Monday, February 2, 2015

Borderlands in SF to close, or, Why I think there's more than meets the eye to this decision

      So yesterday Borderlands Books in SF announced they were closing in March. And while the closing of any bookstore is a tragedy, this is one of the most revered specialty bookstores our genre has.
      But there are some very suspicious things to me in this announcement. Actually, there are several things I'm suspicious about. The first thing that occurred to me is why the first response of the owners isn't to sell. We aren't talking about a random hole-in-the-wall bookstore, this is a destination bookstore. When I went to San Fransisco last year, this was on my list to-do. Just as when I finally make it to San Diego again, I'll go to Mysterious Galaxy. This type of national name recognition has value to a buyer.
        But the more I thought about the post, the more the facts as described didn't add up. I don't usually criticize the way other people choose to run their business, but the owners of Borderlands invited inspection by choosing to post details about their business that don't even stand up to a cursory examination. I'm not criticizing their decision to close, but the logic and numbers used to reason it.
       The principle excuse given was that the wage hike that starts phasing into effect this year and finalizes in 2018 (yes, that's 3 years away) will increase payroll costs by 18%. I don't know what Borderlands is paying their people, but this indicates that it's not currently much above minimum wage. The thing about wages is that they're tax deductible, so the argument that they will need to increase sales by 20% means that either they have no tax liability ever, even on years that they made a record profit like 2014, or that there is something else going on.
      Another thing that didn't add up for me was the way they address staffing. The owner posts about how they would have to drop half of their staff to offset a less than 20% increase in labor over the next three years. This logic doesn't add up at all. You don't reduce your staffing 50% to account for a 20% increase in labor costs, the majority of which isn't even in effect this year.
      The 18% increase stated for their labor costs under the new minimum wage comes out to about 6% a year. This is about flat for the usual sales increases that an established business would expect per year. After the great year they claim to have had in 2014, I'm surprised they're not expecting some type of increase in 2015.
Or 2016.
Or even in 2017.
       The odds that things will be flat for the next three years, in fact, is virtually non-existent. I've never worked for a business with flat sales for three consecutive years in an improving economy.
      Which brings me back around to my original statement: there is something else going on with this closing than what has been presented to us.

1 comment:

  1. Apparently you've never owned a bookstore! I have, and I believe every word of what the owner of Borderlands says about the closing.