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Originally Posted by porkupan
Though I mostly agree with your analysis, I don't think the dire predictions will necessarily become a reality in the near future. Тhere is still enough market for a book superstore out there. Just not as much market there was 10-15 years ago.
If you recall, 15-20 years ago the number of book superstores was quite a bit smaller than it is today. The growth in B&M bookstores, especially in the suburbs has been tremendous. Perhaps there was never need for this much book delivery capacity at the first place? The chains failed to realize that B&M floorspace growth was not necessarily the best model for their business.
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It worked for a while, with greater selection being a competitive edge. The problem with the superstore is that floorspace growth requires corresponding revenue to pay the rent. It's all about sales per square foot, and the more square feet you have...
B&N is shuttering one superstore in Manhattan for that reason, because rental in the area is probably $35/sq ft or more. People say "Gee, it's always crowded", and so it is, but books are relatively low margin, and they simply can't sell enough of them. The one closer to me seems healthy enough, but it's in a lower rent area.
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I believe the superstores should and will survive in the densely populated areas of the U.S. There is enough people out there who like the feel of going to a bookstore, spending time browsing the shelves, buying gifts, buying books, having a latte at the cafe - in whatever order of priority. These people don't necessarily look for the best bargain and the cheapest price: if you like cheap coffee, you don't go to Starbucks, you make your own. But there are people at Starbucks nonetheless.
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They do shop on price, which is why outfits like B&N are killing the independents, but price isn't the only factor.
Someone elsewhere mentioned a friend who owned a small bookstore chain in the midwest, and was grateful he'd decided to add coffee and food to his mix in the stores. He's not exactly booming, but he's still in business, and the revenue from the cafe section lets him make payroll.
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The question is, will Borders survive? I believe, if they enter the bankruptcy protection and the court allows them to swiftly shutdown the consistently non-profitable stores, they have a good chance for staying in business. Even with their current business model.
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The biggest hurdle in shutting down stores is likely existing leases, which they can't simply break without asking for even more trouble. If bankruptcy will allow them to exit leases, it might help.
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Of course, the crazy daily 33% off coupons have to stop. Even Amazon is not stupid enough to give a 33% discount on every book they sell.
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Amazon gets something like a 55% discount from the publishers, so no, it's not crazy to give 30% across the board.
This sort of retailing is low margin commodities, with the main competition being on price. In that environment, you may make pennies on a dollar, so you seek to take in a
lot of dollars to make pennies on. It's all about market share, and Amazon uses price to gain market share.
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If Borders cut the losses and returned to catering to slightly above average clientèle, the niche is probably still there for it to fill...
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Depending on demographics and location. Borders Group owns the Waldenbooks chain, for example, which is pretty much entirely located in shopping malls. (And some outlets have been renamed "Borders Express".) I think at least some of them will be viable, depending on location and product mix.
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Dennis