Thursday, October 21, 2004

Publishers Say Weak Borders Sales Could Reflect Fundamental Problems

Borders Group executives earlier this month tied the company's failure to hit its financial targets to hurricanes and elections. But interviews with a wide range of publishers--many at mid-sized houses as well as at some large publishers and micros--found that the problems at the country's second-largest chain may run a lot deeper. A culture shift, the departure of key employees and old inventory systems have led to widespread publisher puzzlement, and sometimes discontent, with the company. They're changes that could have more than just emotional repercussions--they could be responsible for a number of problems at the chain, from lower sales to higher returns.

All the interviewed, understandably, requested anonymity. But the directness of their comments--and the similarity of their concerns--indicates issues that go well beyond the seasonal factors suggested by the company. The reporting forms the backbone of a larger investigative piece in next week's magazine, but in advance of that, we thought we'd run some excerpts.

A recurring theme among publishers was a lack of coordination between headquarters and stores, as well as tension between executives and buyers. One prominent publisher decried what "seems to be a weird disconnect" between Borders's upper management, which of course these days comes outside the book business, and its more traditionalist buyers. "Years ago, in its heyday, Borders was staffed by really knowledgeable book people who cared about each store," said the president of another publisher. "They still have incredible variety in their stores, and the shopping experience is good. But the book buyers are not given the tools needed to get books into the stores right away."

Publishers said much of their concern involved Border's lack of responsiveness--both to interest in executive-level meetings as well as to instances when titles began to move in other accounts. "There's a great deal of frustration within the marketplace about dealing with Borders right now," said an executive. "If you build a culture where you're implementing a system that's above the market and not really interested in what's doing in the rest of the marketplace, then you're going to have a culture where it's difficult for anything to happen quickly." A drying up of publisher summits also proves that Borders has not been "so welcoming" in hearing thoughts and concerns, as has the departure of buyer Dan Meyer (for B&N) and Phil Olilla (Ingram).

Perhaps not surprisingly, one the biggest areas to suffer when relationships deteriorates is backlist. It is, after all, relatively easy to stay on top of the latest bestseller; keeping up with or reacting to subtle changes on older titles requires a more honed form of communication.

While the company does not officially distinguish between front- and backlist, publishers were almost uniform in suggesting that it is the latter where they have seen the steepest drops. One house attributed Borders's weak backlist to its old inventory systems. Another said: "Borders can compete on sales with Barnes & Noble for a certain period of time, and then I don't know what happens."

Publishers are prone to making many unfavorable comparisons with Barnes & Noble. They said that despite uncertainty over the chain's moves into the publishing world, that store remained, at heart, a place where both the culture and executives were primarily about books. Borders, they said, had not always distinguished itself that way in recent months. "When you go out with Barnes & Noble, at some point the discussions always come back to books. That's not always the case with Borders," said one publisher. He added that the lack of faces associated with the company--or with book culture--compounded the problem. "When you talk about Barnes & Noble it's Len and Steve and Bob Wietrak and Antoinette Ercolano, and ten or twelve people I can name right off the bat. Borders is an enigma."--Jim Milliot, Steven Zeitchik and John Mutter

from PW Newsline for Thursday, October 21, 2004

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