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Arrivederci Borders

19 July 2011

From The Wall Street Journal:

Borders Group Inc. said it would liquidate after the second-largest U.S. bookstore chain failed to receive any offers to save it.

Borders, which employs about 10,700 people, scrapped a bankruptcy-court auction scheduled for Tuesday amid the dearth of bids. It said it would ask a judge Thursday to approve a sale to liquidators led by Hilco Merchant Resources and Gordon Brothers Group.

The company said liquidation of its remaining 399 stores could start as soon as Friday, and it is expected to go out of business for good by the end of September.

Borders filed for bankruptcy-court protection in February. It has since continued to bleed cash and has had trouble persuading publishers to ship merchandise to it on normal terms that allowed the chain to pay bills later, instead of right away.

. . . .

The chain’s demise could speed the decline in sales of hardcover and paperback books as consumers increasingly turn to downloading electronic books or having physical books mailed to their doorsteps.

“When you lose literally miles of bookshelves, it’s going to have an impact,” said David Young, chief executive of Lagardère SCA’s Hachette Book Group, which Borders owed $36.9 million at the time of its bankruptcy filing. “I hope other retailers will now step up and make offers for what they consider to be the prime sites,” Mr. Young said. “It’s a tragedy Borders didn’t make it through.”

The loss of Borders may also make it more difficult for new writers to be discovered. “The liquidation of Borders is an irreplaceable loss of a big part of the book-discovery ecosystem,” said Michael Norris, a senior analyst at Simba Information, a unit of MarketResearch.com “Thousands of people whose job consisted of talking up and selling books will eventually being doing something else, and that’s bad for authors, agents, and everyone associated with the value chain in books.”

Link to the rest at The Wall Street Journal

 

From the New York Times:

The Borders Group said Monday that it would liquidate, shutting down the 40-year-old bookseller after it failed to find a last-minute savior.

Though it is not a big surprise, the move will still strip the publishing industry of shelf space that is becoming increasingly scarce as brick-and-mortar stores continue to founder.

Borders said it would proceed with a proposal by the private equity firms Hilco and the Gordon Brothers Group to close down its 399 remaining stores. That liquidation plan will be presented on Thursday to the federal judge overseeing the company’s bankruptcy case.

. . . .

Publishers, disheartened by the news, had watched Borders’ troubles deepen for years. After the bookseller declared bankruptcy in February, many publishers pressed for a reorganization plan, but they were left unconvinced that executives had a workable way to revamp the company.

“It saddens me tremendously because it was a wonderful chain of bookstores that sold our books very well,” said Morgan Entrekin, the president and publisher of Grove/Atlantic, an independent publisher. “It’s part of the whole change that we’re dealing with, which is very confusing.”

The news exposed a deep fear among publishers that bookstores would go the way of the record store, leaving potential customers without the chance to stumble upon a book and make an impulse purchase. Publishers have worried that without a specific place to browse for books, consumers could turn to one of the many other forms of entertainment available and leave books behind.

Independent shops have closed in droves as book sales have moved online, especially to Amazon. Barnes & Noble put itself up for sale last year and has focused on expanding its digital footprint as sales of print books slowed.

Publishers said that with Borders gone, they would plan for smaller print runs and shipments. Employees at major publishing houses worried about layoffs because many companies have staff members who work only with Borders.

Link to the rest at The New York Times

From The Boston Globe:

Simba Information senior trade analyst Michael Norris said a Borders liquidation could have far-reaching effects, putting thousands of people out of work at a time of high unemployment, particularly in Michigan where Borders is based. The chain, which has been shrinking in recent years, currently has 10,700 employees.

Norris predicts the closing also could cause sales of electronic books to fall. Borders entered the electronic book market with Canada’s Kobo Inc. last year. Owners of the Kobo e-reader will still be able use Kobo software to buy and read books. And Kobo officials said users of Borders e-book accounts, which began transitioning to Kobo in June, will be able to access their e-books uninterrupted.

“Bookstore employees don’t just sell books, they sell the activity of reading, and this decision throws thousands of them out of work,” he said. “This industry is going to slowly figure out that a lot of e-book readers still use bookstores all the time to discover what’s new before heading home to buy it for their e-reading device.”

