Borders' Web-Based Plan to Save the Book

A Borders bookstore in Chicago.

A Borders bookstore in Chicago. Scott Olson/Getty Images hide caption

itoggle caption Scott Olson/Getty Images

In an effort to shore up flagging sales in an industry plagued by declining purchases, Borders started selling books online Tuesday. New York Times reporter Brad Stone says the company has a new business plan, and that they've also created something called a "Magic Shelf."

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MIKE PESCA, host: Mr. BRAD STONE (Reporter, New York Times): Well, you know, like all traditional book chains, you know, Borders is having some trouble these days, and so they're trying to strengthen their online brand and give, you know, their in-store customers a reason to buy from Borders online. And you know, the site is neat and there is this thing called the Magic Shelf, which you mentioned, which is really a (unintelligible) sort of flash video way of presenting visitors to the site with the experience they would get walking into a store.

You're sort of seeing the tables of new books, non-fiction, fiction, music, and you know, on the website, there's kind of a cool way to browse through the new titles, to click on the covers, to see the backs of the covers, and see the descriptions of the books, and how other people are rating those books. I mean, if Borders can bring anything to this experience online, it's really a devoted experience for book lovers and kind of taking them a little bit deeper into, you know, what's new and what people think they'll like right now.

PESCA: That's the kind of optimistic version of the experience of going into the bookstore, because my experience is stepping over the guy who's sitting on the ground reading the entire encyclopedia.

Mr. STONE: Reading, reading Manga comics.

PESCA: Yeah, and asking the clerk, hey, do you have Jack London? And being told, uh, travel?

(Soundbite of laughter)

PESCA: So, online is a little more professional than that?

Mr. STONE: You know, right, I mean, I think the problem is online there's - you know, other retailers are placing such an emphasis on price, and people can go to Amazon or to eBay, you know, and get good deals on this stuff. So, you know, it's just very difficult for Borders to compete. For instance, they have to charge sales tax, because they actually have stores in most of the 50 states, whereas, you know, Amazon, you know, at least for now, has successfully made the claim that they don't have locations in these states, and so they don't have to charge people sales tax.

PESCA: Can you buy a book for, you know, 32 cents like you can on Amazon, a used book?

Mr. STONE: Don't worry (ph). Well, Borders has a relationship with a used-book seller, the website Alibris, which has relationships with a whole network of individual, independent booksellers.

PESCA: Why would I go to Borders, except that I'm familiar with the brand name and, you mentioned, I might already have a gift card that needs a spending? But you know, is there something wrong with barnesandnoble.com or amazon.com?

Mr. STONE: Well. If - there's some things you can do if you're a traditional retailer. You can let people - Borders is allowing people to order from the website, and have it delivered free to the store. But as you said...

PESCA: Barnes & Noble does that, too.

Mr. STONE: Right, and - but there are so many options now, it's a real problem for, you know, a company like Borders, with, you know, these really declining assets and its bricks-and-mortar locations.

PESCA: It does seem, as you describe it, that it's more the case that Borders went into the Internet space because, you know, why not try it? As opposed to going into the Internet space because we think we have a killer app, or we think we can do something better than our competitors are doing.

Mr. STONE: Well, look, I mean, I think they made a strategic error back in 2001, and Toys R Us did the same thing. You know, this was the, sort of, heart of the dot-com bust, and they said this is a - you know, websites are expensive and they don't make money, so they outsourced it to Amazon, which is now their largest competitor.

I mean, Amazon's share of the book business is, by some accounts, now larger than Borders, you know, but it's become very important in terms of brand recognition, and in terms of providing your customers the full experience and, you know, and on offering inventory. I mean, you can't stock everything in a store, but you could give them a kiosk and let them buy online and have it delivered to their home.

Borders just missed the out, you know, really, you know, the largest chains in the publishing business over the last century, they just missed it. They outsourced to a competitor for seven years. So, really, what they're trying to do is just undo the damage.

PESCA: I know that in the early days of Amazon, even, perhaps, up to when Jeff Bezos was named Time's Man of the Year, they were making tons of revenue, but not actually turning a profit. What's their profitability now?

Mr. STONE: It's good. It's something that Wall Street analysts watch very closely, and if they don't like where the margins are heading, they'll hit the stock. But you know, Amazon stock has done spectacularly if you look at the last three years. Jeff Bezos has invested in infrastructure, and really built up a company with an eye on the long term, and they now have an incredible e-commerce engine right now. You know, the other thing that we're really not mentioning is the impact of the huge chains like Wal-Mart and Target. I mean, they also have taken a toll on the specialized book chains like Borders and Barnes & Noble. They compete on selection, and they also, you know, heavily discount.

PESCA: Yeah, so, you were talking about Amazon stocks. That's in stark contrast to Borders' stock, which has dropped from 23 to seven just in the last year.

Mr. STONE: Oh, yeah, right, and the company has announced that it's looking at strategic options. It might sell. Barnes & Noble has said it would explore acquiring Borders. I mean, it's really a franchise that has undergone some turmoil.

PESCA: So, the story of actual, literal bookstores is the big boys, like Barnes & Noble, pretty much push the moms and pops out of business, except in a couple of rare cases where there are strong niches. But now Barnes & Noble is being hit on the chin. It looks like Borders is not doing well. Do you have any theory as to why physical bookstores just aren't the places where people want to go to buy their books?

Mr. STONE: Well, I think, you know, on one level, it's the story of a lot of traditional media, you know, with - there're more and more entertainment options right now. I think price is a big thing. I find it enjoyable to walk into a Borders or a Barnes & Noble, but you can be pretty sure that that 25-dollar hardcover book, you're going to find cheaper online. So...

PESCA: I do, too. I enjoy going in the stores, and looking at all the books, and then maybe making a mental note and going and ordering it for four, five dollars less online.

Mr. STONE: Right.

PESCA: And I would have considered myself a terrible person, back if it were a mom and pop, but with Barnes & Noble? They put the moms and pops out of business.

Mr. STONE: Exactly.

PESCA: It seems like for either bad luck or bad choices, Borders has made a series of wrong decisions, just betting on the future media.

Mr. STONE: That might be true, and also, you know, there also may have been no-good options. I mean, they're really in the thick of some really severe market movements here, and maybe overbuilt a little bit. A lot of stores - a lot of their stores are in close proximity to the large Barnes & Nobles. So that, you know, doesn't do either chain any good.

PESCA: And now the Magic Shelf will have to work its magic. Brad Stone writes about technology for the New York Times. He's the author of the book "Gearheads." Thank you, Brad.

Mr. STONE: Thank you very much.

RACHEL MARTIN, host:

I like what you said about, well, it just made me feel better and less guilty about the fact that I go into book stores, look at the books I want, and go home and buy them online. But when you go to a book store, it's its own experience. I go to have an interaction with the seller, with other people buying books. I don't talk to them, but I like to know that they are out there.

PESCA: So, it helps the book industry overall, but if not the specific store itself.

MARTIN: Exactly.

PESCA: But when you go to a reading in a book store, and you have - you know, it's nice to hear the guy read, but then you get all those crazy fans of the guy.

MARTIN: Yes. True. (Unintelligible) for a long time.

PESCA: Yeah.

MARTIN: Hey, stay with us. Next on the big show, how do we deal with race in America? Mm, not so well. That's not really breaking news. We avoid it, apparently. That's what a new study says. We will talk with the author about that coming up next on the Bryant Park Project from NPR News.

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