Less than a week after a stalking horse deal fell through, bankrupt books and music merchant Borders Group announced yesterday it would liquidate its remaining Borders and Waldenbooks stores.
Direct Brands, a portfolio company of Najafi Co., owns direct sellers Book-of-the-Month Club, Doubleday Book Clubs and Columbia House, offered to acquire Borders for more that $435 million on July 1. Direct Brands was willing to pay $251.1 million for Borders’ assets and assume $220 million in liabilities, but Borders pulled out of the stalking horse agreement on July 13, according to a statement released by Najafi.
Borders operates 399 stores and employs about 10,700 people. If Borders’ new plan to liquidate is approved by the U.S. Bankruptcy Court in Manhattan, private investment firms Hilco Consumer Capital Corp. and Gordon Brothers Group will acquire all Borders store locations and begin liquidation sales as early as July 22.
So what happened to Borders? Brent Niemuth, a partner with multichannel consultancy J. Schmid and Associates, said Borders was most likely done in by a trio of factors: A sluggish economy, the allure of Amazon.com and the evolution of Barnes and Noble.
“I think their biggest mistake was a failure to evolve and react to change,” Niemuth says. “They simply lost focus of who they were.”
Niemuth says when Borders first built its superstores, they were a younger, cooler, more exciting option compared to Barnes & Noble’s more conservative, traditional image.
But Barnes and Noble adapted to the digital age by adding electronic books and e-readers, and those products began to drive the merchant’s sales. And at the same time, Amazon.com carved out a niche by offering a lower-cost ecommerce alternative.
“Borders grew into a generic, vanilla ‘me too’ brand,” Niemuth says. “Eventually, there was no reason to go into a Borders, and that’s the kiss of death for any brand. If you don’t give consumers a real reason to buy from you, and make it clear to them what that reason is, then they won’t.”
Robert Passikoff, president of loyalty marketing firm Brand Keys, says Borders dug its own grave. For example, instead of adding e-readers, Borders’ inventory went from just books to also include mugs, candles and stationery.
What’s more, Borders got into digital late, and did it poorly: Passikoff notes that Borders’ online presence up until 2008 was Amazon.com.
“I’m not sure there’s another retailer who did it as badly in not being innovative or going with the trends,” Passikoff says.
(PHOTO GALLERY: Who filed for Chapter 11 bankruptcy protection in the first half of 2011)