Link to the rest at The Boston Globe

From Forbes:

For gadget fans, the news that Borders Group Inc. plans to liquidate its remaining assets prompts the question: what about Kobo?

The Toronto-based e-book and e-reader startup has been associated with Borders since late 2009 when the bookseller took a 25% equity stake in it. As the so-called e-reader wars heated up, Borders increasingly promoted Kobo e-readers in its stores. The devices were Borders’ answer to Barnes & Noble’s Nook and Amazon’s Kindle.

That synergy is about to end. On Monday, Borders announced it would close its remaining 399 stores after failing to find a buyer for its long-troubled business. The news could affect Kobo on two levels. First, the company will lose its highest-profile U.S. distribution partner, which could dent sales. There’s also the matter of how Borders’ Kobo stake will be handled in the liquidation process.

. . . .

In response to a Forbes request, the company issued the following statement, which seeks to minimize the perceived impact of Borders’ closure on its own business by detailing its other retail partners and referring to its other investors.

“As one of the early investors in Kobo, Borders has a minority stake in our company and serves as part of our distribution in the U.S. along with Walmart, Best Buy, Sears and other retailers. As a member of the broader book publishing and retailing community, we are watching Borders’ story with interest and send our best wishes to all the people of Borders.” 

. . . .

Kobo likes to think of itself as the most global of the large e-book/e-reader companies. It’s a point Kobo Chief Executive Michael Serbinis mentioned during a recent interview with Forbes. Barnes & Noble, after all, is mostly a North American company and Amazon, while a major brand and retailer worldwide, appears less intent on expanding into local language markets than Kobo.

Thus, it isn’t surprising that Kobo’s statement ends with a mention of its international outlook and business, including its launch of a German unit last week. The reference is also a reminder that Kobo’s Borders setback is mostly confined to the U.S.

“Kobo continues to grow in the U.S. and around the world and we’re very pleased with progress of the launch of the new Kobo eReader Touch Edition and European office with Kobo Germany.”

Link to the rest at Forbes

PC Magazine says don’t blame ebooks:

It’s tempting to blame e-books for Borders’ death. Amazon released the first Kindle in 2007; Barnes & Noble, while slow to respond, came up with the Nook two years later. Borders, however, only dabbled in e-books-selling Sony e-readers at first (via kiosks that shoppers always seemed to ignore when I checked) and more recently partnering with Canadian e-book company Kobo. The last time I was in a Borders, which was last week, the first thing I encountered when I entered was a great big table of Kobo readers. But it was clearly far too little, far too late.

But while the rise of the Kindle and its competitors may have helped do the chain in, it clearly didn’t start its death spiral. Borders been ailing for years-and shuttering stores along the way-and its strategies for getting healthy usually seemed to make things worse. I mean it wasn’t until 2007 that it decided that it made sense to have its own Web site rather than to outsource online sales to archival Amazon.com.

While Borders was busy giving the Web and e-books short shrift , it was also doubling down on the notoriously tricky business of running brick-and-mortar superstores. Until late 2010, San Francisco had four Borders stores-three of which were within a mile and a half of each other. I’m no retailing genius, but I couldn’t figure out how the city could support so many giant bookstores in so little space. Now we know it couldn’t: the three ones that were practically neighbors are all gone now, and the last store will close as part of the final shutdown.

. . . .

Bottom line: If e-books didn’t exist, I’m pretty positive that Borders would have still collapsed in much the same way. It might have cratered even if the Internet had never been invented. I’m sorry to see it go, and particularly sorry for the folks who will be out of work. But the market worked. Borders is dying because it simply wasn’t very good at selling books in the 21st century.

Link to the rest at PC World

 

Passive Guy echoes the concerns for Borders’ employees. They didn’t run the ship into the iceberg.

On the other hand, the iceberg wasn’t malevolent, just a force of nature. Disruptive innovation takes no captives and some innocents are hurt when the world changes. It doesn’t make it nice or easy, but the iceberg is the iceberg and nothing will melt it for awhile.

