When Mike Edwards stepped onto his flight from New York back to Ann Arbor, Michigan, in July 2011, he was the still CEO of the second-largest bookstore chain in the U.S. But the 40-year-old retailer was crumbling fast beneath his feet.
Edwards was in New York that day to submit a plan of reorganization and refinancing for Borders Group Inc. to a bankruptcy judge. Since filing for Chapter 11 bankruptcy in February 2011, Edwards spent months courting investors, asking them to throw Borders’ sinking business a buoy of capital.
The deal was 90% done, Edwards thought in the days leading up to that flight. But at 5 p.m. the day before he was going to meet the judge, the CEO found out he would need to file an altogether different document: a plan for liquidation.
“It was at the last minute where [investors] backed out because they weren’t comfortable with the publishers’ support going forward — and they thought that would put the investment at risk, so they pulled the plug,” Edwards told Retail Dive in an interview about his last days as Borders’ CEO.
Up to that point, Edwards maintained optimism that the once family-owned, Michigan-grown bookshop would emerge from its decline into bankruptcy. Under the turnaround plan he was spearheading, the idea was that Borders would come out smaller yet profitable. Now, Edwards found himself coming back to Michigan empty-handed — unsure of what he would tell his waiting employees.
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At the turn of the century, Borders made a fateful move that looks especially bad in hindsight: The retailer struck a deal with Amazon to sell its books online, and it wasn’t too long afterward that the retailer began to struggle. In the mid 2000s, the company’s finances began to falter despite efforts to turn around the business, such as concept stores and a partnership with Starbucks. Borders lost $157.4 million in 2007 and put itself up for sale a year later.
Mike Edwards, a merchandising veteran with stints at Target and Lucy Activewear among others, first came to Borders in 2008. The retailer had already begun to shed hundreds of stores in its bid to stay afloat, and executives rotated in and out of the CEO position like a game of musical chairs.
Soon, it would be Edwards’ turn. On Jan. 26, 2010, Ron Marshall resigned as Borders Inc.’s CEO after only a year at the helm. The board of directors then tapped Edwards, an executive vice president and chief merchandising officer at the time, to temporarily take over the role.
Edwards became the company’s fourth CEO in five years.
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Amazon released its first Kindle e-reader in 2007 and it sold out within hours. Over the next few years, the trend grew and eventually culminated with the release of the iPad in 2010 — a device that was “petrifying” to Edwards and Borders’ future.
“The iPad, in a sense, is a Borders store in your hand,” he said. “You have music, you have video and you have books. And you have access to the largest selection in the world and you don’t have to walk to a bookstore.”
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Most of the decisions that led to the end of Borders were made long before Edwards’ plan to save the business. By the time he became CEO, the company had already spent years employing Amazon to sell its books online and had failed to seize on the e-book trend before it was too late.
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When Borders finally fell, Edwards said his “eyes were wide open” to what retailers need to do to avoid the pitfalls that led to the bookstore chain’s demise. If there’s just one lesson retailers should take away from Borders’ fall, it’s this: never underestimate a transformational trend.
“What I mean by that is you can be the best ice salesman in America until the refrigerator comes out,” Edwards said. “You can be driving your taxi one day and Uber knocks you out the next day. You can be in the hotel business and then Airbnb can surround you with 20 properties with a great size at a lower cost. I think you have to face the digital impact head on and not go through denial and don’t rely on past tactics to change the trajectory of the company because it doesn’t work anymore.”
The retail industry has evolved rapidly over the last decade thanks to mobile phones and the “looming Amazon effect,” which Edwards says is having a massive impact on all searchable product categories. Store traffic is under tremendous pressure, and for retailers who haven’t already, they need to downsize their store footprints and adopt a digital culture as quickly as possible. From experience, Edwards says crafting the right omnichannel experience for an over-stored traditional retailer is no easy task.
“A lot of retailers, if they are publicly traded, they can’t take that earnings hit, so they just do just enough to have an online presence, an omnichannel presence, develop marketplaces and try to turn their stores into marketplaces,” he said. “But it kind of goes beyond that because now the customer wants a digital relationship with their brands and that’s a very different thinking than the marketing in the past.”
Link to the rest at RetailDive and thanks to Ron for the tip.