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Borders (UK) Ltd was a United Kingdom bookshop chain that was in established in 1998, went into administration in 2009, and is very likely to disappear altogether in 2010.

Borders Inc is a US bookshop chain which began life in 1971 when Tom and Louis Borders opened their first bookstore in Ann Arbor, Michigan. From that beginning Borders Inc gradually expanded across the United States as it developed a successful superstore model as it built large bookstores that averaged 40,000 sq ft which featured various additional delights such as a coffee shop.

In 1997 the company decided to expand overseas and purchased Books etc. to give itself a foothold in the British book market. Founded in 1981 when Philip Joseph acquired four leases from the receiver of Words and Music, Books etc. was a small London based bookshop chain that had begun expanding outside the capital in the 1990s. However although Borders Inc intended continuing with Books etc. as a 'small format division,' its intention was to use the acquisition as a springboard for bringing its superstore model to the United Kingdom, and in early 1998 they established Borders (UK) Ltd and opened their first British superstore in London's Oxford Street in August of that year.

Over the next few years Borders (UK) sought to revolutionise the fusty old world of British bookselling as they tried to repeat their successful American formula that provided what the company referred to as a "distinctive multimedia culture"; which in practice meant that their retail outlets also sold DVDs and CDs as they stuck a Starbucks in every store. To support their expansion drive, in 2002 the company opened a brand new 50,000-square-foot distribution centre in Cornwall. It must be said that this was an odd choice for the location of a national distribution centre since Cornwall wasn't exactly central to the British land mass.

Nevertheless the company appeared to be enjoying much success and by 2006 was claiming that it was the "most successful bookseller in the UK" and the "industry leader in like for like sales performance" as well as being the "leading operator" of specialist airport bookshops in the country. It opened a new superstore in Gateshead in February 2006, announced plans to open a new Cardiff 'flagship store', as well as further new stores in Milton Keynes, Newbury, Southampton and Llantrisant, and added its first Irish store in the Dublin suburb of Blanchardstown in October 2006. Borders (UK) was duly the recipient of a number of industry awards; it was the Retail Bookselling Chain of the Year in the Bookseller Retail Awards in both 2005 and 2006, the Bookselling Company of the Year at the British Book Trade Awards for 2006 and 2007, and also won awards for the Children's Retailer of the Year 2007, and the Magazine Destination Retailer of the Year 2007.

One might therefore have gained the impression that Borders (UK) was a successful business, but whilst it had made profits of £4 million during the course of 2004, that proved to be the high point of its fortunes and two years later it lost £10 million. Part of the problem was that Borders Inc largely assumed that they could simply replicate their superstore model in the UK and enjoy the same level of success, without necessarily considering certain differences in culture and geography and the availability of free parking. Faced with the challenge of finding somewhere to site one of their 'superstores' on a congested island the company was forced to place them in out-of-town retail parks, and various people queried why anyone would want to drive five miles out of town to sit and read a book in a Starbucks concession that was next door to a DIY warehouse. However the bigger problem was the emergence of online retailers such as Amazon, which also launched its British operation in 1998, and the fact that large supermarket chains such as Tesco and Asda were also now selling books at heavy discounts, and thus the business was experiencing what was often referred to as "increasingly tough trading".

As it was, Borders Inc was facing exactly the same competitive pressures back in the USA and was itself losing money by 2006, and so in March 2007 the US parent decided to put the UK subsidiary up for sale. Borders (UK) was acquired six months later in September 2007 for £10 million down and another £10 million dependent on future results. The purchaser was a private equity outfit known as Risk Capital Partners, run by Luke Johnson, the former chairman of Channel 4, which specialised in turning round troubled retailers.

By this time Borders (UK) consisted of 41 Borders stores, 27 Books etc. outlets, and three smaller Borders Express shops, with 8% of the British book market, and there was clearly work to be done to return the company to profitability, particularly since the split with the US parent obliged the former subsidiary to replace every system it had in just one year. There were one or two glimmers of hope on the horizon as in June 2008 Borders (UK) finally got around to launching its own transactional website which featured a supposedly "Spookily Accurate Book Suggestor", but perhaps more to the point was the unfortunate fact that Britain was about to experience its most serious recession in sixty years.

Unsurprisingly therefore trading remained 'tough' and the company continued to struggle to achieve profitability. In August 2008 it sold eight Books etc. branches to the rival Waterstone's chain, whilst there was a further setback in October 2008 with the collapse of the Icelandic bank Landsbanki, which had previously provided the company with a £23 million facility to finance its stock, and left the company with the problem of finding an alternative source of funds during the all-important Christmas trading season.