The PC World guy was partly wrong. Ebooks did contribute. Nobody wanted to buy Borders out of bankruptcy because they didn’t see a future in selling physical books from inside retail buildings.

And the Simba guy is an idiot, but when you’re on dealine, any expert will do.

Bookstores, Disruptive Innovation

10 Comments to “Arrivederci Borders”

  1. (No Borders nor B&N buyer : I live in France) I’ve seen stated on more than a few comments regarding Borders that part of it’s historical value to customers was to host a WIDE variety of books, from bestsellers to obscure genre books. It seems Amazon, by allowing customers to buy “long tail” books directly, put Borders in a dire spot…

    That has to have contributed at least as much as Ebooks for Borders demise.

    • SFReader – This is possible, although to my inexpert eyes, the Borders and Barnes & Noble stores I shoppe in seemed to have similar books in stock.

      My general impression is some of the flagship stores for Barnes & Noble and Borders in major cities tried for a more unique look and feel than the rest.

  2. I agree–sorry about the employees, but they certainly should have seen it coming. I am not one to celebrate a demise, but this is good news to me personally. Borders did very little for my life, although I did signings in a a number of their stores. Ebooks have done a lot. Now more people will buy ebooks. I simply have nothing to mourn–zero emotional connection to Borders.

    • Scott – Agree that fewer physical bookstores translate into more ebook sales and Amazon printed book sales because a lot of US consumers will shortly lose the bookstore that is closest to where they live.

  3. The comment that most disturbs me, after the fact that nearly 11,000 people will lose their jobs, is that some publishers are now planning on smaller print runs since Borders will not longer be available to stock their books. While this makes sense from a short-term business perspective, long term that could have a detrimental effect on authors. With smaller print runs, sales will be lower. Currently, if sales are low, publishers drop authors. How with the new lower print runs affect the drop numbers? Will we see more authors being dropped by publishers, resulting in fewer selections on fewer bookstore shelves? Will those authors be able to continue series that have existing audiences by indie publishing, or will the publishers control the rights to those series? I suspect the answers to those questions with vary among authors and publishers, but I have concerns about some of my favorite midlist authors.

    • Keith – Your analysis matched my thoughts when I read the smaller print run comment. I think smaller advances are on the horizon as well which is difficult because advances have been declining even while Borders was around.

      In the short term, Barnes & Noble and indie bookstores will see a sales uptick from Borders customers, but in both the short and long term, publishers will see overall sales decline.

      Of course, those publishers to whom Borders owes money will now receive only a small portion of the debts owed to them. In a liquidation situation, the liquidators are generally the only winners.

    • That’s a completely valid concern, in my opinion. Borders’ fall is just another domino in the currently quite shaky chain of traditional publishing. Authors have been dropped, and will continue to be, while NY publishing tries to sort things out. Meanwhile, the electronic frontier keeps growing. 🙂

    • Yes, there will be pain as there always is from a business going through change. However, I think authors will be better off in the long run. With ebooks, improved POD technology, and the number of people who have access to books, it’s never been a better time to be a writer.

  4. My favorite comment I’ve seen about this so far (and I don’t remember where) was someone claiming that Borders closing was going to hurt e-book sales, because many consumers come into a store first before they go home and buy the e-book. Um, I think the opposite is probably going to be true.

    An author friend announced his next book will be out in 2012, and I told him I hoped that there were still bookstores in 2012.

    The vicious cycle that I see here as well – bookstore goes bankrupt. Therefore, they have no money. Which means the publisher doesn’t get their money from the stores. Which means the author doesn’t get their royalties because there is no money coming in.

    It’s not something I feel safe putting stock in right now – the hope that two or three years from now the bookstores will still be there and will still be solvent.

    • Sariah – I had a conversation last night about browsing in a bookstore or library and discovering books. The woman with whom I was speaking had the same observation I’ve had, that Amazon doesn’t provide anything similar and spoke about how she loved browsing in bookstores.

      When this woman’s husband asked her how long it had been since she had visited our local Border’s, about five minutes from their house, she couldn’t remember.

      I’m not certain exactly what this means, but I don’t expect people like my friend to suddenly start visiting the local Barnes & Noble, which is about 15 minutes away.

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