Loral Langemeier Discusses Lessons Learned from a Great Fall

Sometimes great falls and fiascos are the best resource for business lessons. These examples end up in the list of ‘precautionary measures’ as something that’s NOT TO BE FOLLOWED under any circumstances. However, whether or not these lesson providers or the ‘fallen businesses’ (pun intended!) learn from their own mistakes, they provide their rivals a reason to smile and an excellent lesson for others. It’s said that one learns from his own mistakes, but in this competitive world one prospers from others’ mistakes!
So, today’s treasured epitome of an “inspiring” blunder is none other than the Borders Book Store! Wake up and smell the coffee! There was a cultural shift while you were sleeping, Borders.
Back in 2003, Borders Book Store had more than 1,200 stores. Now they’re closing even the remaining 399 and the net effect is nearly 11,000 employees losing their jobs. What went so wrong?
Is it another casualty of the Internet era? Not exclusively.
Business is business.
Borders hasn’t made a profit in five years. The last time Borders made a profit was 2006. Its yearly income dropped by $1 billion over the next four years.
Borders began with used rare books in a two room flat after it was founded in 1971. Later, in 1975 it bought out the entire stock of Wahr’s, an 80-year-old bookstore that was ending its business. Borders was best known, in the early days, for their awe-inspiring collection of books and wonderful atmosphere.  Their gigantic inventory was possible because the superstores on average were 25,000 square feet of prime real estate. Costly.
But, that’s what people loved. It was a great place to browse books, relax, drink coffee and squeeze in a nice little break. Oh, and buy books and magazines. (Buying actually became an afterthought with most customers. It’s the experience they went there for, primarily.)
As a result, the Border group sank into heavy debt. To keep the business afloat, the company borrowed $42.5m USD in March 2008 from Pershing Square Capital Management, the company’s major stock holder. This further ended in dropping Border’s share by 28.6% to $5.07/share. Share price continued to drop until it reached the $0.53 level on January 28, 2009.
However, a group of execs high up on the corporate ladder made the decision to clear out sections of books to make room for DVDs and CDs.  Then they cleared away even more area to make room for “PaperChase” (i.e. product line of stationary supplies). Later they closed all of their DVD and CD departments across the board. And very soon much of its senior staff left the company abandoning the sinking ship.
There were a lot of poor decisions, all on the executive level. No input from the stores was accepted and the employees were instead encouraged to leave (some had been with the company for around 20 years. Not smart!).
Did Borders forget how to be a bookstore? Indeed!
They took their eyes off the ball. They stopped focusing on what their customers wanted and instead focused on expanding – seemingly for the sake of expansion. It all made little sense. They treated the Internet like it was a passing fancy and tech toys (like digital readers) as though they were pocket protectors. Were they ever wrong!
Borders failed because they:
•    Ignored the massive move to digital formats in books, video and music
•    Dismissed the power of the Internet and its massive target market
•    Were too late to market with their e-reader  (Barnes and Noble didn’t wait so long)
•    Outsourced their online store to super competitor, Amazon.com
•    Had revolving door management problems
•    Missed the mark with Borders Rewards campaign (frustrating their customers further)
•    Kept replacing their staff too frequently.
•    Tried out different branch businesses including self publication which didn’t turn out well.
Borders is doing one thing right today. They are convincing everyone that the world has changed and so has business.
Barnes and Noble seems to have survived, but they may very well be next. Super book stores may be a dying breed giving in to the smaller, more adaptable, independent shops. In these town and country book shops, the owners have a real love of books, work in the store themselves, and hire friendly, knowledgeable employees that cater to their customers on a level you just can’t get in superstores.
Mass production is old and mass individualization is new (again).
Many people will miss Borders and you’ll read tweets and comments saying just that. One certain comment expresses the demise of this book store: I will miss Borders, more for the fact that it is the only real book store in my city than for the store itself. I do agree that they took their eye off of what made them successful. Walking into Borders used to be about the books, but our local store pushed the books to the back of the store in recent years to make way for music and movies and stationary and toys and games, etc. It was a struggle to find what I was looking for most of the time because the employees knew next to nothing about books, but could tell you where every DVD in the store was located and when it was released.
It certainly hurts when a book shop shuts down but we will keep buying books, print and digital. The business of books is not dead, it’s just changed.
Loral Langemeier, CEO/Founder of Live Out Loud, is an international speaker, money expert and best-selling author of the Millionaire Maker 3 book series and Put More Cash In Your Pocket. To learn more about Loral Langemeier Programs, her workshops and the so called Loral Langemeier Scam, please visit http://www.liveoutloud.com