One claims it's the company's only chance for survival. Atari has filed for Chapter 11 bankruptcy protection. BWM presents the new one.
Kodak is filing for Chapter 11 bankruptcy protection. What's up guys, my name is Jake, and welcome to the 23rd episode of Bankrupt. For decades, there have been two major bookstore giants in America, Barnes & Noble and Borders.
They were pioneers in taking the big box store concept of retail and adapting it to the humble bookstore. Borders in particular was a well-loved brand, one which started from modest beginnings and grew to become a massive and culturally significant company. With over 700 locations around the globe.
and 33,000 employees. But despite its billions of dollars in revenue and even a partnership with Amazon, it would ultimately declare bankruptcy and disappear completely by 2011. So let's find out what exactly happened here and why this brand ultimately failed after so many years of success. This is Borders. This video is very appropriately sponsored by the new novel Symphony of the Sojourn.
Click the link in the description below to get your copy today. It started in Ann Arbor, Michigan with two brothers, Lewis and Tom Borders. They were studying at the University of Michigan and had decided to open up a small bookstore using their family name called Borders Bookshop. It was 1971 and their small business mainly appealed to the college crowd in the area. Not only were they offering textbooks, but also a full inventory of vast titles including rare and hard to find books.
books. Their small location would move a few times in the area, but would ultimately grow from here. The brothers would end up opening an additional Borders Bookshop in Michigan, carving out a niche of not only providing a place to find special books, but a comfortable one too, a great place for students in the area to hang out.
Their small bookstore business was expanding out of state now too, opening up locations in Georgia and Indiana. After seeing how customers interacted with their locations, the brothers opened up a brand new location. that was a little different.
It was a larger scale store, featuring over 70,000 titles across 10,000 square feet. The store would feature lots of seating, soft classical music, all packaged in their signature warm and cozy atmosphere. Staff were also trained to be highly knowledgeable on books in general, and were encouraged to think of their jobs at Borders as a long-term career. That ultimately resulted in staff being brought on as full-time employees that were paid more than equivalent positions at other chains.
On top of all of this, their stores were kept very clean, with the philosophy that neatness would show respect for the product. Because of this, Borders was growing a very loyal customer base, with many of their locations selling around 500 books a day, with some customers spending hours just perusing the huge catalog of stock. Now to keep track of all this stock, the two brothers also started another company called Book Inventory System. which did exactly that, kept an electronic inventory system of all of their books. Between this new venture and their bookstore brand, in 1988, Borders were bringing in over $32 million in sales, with a very impressive net income of nearly $2 million.
Obviously things were going well, and the brothers wanted to grow the brand even further. They hired the CEO of Hickory Farms, Robert D. Romaldo, who they would later name president in 1989. He was now overseeing the substantial growth efforts for the company, opening many new locations. In just a few years, those sales had increased as well, now to $60 million with 21 stores.
This growth and brand loyalty ultimately caught the eye of the nation's largest discount retailer, Kmart. They had a sizable division of bookstores called Walden Books, and wanted to expand that side of their business even further. They correctly identified the untapped potential that Borders had, particularly with their Superstore concept. So in 1992, Lewis and Tom had sold their brand to Kmart for an undisclosed amount, basically selling it for Kmart stock, which I hope they have since sold.
While the two brothers would stay on as major shareholders, Borders was now wholly owned by Kmart, and they were now ramping up their major expansion efforts. And those efforts were explosive, as by lumping in Walden Books, In 1994, sales had reached $1.5 billion, making the brand have the highest sales per square foot in the whole industry. But while the success was great, Kmart were having their own problems, and shareholders ultimately let the bookstore division go. Something the former executives at Borders had already been preparing for.
After just three years, Borders and Walden Books were spun off as one large, separate corporation called Borders Group. By now, their stores were growing in square footage size. And while the cozy feeling may have been lost a bit, the vast selection of books made up for it. Exceptional customer service was still a priority, and novel concepts like in-store computers, televisions, and CD listening stations were all set up. along with a coffee bar, something that was especially very popular with customers.