The following year proved to be just as challenging as in February 2009 it emerged that WH Smith had signed a new deal with BAA, which would see it running all the bookshops in BAA's seven UK airports, which effectively put end to Borders's own airport bookshop operation, whilst in July 2009 Borders (UK) disposed of five store leases to the fashion chain New Look, including the lease of its Oxford Street store, as well as the lease for its one and only store in the Republic of Ireland. It also became known that Ernst & Young had signed off on the accounts for the year ending 2nd February 2008 on the on 31st July 2009, and with pre-tax losses increasing from £10.3 million in 2007 to £13.6 million in 2008, the auditors had felt obliged to qualify the accounts on the basis that there were "events and conditions indicate the existence of material uncertainties which may cast doubt about the group's ability to continue as a going concern".

However by that time Ernst & Young had delivered its professional opinion, Risk Capital Partners had given up, as on the 16th July 2009 it disposed of its interest in Borders (UK) to a management team led by chief executive Philip Downer and finance director Mark Little with backing from Valco Capital Partners. No sum of money was mentioned, and it was believed that Risk Capital Partners had suffered a "considerable loss" on its investment. Chief executive Philip Downer was pleased that this new deal would "secure the future for Borders"; although he rather cryptically explained that future profits would be derived from sources that had yet to be identified. It was no surprise therefore to here a few months later in October 2009 that its Books etc. operation had been moved into a "clearance format", which is to say, the stores were all holding closing down sales, as rumours circulated that the business as whole was suffering from "severe cash flow pressures", didn't have enough cash to survive Christmas, and that a number of publishers were refusing to supply any further stock.

In the following month WH Smith made an approach for what was now being described as the "troubled bookseller", but on the 20th November 2009 it was announced that the talks had ended, and three days later on the 23rd November Borders UK further announced that it had appointed Clearwater Corporate Finance in order to try to find a buyer for the business. On the following day the Borders.co.uk online operation stopped taking orders for new books on its website, whilst it was "in discussion with potential buyers". Whether there were any 'potential buyers' in prospect turned out to be beside the point as on the 26th November 2009 it was announced that Philip Duffy, Geoff Bouchier and David Whitehouse of MCR had been appointed as joint administrators of Borders (UK) Limited.


SOURCES

  • Bookselling 2000 Market Report, Edited by Simon Howitt, Key Note Ltd 2000
    http://www.macintyrehudson.co.uk/common/keynote/sample_full_report/33015.pdf
  • Borders books more UK space, 16 March 2006
    http://www.retail-week.com/borders-books-more-uk-space/101795.article
  • Borders UK Background Media Pack, August 2006
    downloaded from www.bordersstores.co.uk/
  • David Teather, Borders retreats from Britain to concentrate on US book chain, The Guardian, Friday 23 March 2007
    http://www.guardian.co.uk/business/2007/mar/23/books.retail
  • Fiona Walsh, C4 chairman rescues Borders bookshops, The Guardian, Saturday 22 September 2007
    http://www.guardian.co.uk/business/2007/sep/22/books.retail
  • Borders UK launches new transactional website designed by Tangent, 12 June 2008
    http://www.investegate.co.uk/article.aspx?id=200806160700077333W
  • James Thompson, Borders' Icelandic debts force refinancing as key Christmas period approaches, 17 October 2008
    http://www.independent.co.uk/news/business/news/borders-icelandic-debts-force-refinancing-as-key-christmas-period-approaches-964326.html
  • Alison Flood, Drabble protests WH Smith's airport bookshop monopoly, The Guardian, 17 February 2009
    http://www.guardian.co.uk/books/2009/feb/17/drabble-baa-wh-smith
  • Katie Coyne, Downer leads management buyout at Borders UK, 16.07.09
    http://www.thebookseller.com/news/91788-downer-leads-management-buyout-at-borders-uk.html
  • Neill Denny, What next for Borders?, The Bookseller, 15.10.09
    http://www.thebookseller.com/in-depth/feature/100334-what-next-for-borders.html
  • Graeme Neill and Neill Denny, Closing down sale begins at Books Etc, The Bookseller, 18.10.09
    http://www.thebookseller.com/news/100367-closing-down-sale-begins-at-books-etc.html
  • James Hall, Why Books Etc is closing, Daily Telegraph, October 22nd, 2009
    http://blogs.telegraph.co.uk/finance/jameshall/100001465/why-books-etc-is-closing/
  • Borders starts closing down sales, BBC News, 29 November 2009
    http://news.bbc.co.uk/1/hi/business/8385117.stm