Friday, March 18, 2011

Borders Looks to Used Books for Help

As Borders Bookstores announced additional store closings today, Borders Group CEO Mike Edwards told the Wall Street Journal the troubled bookseller is considering a radical option: used books. During the interview with the WSJ, Edwards indicated that "Borders may also seek to add used books, an area that Mr. Edwards said is doing well online." While on the surface this may seem like a solid plan, there are just as many drawbacks for Borders as advantages.

It is hard to say just how well sales of used books are doing nationwide, simply because used books are not included in monthly and yearly sales figures reported by the Association of American Publishers. However, it is likely that used sales a doing well based on the number available online, the continued growth of mammoth used-book chain Half-Price Books, and the fact that in a down economy readers are looking for the cheapest deal they can find.

Borders would benefit from offering used titles in at least two ways. The first is the increased profit margin that used books enjoy over new titles (depending on how much Borders pays sellers for those titles when they acquire them). The second is that at least in the short-term, people looking to sell their used books would go to Borders first to see if they offer more than Half-Price or their local used bookstore. Half-Price Books, for example, has been offering less and less money to sellers over the past several years as their competition has essentially dwindled to garage sales. Borders' entry into the used-book market could help increase what sellers receive across the board as the stores compete for inventory.

But the downside for Borders of selling used books is daunting. Borders is a new book retailer with no experience in the used book market, and it is a very different market. Edwards said recently that it was "critical for Borders to be able to return (unsold) books to publishers consistent with our ordinary business practices." You can return unsold new books to the publisher for credit, but you can't return used books; you're stuck with them until they sell.

Another point in the WSJ article shows just how little Edwards understands what it takes, labor-wise, to handle used books:

Although Borders isn't looking to add to staff—it shed a number of key members earlier this year, Mr. Edwards said he might be willing to hire a senior online executive to work with

If Borders isn't looking to add staff, they should not even consider moving into the sale of used books, and here's why. I was recently in a Borders store (one that has escaped closure) and a Half-Price Books location. The Borders store is a roughly 25,000 square foot super-store, and there were four employees on duty. The Half-Price store is a little more than one-tenth that size (3,000 square feet), and had 7 employees on duty: two working the registers, two shelving and answering questions, and three working the counter where people sell their books to the store.

Why so many working the incoming books counter? Because buying used books from customers for your inventory is a time consuming and labor intensive process. You have to look through every box and at every book, look up current used-book prices, and consider how many of that title you already have on your shelves. You have to wade through piles of books with torn covers, mold, and water damage. For every current best-seller you examine, there will be multiple Readers Digest Condensed books, diet books, Jane Fonda workout books, Harlequin romances, and book club editions, all of which are worthless on the secondary market. Then you make the offer to the seller. If they accept then you have to price and shelve the good books and dispose of all the dreck; if they refuse the offer, they take their books home and you just wasted valuable time for no benefit.

At a time when Borders is both unwilling and unable to add staff, there is no way they could process the used books customers would bring in to sell; they simply don't have the manpower. They would have to reconfigure a sizable area of each store to receive and process these books, as well as using significant shelf space for a used-book section. These issues are not a problem for smaller, independent used bookstores with 1,500 square-foot stores (which need much smaller inventories) or for Half-Price Books (which has 40 years of experience in the used-book market). But for an established new-book chain struggling to get out of bankruptcy, adding used books would simply be another in the long line of critical business missteps that brought them to where they are today.

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