Borders headed for bankruptcy filing

[Shack70]

I rarely go to brick and mortar book stores any more. The only one near me is a Borders and I can get almost any book they sell off Amazon cheaper even when Borders offers a coupon. The local Borders is always crowded so I don't see it getting shut down right away. The crowding is another reason I don't go it. I don't enjoy standing in line for 15 minutes to buy a book.

[tubemonkey]

Originally Posted by Andrew H.

There is still money to be made with B&M stores - but not as much as there used to be, and clearly not when B&N and Borders have so many giant stores within a couple of blocks of each other. Two stores barely breaking even close to each other *can translate* into one store making a decent profit if the other one goes away.

Within a 50 mile (80 km) radius of me, there are 14 Barnes & Nobles and 11 Borders.

Within a 25 mile (40 km) radius of me, there are 12 Barnes & Nobles and 8 Borders.

[curtw]

Originally Posted by Scott Nicholson

The local Waldenbooks didn't pay its rent and just announced a Feb 27 closing--but this store has sucked for years and years. Have you EVER been in a Borders with good customer service, selection, and value?

It's funny you would say that. By far the BEST bookstore I've ever been in was Borders--back when there was *one* store, on State Street in Ann Arbor. I remember it being the only place in town to find Hunter S. Thompson's The Curse of Lono. Bigger is definitely not better.

[fjtorres]

Originally Posted by tubemonkey

Within a 50 mile (80 km) radius of me, there are 14 Barnes & Nobles and 11 Borders.

Within a 25 mile radius of me (4 Million population) there is one Borders and zero B&Ns. Don't expect that Borders to close (it is always mobbed) but then, with *their* management, they just might.

Todays WSJ report pointed out some Borders leases run 15-20 years () and they have a full Billion () in liabilities. I'm thinking the former explains the latter.

Not. Good.

[tubemonkey]

Originally Posted by fjtorres

Within a 25 mile radius of me (4 Million population) there is one Borders and zero B&Ns. Don't expect that Borders to close (it is always mobbed) but then, with *their* management, they just might.

My metro population is 3.4 million.

[Kali Yuga]

Argh, Andrew H. beat me to the punch. At any rate...

Originally Posted by jocampo

They were having issues before but failed to enter into the ebook market on time.

Yes. $600 million worth of issues.

And really, how much faster could they have gotten into it? B&N, which had a string of profitable years and thus greater resources, only started shipping in November 2009; Borders was only about 6-8 months behind.

Let's face it, ebooks were the red-headed stepchild of the book biz until the iPad came out. The idea that Borders should have spent millions building a device and an ebook store in 2007, when they were already losing money -- well, that's just not realistic.

It's also not their method. For years, Borders used Amazon as a back-end for their online book sales; they only launched their own website in... 2007? 2008? They did the same with ebooks, partnering with Kobo instad of rolling their own.

And numerically, I don't see how an earlier entry would have helped. In 2006 -- their last profitable year -- they made $100m in profits off of $4 billion in revenues. They're down to $2.8 billion in revenues now; and I really don't see how a new ebook venture, competing against Amazon and Apple and B&N and Sony and everyone else, was going to capture nearly enough revenue to reverse that slide.


While I fully agree that moving forward book chains are unlikely to survive without an ebook strategy, I see no compelling arguments that Borders would have avoided bankruptcy if they got into ebooks earlier.

[bill_mchale]

Originally Posted by Kali Yuga

Argh, Andrew H. beat me to the punch. At any rate...



Yes. $600 million worth of issues.

And really, how much faster could they have gotten into it? B&N, which had a string of profitable years and thus greater resources, only started shipping in November 2009; Borders was only about 6-8 months behind.

When that 6 months includes Christmas (which often represent half the sales a retailer makes in the year), it can be significant. It also is 6 to 8 months more that you are allowing your competitors to carve a bigger niche of the available market for themselves. And even once they did get the Kobo out (though they carried the Sony readers for years), they didn't really start effectively promoting it in stores until just before Christmas this year. By then Nook had been out a year, the Kindle for what, 2 years? All the early adopters had already gotten ebook readers. And lets remember early adopters often have a significant impact on what their friends and relatives end up getting.

Let's face it, ebooks were the red-headed stepchild of the book biz until the iPad came out. The idea that Borders should have spent millions building a device and an ebook store in 2007, when they were already losing money -- well, that's just not realistic.

I don't buy that. The Kindle still dominates the eBook business. Yes, in the minds of some, Apple's release of a tablet somehow legitimized ebooks, even though Apple didn't even bundle ebook software with the initial release of the iPad, but eBooks were already here and legitimate long before the iPad, and the eInk readers still remain the choice of someone looking for a device specifically to read.

It's also not their method. For years, Borders used Amazon as a back-end for their online book sales; they only launched their own website in... 2007? 2008? They did the same with ebooks, partnering with Kobo instad of rolling their own.

And numerically, I don't see how an earlier entry would have helped. In 2006 -- their last profitable year -- they made $100m in profits off of $4 billion in revenues. They're down to $2.8 billion in revenues now; and I really don't see how a new ebook venture, competing against Amazon and Apple and B&N and Sony and everyone else, was going to capture nearly enough revenue to reverse that slide.

