Borders' Loss May be Others' Gain in Book War

By Allison Linn
|  Wednesday, Feb 16, 2011  |  Updated 1:00 PM PDT
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Borders' Loss May be Others' Gain in Book War

AP

Borders bankruptcy could be good news for indie bookstores.

Bookseller Borders’ decision to file for bankruptcy protection and close about 200 stores is another blow to the publishing industry, but it could provide a boost for independent booksellers and archrival Barnes & Noble.

Borders said Wednesday it was seeking bankruptcy protection and would close about one-third of its 642 stores. The filing comes after company’s long struggle to adapt to changes in the industry, including online sales and electronic book readers, and to deal with overexpansion during better times.

 

Industry analysts said Borders’ loss could be Barnes & Noble’s gain because the two booksellers operate so many stores close to each other. Michael Souers, an industry analyst with Standard and Poor’s, said he suspects many of the stores that Borders has targeted for closure are near Barnes & Noble's stores.

 

“Overall, the country is pretty much oversaturated with bookstores in general, and so if there’s a couple of bookstores right close to each other it’s likely that they’re performing less well than if there was only one bookstore within 10 miles,” Souers said.

(For a full list of stores that are closing, click here.)

In a statement, Barnes & Noble spokeswoman Mary Ellen Keating said the company regrets that the publishing industry has suffered this loss and looks forward to continuing to serve its communities.

Barnes & Noble has had struggles of its own, and the company said last year that it was exploring options including a possible sale. Keating said in an e-mail Wednesday that process is still ongoing.

 

The other potential winner in Borders’ woes: That small, neighborhood bookstore on the corner.

“I think that independent bookstores definitely have a shot at benefiting the most from store closures,” said Michael Norris, a senior analyst with Simba Information who follows the industry closely.

Although independent booksellers still appear quaint on the outside, Norris said many have done an impressive job in recent years of adapting to changes in the industry.

Many now have Facebook pages, Twitter accounts and e-mail newsletters. In addition, their trade group, the American Booksellers Association, entered into a partnership with Google to provide electronic book sales. Norris said local booksellers also have benefited from “buy local” campaigns and other efforts to draw community to their stores.

“They basically offer a lot of value that goes beyond simply the lowest price,” Norris said.

Oren Teicher, chief executive of the American Booksellers Association, said the trade group’s membership has stabilized in the past year after a long period of decline.

The organization currently has about 1,500 members doing business at about 2,000 stores. Teicher estimates that about 500 independent bookstores have closed in the past decade, but he said membership today is about the same as it was last year.

Norris said his annual survey of independent booksellers also has shown a steady increase in the last few years of the percentage of stores reporting an increase in year-over-year sales.

Although it is easy to blame Amazon.com for Borders' woes, analysts say the online bookselling powerhouse may not see as big an advantage from the bankruptcy filing.

Amazon.com has been a fierce rival both because of the convenience and competitive pricing of its physical books and because of the success of its Kindle electronic reader. By contrast, Borders was slower to embrace online and electronic book sales.

Still, Souers of S&P said he expects that few people will switch from Borders’ eReader effort to Amazon.com’s because of the bankruptcy filing. By contrast, he said it’s much more likely that a person will walk across the street from a shuttered Borders bookstore to an open Barnes & Noble.

Norris said it also would be a mistake to say that the advent of electronic readers is the only reason for Borders’ bankruptcy filing. He said the company made a number of missteps in the years leading up to its filing, including a loyalty program that was weaker than many competitors. The company also faced growing competition from traditional competitors, online retailers and big box stores such as Costco and Walmart.

“It’s kind of like ‘Murder on the Orient Express – you can’t pin the murder on the last guy that stuck in the knife,’” Norris said. “There’s just a lot of factors involved.”

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