Is Borders heading for its final chapter?

**celeb_2006** · February 5th, 2011, 11:01 AM

As Borders Group scrambles to restructure its debt to vendors and lenders, its customers are coping with fewer stores and worries about the chain's future. Above, a Borders store in Southbury, Conn. (Carolyn Cole, Los Angeles Times / May 28, 2008)

http://www.latimes.com/business/la-f...wed+Stories%29

After a series of competitive blunders and missteps in the last decade, the bookstore chain is under siege, cutting staff, shuttering stores, shaking up top management and flirting with bankruptcy.

By Stephen Ceasar, Los Angeles Times

6:40 PM PST, February 4, 2011

Starting off as a used-book store in 1971 in the Michigan college town of Ann Arbor, Borders grew into a successful nationwide chain of superstores, widely castigated at one time for helping stamp out many small, independent stores around the country.

But after a series of competitive blunders and missteps in the last decade, Borders Group Inc. itself is now under siege, cutting staff, shuttering stores, shaking up top management and flirting with bankruptcy.

Critics said the company botched its move into the digital age and instead saw sales drop and earnings plummet.

The company reported a net loss of $74.4 million for the quarter that ended Oct. 30 and has reported financial losses every quarter for the last three years. Borders' bricks-and-mortar chief rival, Barnes & Noble Inc., also has been struggling financially.

"The superstores were viewed by the independent bookstores as dinosaurs that came to kill them — and they did," said Al Greco, a book publishing expert and professor of marketing at Fordham University's Graduate School of Business Administration. "Today, it looks like the big bang has hit and now the dinosaurs are in peril."

Last week, GE Capital threw a lifeline to the company in the form of a $550-million line of credit, dependent on publishers' agreeing to convert the company's delayed payments into loans, among other requirements.

In a Jan. 27 statement, Borders President Michael Edwards said the company was "doing everything possible" to maintain relationships with vendors and publishers and viewed the refinancing as the most practical solution, but also noted that an in-court restructuring is a possibility.

On Friday, the company disclosed that it no longer complies with New York Stock Exchange rules that require it to maintain a minimum average trading price of $1 a share over 30 days.

The price dropped below $1 on Dec. 31 and has continued to fall. Shares lost a penny Friday to 39 cents.

As the company scrambles to restructure the debt to vendors and lenders, its customers are coping with fewer stores and worries about the chain's future.

On Westwood Boulevard, in the shadow of UCLA, sits a sprawling shell of a Borders store that served university students and area residents for 27 years until it closed last month. It was one of a handful of California stores closed in January and 32 mostly smaller stores in malls that were closed last year.

As of December, the company operated 509 superstores and 169 of the smaller-format stores, which include Waldenbooks, Borders Express and Borders Airport stores.

Some Borders shoppers at the Brand Boulevard store in Glendale lamented the company's current woes, while others seemed less worried.

Tammy Hill, 42, of Glendale, said she shops at the store frequently and enjoys the atmosphere at Borders, where couches and chairs are sprinkled throughout the store and shoppers are allowed to plop down in an aisle and read for hours as if they were at a library.

"It's a little more serene," she said as she revealed that she was dreading going down the street to buy an interior design book she couldn't find at the Borders. "I was just fretting about it," she said. "Oh God, now I have to go to Barnes & Noble."

Some shoppers, like Jeff Rosen, 56, of Silver Lake, have taken notice of the company's troubles. He was searching for a book with his daughter. Though he usually shops online at Amazon.com, he made a trip to the store to make sure he used a gift card while he still could. "I want to burn it off," Rosen said. "It won't be good in six months."

Borders, along with Barnes & Noble, thrived in the 1980s and 1990s as the superstore trend caught on and spread to the book business. Kmart Corp. owned the company briefly in the early 1990s before the bookseller went public as Borders Group Inc.

Greco said small neighborhood bookstores were no match for the superstore, which carried 100,000 to 175,000 titles — a selection most independents could not match — as well as such merchandise as CDs, newspapers, magazines, candy, calendars and coffee, plus the tables, chairs and sofas shoppers could use for leisurely reading or studying.

"They became a destination," he said.

But by 2000, the bricks-and-mortar booksellers began a collective decline because of competition from online vendors such as Amazon.com Inc. and discounters such as Wal-Mart Stores Inc. and Target Corp.

Borders was especially hurt by poor and sluggish decision-making by revolving-door executives from unrelated industries, including supermarkets, women's apparel and finance, Greco said.

In 2001, just as Internet commerce was beginning to thrive, the company made the mistake of turning its online sales over to Amazon, a competitor, which gained vital customer information such as purchasing habits. "It's unheard of," Greco said. "It's as if Coca-Cola asked Pepsi to distribute Coca-Cola."

At the time, Borders prided itself on providing an eclectic selection that would better appeal to the serious book reader and strove to be less "cookie-cutter" than other large bookstores, said Gary Balter, an analyst with Credit Suisse.

Amazon was able to lure those serious readers away from Borders by prompting them with suggestions of related books based on their purchase. "That was their target customer," Balter said. "If you're a serious book reader you can now go online, see similar books and you don't have to go through shelves.… It's more convenient."