The key is, they shouldn't have gotten in for Christmas 2009, they should have been working on getting in Christmas 2008. They have been selling Sony readers since the days of the PRS-500. But their ebook strategy has always been unfocused (still lacks focus actually). The Kindle didn't take off because Amazon sold it, the Kindle took off because Amazon made a good reader and then focused on it while the market was still very young. Borders could have been that company.

While I fully agree that moving forward book chains are unlikely to survive without an ebook strategy, I see no compelling arguments that Borders would have avoided bankruptcy if they got into ebooks earlier.

It all depends when and how they had gotten in.

--
Bill

[chyron8472]

So, what does this mean for bookstores, brick-and-mortar or otherwise?

Competition is key for keeping prices down. I'm not sure I'm keen on any one company, be it Barnes & Noble or Amazon, finding themselves in the position of having near complete control over pbook or ebook prices.


For one, when I think of a large bookstore chain, the first two names that come to mind are Borders and Barnes & Noble. If Borders dies, wth does that mean for the book market?

[Kali Yuga]

Originally Posted by bill_mchale

When that 6 months includes Christmas (which often represent half the sales a retailer makes in the year), it can be significant.....

True. But if you genuinely believe that launching in September 2009 instead of May 2010 would have saved Borders, then you just aren't recognizing the realities of the situation.

4 straight years of losses. High interest corporate loans. Terrible real estate decisions, locking them into costly 15- and 20-year leases. Revolving management that took millions when they left. They were already closing stores in early 2010. They can't pay the publishers. Their biggest shareholders are about to be wiped out. The Wall Street Journal thinks they may owe $1 billion.

There is no way that getting the Borders-Kobo out 6 months earlier would have fixed this. That's bailing out a sinking boat with a teaspoon.

Originally Posted by bill mchale

All the early adopters had already gotten ebook readers....

So what? Let's face it, the iPad came out at the same time, with zero experience or brand identity with books, and zoomed right past Borders for ebook market share. By June they allegedly had 20% or so of market share.

And remember Sony? They were one of the first big entries in the ebook space; it used to be "zomg Sony and Amazon," and now they're on the bench.

And, of course, numerous portable digital audio players preceded the iPod; IBM and Apple dominated the early PC market; Real was a big presence in streaming video; Palm had one of the first Smartphones; Symbian has had a mobile OS, that is now getting spiked in favor of Windows Mobile 7....

Getting to market early doesn't matter.

Originally Posted by bill mchale

The Kindle didn't take off because Amazon sold it, the Kindle took off because Amazon made a good reader and then focused on it while the market was still very young. Borders could have been that company.

I'm sorry, but you're not talking about the actual Borders. You're talking about a hypothetical bookstore chain that wasn't losing money hand over fist, had enough cash and/or credit on hand to afford an early move in ebooks, had good management, and had the muscle to force publishers to get into digital.

That Borders does not exist, and hasn't existed for years. The real Borders was not going to be saved from years of losses -- and more losses to come -- by ebooks.

As to the the Kindle, it took off because Amazon was pushing it as hard as they could -- putting it on the front page for years on end and buying tons of ad time. They had the money to develop the market, the muscle to push the publishers, a culture that pushes technology, and a brand identity that fit. It was also a decent product, but that doesn't always matter much either....

[Kali Yuga]

Originally Posted by chyron8472

So, what does this mean for bookstores, brick-and-mortar or otherwise?

They're screwed.

They will likely follow the same path as record stores. CD's still sell fairly well online, but the chains are gone and only a handful of physical stores still exist.

However, prices haven't changed much. In fact, at least one label slashed CD prices to match download prices.

[queentess]

Originally Posted by Kali Yuga

I seriously doubt ebooks have much to do with their fall. This has been years in the making, and ebooks have been a tiny slice of book sales until very recently.

They almost certainly expanded too fast and unwisely. International stores, acquiring and then closing other chains, too much overlap with B&N....

Here's a nice summary of what they've been doing wrong for years
http://www.crainsdetroit.com/article.../C03/302099999

[neb52]

Borders made the mistake of aggressively expanding into an economic collapse and a major shift in their industry's business model that they missed by a country mile. BN on the other hand went in aggressively renegotiating leases and consolidating acquisitions. BN was also caught off guard on the eBook surge, but they had the resources to burn to catch up. That doesn't mean that BN is out of the woods, but since Riggio came back, this past Quarter is showing that they may have steered out of the danger zone.

What this means for the B&M market, is that the market is dictating that only one national chain can exist followed by smaller regional players along with the smathering of regional used book stores like HPB. BN's leases are averaging 2-3 years left on most stores (compared to Borders 8 year average), which means that they should be able to close or reposition bad stores.

The biggest challenge to BN's B&M are the Superstores Target, WM and the dicsount club stores that all carry the hottest hard back books. eBooks show that they are cannibalizing paper back sales, so BN will have to find a way to reinforce it's hard back sales and other sales (toys and games). I can see BN merging the new and used book store models in the future just to keep the B&M thriving.