Crossing the Border From Success To Failure On Business On The Brink

Business on the Brink, formerly known as The Brink, is a podcast about companies on the verge of great success or terrible failure. Hosted by Jonathan Strickland and Ariel Kastan, this episode is all about the rise and fall of Borders Books, the first book superstore. “This is an interesting story,” Jonathan says, “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 then plunges. This particular story has both.”

Borders was started by the Borders brothers, Tom and Louis, in Ann Arbor, Michigan in 1971. The brothers were attending the University of Michigan and thought they could cater to university students with a used bookstore. They set themselves apart from other bookstores quickly by getting larger spaces. “The fact that they had so much space meant that they could end up having a larger inventory, a greater variety of books than what their competitors could have,” Jonathan says. Instead of having to order what you needed, “there’s a more likely chance that the book you wanted was already in stock.” 

Tom was a teacher, and Louis had a degree in mathematics and computer science, which showed itself to be a match made in heaven for a successful bookstore: what really catapulted Borders into the business world was the Book Inventory System that Louis created. “It was a way for them to track not just what was in stock, but what was selling,” Jonathan explains. “And it got to a point where 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.” Instead of keeping this “secret sauce” to themselves, they sold it to other bookstores as well, creating a spin-off business. It led to more Borders stores opening in Indianapolis and Atlanta. “This BIS 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 store's inventory for that particular population. It shows that different populations wanted different books....So they were always on top of things.” 

Things looked good for awhile: they created a public offering on the stock market and opened international locations, with the goal of having one thousand stores all over the world. But this was in the early 2000s, and Amazon was creeping into the marketplace with an inevitability "Thanos" would envy. “They weren’t profitable,” Ariel points out, “but they were bustling.”

To keep up with the changing online consumer trends, Borders started Borders Online, but as Jonathan says, creating an online presence wasn’t easy then just as it isn’t easy now, and the web store didn't do well. Investors backed off quickly - losing a huge lead in the online marketplace - saying they would concentrate on the in-store experience, a decision Ariel says wasn’t a great one either: Instead of bringing toys and games into the stores, “things people couldn’t download,” they focused on music and DVD sales. Then began a revolving door of CEOs and strategies that would only accelerate their decline. Find out more about the decisions they made to succeed as well as fail, the final nail in the coffin, and more in this episode of Business on the Brink. 

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