In 2008, the company ended its relationship with Amazon and rolled out its own online sales operation, but it trailed behind the more seasoned online operations of Barnes & Noble and Amazon, Greco said.

Rosen, of Silver Lake, said he had tried to use Borders' online store in the past but found navigating it "awkward." By contrast, he said, Amazon.com was "quick and easy."

Borders' precarious situation took another hit with the emergence of the electronic reader. In November 2007, Amazon released its e-reader, the Kindle, taking both superstores by surprise with the new technology. When Barnes & Noble came along with its own e-reader, the Nook, in November 2009, Borders still had no answer, Balter said.

It was not until last July that Borders formed a partnership with a Canadian firm to distribute e-readers and launched an e-book store.

Dominique Morris, 25, a freelance journalist, was shopping at the Glendale location on a recent afternoon with a friend. As she headed for the exit, she stopped to check out the e-reader, which was prominently displayed by the front door. "I didn't even know they had one until now," said Morris, who shops at the store about twice a month.

Greco said he expected the company to seek bankruptcy protection soon. "It's pretty clear they will file for bankruptcy; it's just a question of when," he said. "Borders at one time was an unbelievably impressive bookstore chain — people loved it. The day they go into bankruptcy will not be a happy day for publishers, authors and readers."

**purple rain** · February 5th, 2011, 10:55 PM

I go to Borders (and Barnes & Noble) all the time. But I only read the books and magazines in the store. I rarely buy anything because everything is so overpriced. Why would I buy something from Borders when I can get the same product from Amazon at a much cheaper price & tax-free? They are going out of business because their prices aren't competitive with those of online retailers.

**Sojiita** · February 6th, 2011, 11:21 AM

Originally Posted by purple rain

I go to Borders (and Barnes & Noble) all the time. But I only read the books and magazines in the store. I rarely buy anything because everything is so overpriced. Why would I buy something from Borders when I can get the same product from Amazon at a much cheaper price & tax-free? They are going out of business because their prices aren't competitive with those of online retailers.

Which means basically that bookstores are going to go completely extinct. Seems unavoidable now with the internet and all.

*goes off somewhere to cry*

**twitchy2.0** · February 6th, 2011, 11:31 AM

"Today, it looks like the big bang has hit and now the dinosaurs are in peril."

Truly terrible mash of analogies.

**LynnieD** · February 6th, 2011, 11:32 AM

They closed the Borders at the Syracuse Mall. It was HUGE too---several floors, just a huge store. It will be sorely missed.

**ana-mish-ana** · February 6th, 2011, 01:16 PM

The whole publishing industry is going to change - and discounted books from Wal-Mart and Amazon is a factor but this is going to affect publishers too. Barnes and Noble is also struggling but their doing well with the Nook which shows that ebooks are going to replace Mass Markets- Amazon has already stated that is the case with their sales of the Kindles/Kindle books. But there is something seriously wrong with the current system such as returns and pulped books.

I am really sad though about book shops disappearing but its kind of ironic though that 10/15 years ago these huge megastores closed quite a few indy ones but now the internet/ebooks seem to be doing the same them.

**ortiz** · July 23rd, 2011, 06:28 AM

It's official, sadly Borders is going out of business.

Borders Forced to Liquidate, Close All Stores - WSJ.com

**Penny Lane** · July 25th, 2011, 10:28 AM

The Waldenbooks in my hometown is closing... the only bookstore in the entire city without counting a christian bookstore and several textbook stores for the local university. My brother and I would love to go and peruse the shelves and we'd walk out of there with 10 books apiece sometimes. I know he loves to read and it sucks that he's not going to have that option open to him anymore. We have an extensive library but still.. it's sad. Remember that story about the only city in the US without a bookstore? That's like 200 miles away from my hometown. It's sad that all these areas with already-poor literacy are having resources taken away from them like this. I know there are still options like public libraries/online media... but, if anything, it's just symbolic of how little importance we give function over profit.

**NVash** · July 25th, 2011, 06:01 PM

When I was younger we had Waldenbooks in the mall, then one day they were replaced by Borders Express. Whats funny is there was a huge Borders not even two miles down the road. Did Borders really need to take over Waldbenbooks? I think not.

**witchcurlgirl** · July 26th, 2011, 06:26 AM

Borders didn't take over Waldenbooks, they were both bought by the same company (Kmart), who rebranded the stores as Borders. Borders was able to buy themselves back from Kmart later on.

It sucks when bookstores close, but these are businesses and they're there to turn a profit. If they don't they close. It's business 101. From what I've read Borders hadn't turned a profit since 2006, and sales were dropping about 15% per year. They didn't just close, they had to go Chapter 11.

**A*O** · July 26th, 2011, 06:32 PM

Our local Borders closed a few weeks ago. For reasons I've never entirely understood books are insanely expensive in Oz (eg, over $70 for a hardback cookbook, $30 for a paperback novel). So naturally I use Amazon for real books shipped from the US at less than half that price. E-books are even cheaper. I do miss browsing in a good bookshop but there has been a huge shift in people's buying habits now thanks to the internet.