These new concepts kept those loyal customers in their stores longer, but they added millions of dollars in expenses to the company's overall bottom line. This expansion was overall good for the corporation though, and they had to keep the iron hot, as Barnes & Noble was another giant in the industry, also expanding widely and capturing their own markets across America. By 1996, more US adults had purchased books from chains than they did from independent bookstores, a critical point that showed the appetite for bookstore chains. Though at the same time, analysts began wondering on how much more of this market was really out there.
They went on to estimate that there really might only be a market for around 1500 bookstores in the entire country. Both Borders Group and Barnes & Noble were already fast approaching this So, borders began to expand outside of the US market, first trying to enter Canada, which ultimately was denied. Borders would finally cross borders in 1997, first opening a location in Singapore, then establishing a modest presence in Australia, Ireland, Puerto Rico, New Zealand, and most significantly in the UK. Overall sales, however, were anything but modest, as the company had now brought in more than $1.6 billion in sales.
Truly an astonishing rise from the beginning of the 90s. But the market was beginning to change, and competition with Barnes & Noble was fierce. By 1998, Borders launched their first website, setting out into the digital marketplace. Though it was a late and costly endeavor that flopped immediately.
It basically made no money and cost tens of millions of dollars to operate each year. The brand was also dealing with lawsuits from independent booksellers, as well as a slumping stock price. Longtime CEO Robert D. Romaldo had retired by this point, and with annual sales down, shareholders began to distrust the new executive leadership. But there were some positives.
At least, they were seen as positives at the time, as the website launched back in 1998 had now been axed. Instead, they formed a partnership with Amazon.com in 2001. A couple years later, in 2003, the company had 1,182 locations open between both the Core Borders brand as well as the Walden Books brand. Despite some challenges being faced, they still brought in a healthy $3.4 billion in net sales, as well as a very impressive consolidated net income of over $110 million. These healthy profit margins and sales would continue for the next few years. building the company up as a massive brand and allowing for some high-level marketing.
One I distinctly remember is their placement in Steven Spielberg's 2004 film The Terminal, with a prominent border store front and center. It was also the choice for many celebrity book signings and notable launches, particularly later entries in the Harry Potter series. By 2007 however, things began to take a turn for the worst.
Despite bringing in over $4 billion in total sales, the company lost over $1.5 billion in sales. $136 million that year, a devastating and record-breaking loss for Borders. It turns out that their big bet on CD listening stations and DVD sales were not the slam dunk they thought it would be. Moreover, the industry was moving on to online sales, and Borders kept with their strategy to offload the responsibility on Amazon, a company who they had no control over. That would later come to bite them, as they benefited very little from their partnership and were left with nothing once that partnership ended later that year.
That forced Borders to launch an entirely new website by 2008, hilariously late for a major retail brand's launch. Amazon had already released the Kindle, while Barnes & Noble were gearing up to release the Nook. Both were digital e-readers that would prove to be very popular. Borders, however, did practically nothing. They would later partner with a third-party manufacturer and sell very little of their own branded e-readers.
Meanwhile, the company had decided to offload their international divisions, selling the UK stores to a private equity firm and closing whatever they couldn't sell or lease. Ultimately, that international expansion from the 90s did more harm than good for the entire corporation. Domestically, the number of Walden Books locations were also being decreased. That was a brand that had seen a year after year of declining sales.
It made sense though, as the majority of Walden books were small locations found within malls, a sector of retail which obviously was in decline. Borders would ultimately shutter 300 of them and the brand would continue to drag down the entire corporation. Those net losses continued on into 2008 and 2009, seeing the company lose 157 million and 186 million dollars respectively.
By this point, the high customer service standards they had once held themselves up to were now beginning to fall to the wayside. Remember back in the 80s and 90s when they were focused on bringing in full-time, well-trained, career-oriented employees? Well, that was long gone, as Borders now employed more part-time employees than full-time, many of whom replaced the higher salaried, long-time employees of the company. Really, corners were being cut across the board. And that was already paired with higher prices than rivals.
