In contrast to a corporate tradition that has been almost reclusive, Borders Group president, CEO and new chairman Greg Josefowicz is strikingly sociable and open. He's also quick-witted, with a business sense that appears to be firmly rooted in common sense. This is probably to be expected from an executive who learned retailing by working his way up from checkout bagger to president at Jewel-Osco, the dominant grocery store and pharmacy chain in the Chicago region.
Josefowicz joined Borders in 1999 as president and CEO. Last month he was made chairman as well, in a long-planned move, replacing Bob DiRomualdo, the man who guided Borders's growth from a tiny Ann Arbor, Mich., bookstore with a handful of branches to the second-largest American book retailer and an increasingly important presence in most English-speaking countries.
Following DiRomualdo and the founding brothers, Tom and Louis Borders, Josefowicz is the third "generation" to run the company. At first glance, it would seem that leading Borders mainly consists of continuing policies already in place. Still, although "the basic store model is successful," as Josefowicz put it, the company has spent much of the last year in an "introspective" strategic process, "examining where we'll be when we grow up."
And growing it is. Josefowicz noted that the average age of the more than 360 Borders superstores is three years. At least 40 more outlets will open this year, and Borders also plans to grow by revamping its operations, Josefowicz said. The major elements of this revamping will involve customer focus, inventory management and streamlining administrative systems.
The strategic process has encompassed the entire company and includes a series of initiatives with names like "category management" and "common systems" that are essentially, said Josefowicz, the basics of book retailing.
Josefowicz estimated that Borders is "serving only about less than half of the relevant audience in the U.S.," meaning that despite the company's proliferation across the country, many potential customers are not close to its stores. Some of these customers are in relatively isolated areas, for which Borders recently unveiled what it calls its "small market stores." Several will open shortly, and range from 12,000 to 17,000 square feet in size. (Some will open in Australia as well.) By contrast, "regular" new Borders superstores have anywhere from 20,000 to 25,000 square feet of space.
The company is also expanding internationally, opening more Borders and Books, Etc. stores in the U.K. and more Borders in Australia, with eight to 10 planned for next year and another 70 to 80 within five years. The market, which includes Singapore and New Zealand but not Canada, represents "a book-buying potential one-third the size of the U.S.," Josefowicz estimated.
"There is enough growth in the industry overall for us to continue to grow," Josefowicz insisted. He called this a nice change from the grocery world, where "to grow you have to steal business."
Demographics are in the company's favor, Josefowicz maintained. College graduates and people over 45 buy some 60% of books, and that population group will continue to increase. Moreover, the current economic slowdown is, he said, "not a debilitating one for us." If anything, the company's main competition comes from "distractions of the mind," whether the public's focus is on the Bush-Gore election controversy or, of course, the attacks of September 11. Besides other bookstores, the competition includes nonbookstore outlets where convenience is a paramount consideration.
While he acknowledged that these nontraditional competitors are taking half the book market, he believes convenience is a weak foundation for serving customers, noting, "The moment someone else becomes more convenient, they lose their power."
Instead, Josefowicz summed up "the best reasons" for customers coming into and returning to a store, regardless of what it sells, as "I like it, it's big, I get what I want and I feel good." Thus, much of Josefowicz's focus is on the customer's experience in the store. Noting that there is a range of options for customers, from $1.99 remainder books to John Adams by David McCullough for $35, he said that the "vast majority of customers don't come in with a specific purchase in mind," although they often intend to browse certain categories. "They are coming in for the event," he said.
Right now Borders carries "everything," a situation Josefowicz intends to change with an emphasis on "variety and distinction," particularly compared to the competition. The commitment to variety "may defy economic logic in some categories," he said; poetry is probably the best example of this. He contended that many readers judge a store by its poetry section even if they don't buy many poetry titles. As a result, even though poetry sales are low, "we make a commitment so they'll continue to come into the store."
In a related effort that Borders believes will save millions of dollars a year, the company has focused extensively on inventory management. (Borders has about $1 billion invested in inventory at any given time.) The company has been paring its stock and coordinating shipments better, which should also help reduce returns. Borders is analyzing customer information to find out what consumers want, and Josefowicz said that the change has begun "without harm to customer needs."
Among other refinements in the stores are the Title Sleuth kiosks, which now offer "sister-store capability." That is, they allow users to find out if titles are in a nearby store. Web users have a similar ability. Josefowicz estimated that between 25% and 30% of customers, or 1.5 million users a week, use Title Sleuth.
The company is also trying to use more "traditional retailer tactics," Josefowicz told PW. Borrowing an idea from music retailing, for example, the stores began displaying backlist John Grisham titles three weeks before the appearance of his latest novel, The Summons.
One area that Borders does not intend to explore is publishing. "We want to be content providers, not content producers," Josefowicz said.
Some personnel changes were made last year, and there are fewer full-time staff than in the past. Borders has had to "conform to labor reality," Josefowicz said, but turnover has "slowed down."
A new era has quietly begun at Borders, in which the focus, now even more than ever, is in the details. It's an era in which, as Josefowicz put it, "Booksellers and retailers are not mutually exclusive."
