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Wednesday, February 2, 2011

Pondering Borders’ Impending Bankruptcy

Since the beginning of January, the news regarding the fate of Borders’ Books has grown increasingly dire. The nation’s second-largest bookseller is in a financial free-fall from which it is unlikely to recover. At the time of this writing, the company’s share price has fallen to 47 cents and a bankruptcy filing is widely expected to occur within weeks, with massive store closures to follow. This news elicits decidedly mixed feelings in me; I’m frankly not sure whether to cry or throw a party.
First, the complete demise of a bookseller with over 650 stores will put a very large number of people out of work; given the current unemployment situation this could not happen at a worse time. As with the closing of any large business, there will be collateral damage to ancillary businesses as well; the impact goes well beyond the book world. Lastly, for me there is nothing worse than seeing a bookstore, any bookstore, close.
With that said, Borders has done little to warrant the goodwill of independent booksellers or the reading public. Borders, which itself started as a single independent bookstore in Ann Arbor, Michigan showed no mercy in destroying independent bookstores across the nation by undercutting their prices, only to raise them again once the competition was gone.
Borders has consistently shown that, from a business standpoint, they have no idea what they are doing. While able to initially defeat the smaller indie stores because of mega-purchasing and discounting power, they have since been behind the curve on nearly every other decision. They expanded their CD section as everyone was turning to audio downloads, expanded their DVD section as everyone was moving to Netflix, and completely missed the explosion in e-books by producing an e-reader that was both inferior to other models and introduced later.
Worst of all for a bookseller, as time went on the number and variety of books they offered decreased. In a typical 25,000 square foot Borders store you will find a café, games, toys, calendars, stationery, and any number of other sideline items, but fewer and fewer books. The majority of the books leaned toward the best-seller list, exactly the titles that people could buy cheaper on Amazon or at big-box retailers like Wal-Mart or Target. The literature section got smaller (except for their own Borders Classics titles) and the vampire section got bigger.
There are some who think the loss of Borders will have a negative impact on the books that publishers bring out each year, especially from new or unknown authors. I don’t see how this is possible, given that they aren’t exactly on the cutting edge of new literature now. And as for publishers taking huge losses on inventory if Borders goes under, Borders stopped paying those bills back in December and have been essentially cut off by publishers since then.
Ultimately, while I won’t do a happy dance when Borders is gone, neither will I shed a tear. While giants like Amazon and Barnes & Noble will pick up some of their market share (what little is left by now) the void will also be filled by new, entrepreneurial, independent booksellers who are more knowledgeable, more customer-friendly, more able to adapt to changes in the publishing world, and more rooted in the community than Borders ever was. For me that’s a fair trade.   

7 comments:

  1. Very well stated! Their whole business model seemed to be beat up on the little guy. After they got done doing that, the organization stood there with thumb inserted in anus.

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  2. good riddance. I've never been a fan of Borders. It is sad that Barnes and Noble is heading down the same path. Their brick and mortar stores are nothing but big stationery CD/DVD and games store with cafe and an ever increasingly smaller book section.

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  3. I'm conflicted about this, but at the same time I look forward to some of the smaller, local bookstores making a rebound. As larger sellers collapse, there is always a niche left to be filled.

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  4. I found this searching for stories on the impending bankruptcy. My understanding is that Borders will not completely shut down (at least not yet) but close roughly 150 stores and downsize significantly given the stipulations of a 550-million dollar cash infusion from GE.

    I'm fortunate to have an independent bookstore near me (a little bit of a drive) and I'm not a big fan of B & N. I will be curious to see how this plays out.

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  5. Scott -- Actually the $550 million from GE is contingent upon Borders finding roughly another $300 million or so in additional financing and concessions, including getting the publishers to accept debt and/or IOUs in lieu of payment. The publishers have all said that's just not gonna happen.

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  6. As of this morning Borders' bankruptcy is no longer impending...it's a reality.

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  7. Thanks for sharing your info. I really appreciate your efforts and I will be waiting for your further write ups thanks once again.
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