Bad Times at Borders

continued

“The direction things have taken and the stupidity of the response leads to Chapter 11,” says one former Borders manager. “I don’t see any easy way out of this thing.”

Barnes & Noble, meanwhile, faced most of the same challenges—but the Manhattan-based company emerged in much better shape.

Brothers Leonard and Stephen Riggio started out with college bookstores; they now own more than 500 on campuses across the country, including one in the Michigan Union. Expanding into consumer bookselling, they bought the century-old Barnes & Noble store in Manhattan and made it the cornerstone of a second national chain. They took the consumer stores public in 1993.

Though the Riggios came late to the superstore game, they played it better than Borders did. Some observers argue that B&N was smarter and more strategic in choosing locations, and negotiated better lease terms. And its response to the Internet bubble was sheer genius.

Like Borders, Barnes & Noble moved online in a big way in the late 1990s—but unlike Borders, it used other people’s money. B&N persuaded German publishing giant Bertelsmann to pay $200 million for a 40 percent stake in barnesandnoble.