The brand was in trouble, and they hired two investment banks to help them through what could be a potential sale. They then went to a major shareholder, an investment firm called Perishing Square Capital, to take out a loan that would keep them going. Borrowing money otherwise in 2008 was difficult and expensive.
By 2009, the company had just 515 Maine borders locations and 386 Walden Books locations. A significant decrease of stores, which didn't help overall sales. Which, by the way, were now down to $2.6 billion by 2010. That's a decrease of $1.4 billion in just three years.
Competition was brutal for the company. And that mixed in with a sharp rise in online sales, and the tail end of an economic depression. Well, Borders was on life support. Even after some positive financial news, the weight of their bloated infrastructure, low cash reserves, and challenging market had brought the book giant to its knees.
The core incentives that brought customers to their locations, like large book selections and a vast square footage, now became an expensive operational headache. On February 16th, 2011, Borders Group had filed for Chapter 11 bankruptcy protection. In doing so, the company announced the immediate closure of over 220 stores. all while they try to reorganize and pay down their $1.2 billion in debt.
CEO Mike Edwards explained that, Despite one bidder coming in for an acquisition attempt, the company ultimately turned it down, not thinking it was sufficient enough to keep it going. Instead, the board opted for a total liquidation. So, Borders was converted to Chapter 7, And by summer of 2011, the entire chain of stores began closing down. To the deep sadness of many customers, Borders and Walden Books were now officially shut down in September of that year. Their hangout place, coffee shop, and cozy space to get away had now been shuttered for good.
As the company closed its doors, a few bits of its death were absorbed by its competitor, with companies like Books A Million buying up a few retail locations, while Barnes and Noble, a acquired the brand trademarks, and redirected the website to theirs. Borders actually had some really prime pieces of real estate, many of which were quickly bought up and filled. And by doing so, that kind of very quickly erased the massive presence Borders had.
While there are some reminders of the past in the form of abandoned storefronts, like this location in Cleveland Heights, the majority of the Borders brand has now dissolved. Even the Brothers'first shop in Ann Arbor. While the building still stands today, It's now occupied by a CVS. But while the book empire that Borders built in America is now gone, that doesn't mean it's gone everywhere.
Borders International Divisions were purchased a few years prior to the domestic bankruptcy. Many of them also shut down afterwards, even after a Singaporean company tried to restart. The latest closure was all the way up to mid-2023 in Malaysia.
But there is still one location still alive today, in the Middle East, particularly in Dubai. Regardless, unless you live in Dubai, Borders is a dead company that has been erased in the brutal retail landscape. But the brand did see a monumental rise from its very humble and innovative start to a massive book giant with tens of thousands of employees and billions of dollars in revenue.
But through all of this, the brand lost much of its original charm and grew to become a totally different type of chain store. Ultimately, management became very comfortable with all of their success, and caught themselves in a dangerous place once they failed to keep up with technology and competition. They grew to a point where they outpaced what analysts believe would be the best way to be the apex of customer demand, and once that demand began to decline with the advent of online sales, it was just all over for them.
There probably are a few scenarios that could have let the company survive. Perhaps if they offloaded Walden Books years prior, the company may have made it through with a much smaller retail footprint. But Borders just couldn't weather the daunting challenges they had ahead. Ultimately, they had to turn the page to Chapter 7, that being the final chapter for the company.
While borders may be gone forever, the creative stories that their stores once held are still thriving today. One such example is this video's sponsor, Symphony of the Sojourn. It's a fantasy novel written by Rowan Alexandria Bennett, taking inspiration from the tabletop game Dungeons and Dragons. The world she's created in this book is filled with a rich atmosphere, political intrigue, pirates, and magic.
I've been making my way through it these last few days, and while I don't particularly seek out fantasy novels, I really like how this one is structured with each character having their own arc and written in their own voice It's a really interesting framing device for a much larger story So if you want to immerse yourself in a fun new world I really do recommend picking this up and you can do so right now by clicking the link in the description below It will bring you to the detriment of borders to the Amazon page for the book where you can pick it up and paperback Hardcover or on Kindle. Anyway guys, my name is Jake and thank you very much for watching.