borders really succeed, offers to help finance the merger between Barnes and Nobles and Borders. But still no dice. So yeah, by the end of it's getting to the point where it's impossible to deny inevitability. They are looking at the very real possibility of going out of business. They had lost another seventy four million

dollars in the first quarter of ten. They delayed vendor payments. They started to try and figure out if they could maybe make a deal where they wouldn't have to pay cash upfront for the book stock. They would only have to you know. It's it's kind of like when Nintendo offered to the same thing. Yeah, they said, we'll provide all the stock, you don't have to pay us, just pay us if you sell the console. That's kind of what Borders was doing, except on the other side of

publish just publish. Just don't like that very much. No, No publishers like it when you buy their books. They're so great about like, no, I'll give you a whole bunch for free, and then you just pay me if you happen to move them. They're like, look, you guys, it looks like you might be looking at bankruptcy. We

don't want your debt. Yeah. They kept on trying, but it just wasn't really moving anywhere, and by February, the New York Stock Exchange pretty much put the nail in the coffin because the stock exchange there there are rules were being listed on the New York Stock Exchange. You have to meet certain criteria, including a certain share price, or else the stock market will delist you. And I think it's like a dollar. I think a dollar is that minimum. And they were in ninety cents to share. Yeah,

so they got for a while. It wasn't like they hit ninety cents in New York Stock Exchange said you're out. Yeah, so they tried to go into chapter eleven. They said that they had one point to seven billion dollars in assets and one point to nine billion dollars in debt. Yeah, they had some investors lined up and they eventually backed out. So they were Originally when they went into when they went into file for Chapter eleven, they were hoping to

be out of bankruptcy by September. They had some bids, a bunch of like I said, they all kind of backed out. It all fell through. They had a buyer, Najafi was looking to buy them, but the Borders creditors didn't like that. Yeah, they were afraid that Najaffee was just going to come in liquidate all the assets and then sell them off and then the debt would be left with whomever the you know, was still around, And

they said, no, we don't want to do that. The creditors are like, well, we feel like he's kind of a shark. We'll kind of we'll do this, but we have to pick who the liquidators are if they liquidate. And and it was just this big ordeal between the Jaffee and the creditors and the publishers and they couldn't come to an agreement, and so the Jaffee pulled out

as well. Yeah, so then it ends up having to go to liquidation anyway, It ends up going up for auction and goes into the company goes into Chapter seven bankruptcy. So Borders liquidates their stores. Most of them are liquidated by July, includes all the Walden books as well, and the books you know, the book Kiosks when it went into chapter seven. At that point had been the second largest bookstore chain, just behind Barnes and Noble. It's so sad because I don't think Barnes and Noble would be

what it is if it hadn't been for Borders. Uh. And then now Barnes and Noble actually owns intellectual property of Borders. They spent thirteen point nine million dollars for it to have the intellectual property, So let's answer that question. Though. Why did Barnes and Noble survive but Borders didn't. I think it was late adoption to the trends. I mean that that's really what it is. Are there are some other things, so they were late to commit to. Yeah, they were late to jump on the on the e

book train. They they invested in CDs and DVDs at a time when people were looking at digital media the books, just as the population was starting to migrate from physical media to digital media where they were downloading stuff instead of just buying the hard copy stuff. And then my assumption is they also weren't bringing things into their store that people couldn't download, like the toys, like the games,

things like that. Also, some analysts say that expanding internationally pulled them too thin as well, but I think that's probably a smaller piece of the puzzle because one of the fun facts I have later on a combination of things, again, like the super aggressive stance on opening more locations probably

was over extending their reach a little bit. And then as you say, these late adoptions of these very critical technologies would end up haunting them so well, and CEO turnover didn't Oh sure, Yeah, that was another thing, right where you you put someone new in charge and if things don't immediately get better, saying let's change it out again. Like sometimes that's necessary. Sometimes you put someone in charge and it becomes very clear, like we made a terrible decision.

But in other cases factors that have nothing to do with the leadership. It could be external factors that the leadership is dealing with and maybe maybe things would have been worse without that leader in place. Yeah, And I mean so when you see one CEO go out quickly one or two, that's understandable. Once once you get a rash of the CEO cycling in and out then just

freaking out. Yeah, exactly. The board directors doesn't have any confidence in the company, and that in turn trickles down, like the morale problem goes throughout the entire organization at that point. So yeah, this was this was a case of like a lot of bad factors all hitting at the same time. That being said, while we have these terrible stories to tell, we also have fun facts. Yes, we arial likes to put these at the end of every episode. I did a couple of them for this one.

One of the fun facts I have is that one of the first Borders locations is now a restaurant and craft beer pub called hop Cat. Don't know if the original store not, but you can apparently get one of up to a hundred different beers on tap there. I'm going to imagine that the bar is built up on old Borders books. Yeah, and then Louis Borders was also responsible for founding another famous company that lasted only a

short while. In fact, is a company that is largely associated with the dot com crash, and that would be web Van. Web Van is one of the most notable failures during the dot com days. It lost nearly a billion dollars of investment when the company failed. I think that investors had put in eight hundred fifty million dollars into that company, and it was one of the ones that went belly up shortly after the market crashed in the dot com bubble burst. Yeah. He also founded another

company called people Media dot com. That was a company that would archive magazine articles and it would allow people to access them on a subscription basis. So it was behind a paywall. Right. You would the idea being, oh, I want to get access to this old article that was published in say, Popular Mechanics back in nineteen sixty three, and so you would pay a subscription. Uh. The name of the company changed to my wire dot com. But it didn't result in a successful business model. So I

don't know exactly when it went out of business. I couldn't find any information on that, but I will tell you that if you try to navigate to my wire dot com now you'll get like kind of just a bunch of generic links. It's not even it's clearly not the same thing. I guess, Uh, I guess for Louis, it was really one and done. Yeah, at least as of two thousand fifteen, there were still international Borders. Not again not. There's a lot of international Borders that way,

like Borders bookstores, including in Malaysia. Um so some of those sold off forgot bought by other companies prior to Borders going under and they still exist. Yeah, the first Borders location stayed open all the way to the end, all the way to the end, which is a pretty good benchmark. Yeah, I'm sure there was a sad ceremony held at the University of Michigan campus and the last one closed. And I love your your final fun fact here. Yes,

it's in all of my research. I came across an article on the Washington Post from May, if you want to look it up, on what you can still do with old Borders gift cards. I mean, because you might come across like you might find one stuffed in a soft shore one day. Among the suggestions suggestions were ninja stars and gifting them to people you don't like. I like that second one a lot, figured you might well. That wraps up this episode. We want to thank Ashley

again for writing in and suggesting these. The next few episodes will be recording are going to all be from Listener requests. So maybe some of you out there are thinking about a company you would love to have us cover. Maybe there's a story about an amazing ascension or a terrible fall, and you want us to give our take on it. If you want us to do that, writing us is the best way to do it. Send us an email. They can send us that email at feedback at the Brink podcast dot show yep, and you can

visit our website that's the brank Podcast dot Show. You'll find the archive of the elder episodes there and some information about your beloved hosts. And speaking of those two beloved hosts, I have been Jonathan Strickline and I have been aerial casting, I'm going to go read a book. Business on the Brink is a production of I Heart Radio and How Stuff Works. For more podcasts for my heart Radio, visit the I heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows,