Monday, February 28, 2011

Borders' Bankrupty Stinks

While not at all shocked about it, the announcement that Borders has filed for bankruptcy has me puzzled. How does an industry stacked with benefits for the retail side of the business get it so wrong so often? The financial bankruptcy of this one retailer barely scratches the surface of the inept handling of the advances in the exchange of information and the exploding independent and self publishing industry. Let's face it, the industry as a whole is bankrupt in business practices, ethics, common sense, and their agility and ability to bend and sway with the consumer and how and why they need a book.

It is sad to see a business closing its doors and so many people losing their jobs. It is the fault of the industry as a whole, as well as the individual executive managers of these retail establishments and not the front line staff. Bookstores are just huge consignment shops that can make completely irresponsible inventory buys so they have a big well-stocked store with virtually no penalty to them for bad buys — they just return the books to the wholesaler (no matter from whom those books were originally purchased).

Consumers complain and say books are too expensive now… so why no sales Mr. Bookstore Manager? Why is it that the publisher is asked to carry debt for a bookstore? Why is the publisher asked for increased discounts? Why are royalties to the author cut or unpaid? Why do consumers have to BUY their discounts in the form of rewards and loyalty cards? Why can't bookstores have sales just like any other retailer? Because they won't.

The real numbers are hard to dispute. Bookstores buy their returnable stock at a 40% discount or better. That is the biggest cut anyone gets in the sale of a book. Wholesalers keep about 15%, Distributors keep about 15%, Royalties for the author 7-8%. Publishers get to pay for the production of the book and then they get to ship them to the distributors, so their cut is often very small (and by very small, I mean miniscule -- once cost of goods sold and shipping is taken out, it's hard to see any percentage -- and, shhhhhh, let's not mention returns and reordering the same titles a day later). Something doesn’t sell in the bookstore? No problem! Send it on back to the distributor/wholesaler/publisher and don’t pay a dime. What other industry sells their wholesale product to the retailers and then takes the entire thing back when it doesn’t sell? The whole thing really stinks for almost everyone.

Also, there are 29 million or so books in print, and a typical bookstore has 125,000 titles in the store. That's like trying to fit the whole world into a history classroom rather than using a globe. Unfortunately, since people want a specific book, and bookstores obviously can't carry everything, it often only makes sense to go to an online retailer like Amazon who WILL order a book when someone buys one. Just because a publisher uses a wholesaler to handle the bookstore relationship, it does not mean they can or will order a book for you, either. Talk about the chicken or the egg. The bookstores won’t place a backorder for books that aren’t in stock at the wholesaler, and the wholesaler won’t order books from the publisher until a backorder is placed by the bookseller.

It’s not the bookstore’s fault — it’s just basic math versus basic real estate. It's the publishing industry's fault for putting up with these ridiculous practices from the retailers and allowing their own ridiculous practices to continue. It’s the consumer’s fault for expecting returns with no excuses, browsing and never buying, but damaging product while in the store, and treating the stores like they are libraries. You don’t go into a clothing store and try something on and then walk around and meet friends for coffee in it for three hours in the store and then just take it off and go on your merry way, do you?

Bottom line to consumers: If you want to support the relationship with the local bookstore, DON’T buy things and return them damaged. DON’T stay in the bookstore and read everything for three hours and not make a purchase (and likely damage the product while you are reading it anyway).  DO insist that the store order the books you want, and show up when they arrive, and then BUY the thing you ordered. DO buy sideline items, coffee, periodicals and books.

Bottom line to bookstore management: Educate your consumer on how to best support your retail establishment. Educate your staff on how the book industry works. Offer to take orders for books you don't stock and then make the customer pay for them. When one of your customers damages something, make them pay for it. When you buy too much of something, have a sale rather than returning it.

Bottom line to publishers: Let's get together and stop letting the industry bully us into oblivion.