TOPICS > Economy

Borders Closes the Book as Decisions Come Back to Haunt Chain

July 21, 2011 at 12:00 AM EDT
On Thursday, representatives of the Borders bookstore chain were in court with a plan to liquidate its remaining 399 locations as early as Friday. Jeffrey Brown discusses what's next for bookstores, the publishing industry and bookworms with Slate's Annie Lowrey.

JEFFREY BROWN: Next, the last chapter for one of the country’s biggest bookstore chains.

For Borders, it is, yes, the end of the story. In February, the book chain filed for bankruptcy, hoping to reorganize and stay in business. But, today, its representatives were in court with a plan to liquidate its remaining 399 stores beginning as early as tomorrow. More than 10,000 employees will lose their jobs as a result.

WOMAN: Getting the news today, it is upsetting. We tried. We tried. We gave it our best.

JEFFREY BROWN: And customers will lose one more place to peruse new books.

WOMAN: I mean, I used to have this Sunday routine where I would go every Sunday and look at all the authors and then have a coffee and maybe read some magazines. And I won’t have that little routine anymore.

JEFFREY BROWN: From humble beginnings — the first Borders, a used bookstore, opened in Ann Arbor, Mich., in 1971 — the company became a pioneer of the big-box bookseller concept.

At its peak in 2003, Borders had more than 1,200 stores around the country, each with thousands of new titles. The company says a host of factors led to its demise, including the turbulent economy, the move away from brick-and-mortar stores to online retailers, and the rise of e-readers, like Amazon’s Kindle, Apple’s iPad, and the Nook of rival Barnes & Noble.

And more on this story now from Annie Lowrey, who’s followed it as a business writer for the online magazine Slate.

Welcome to you.

ANNIE LOWREY, Thank you.

JEFFREY BROWN: Now, part of this is, of course, about larger trends of the Internet’s impact on the book business. But Borders also made its own mistakes, I guess, along the way, right?

ANNIE LOWREY: Absolutely.

JEFFREY BROWN: What happened?

ANNIE LOWREY: It’s not an easy climate for any retail business. It’s not an easy climate for anybody who is selling books, obviously.

But Borders made some strategic mistakes. First and foremost, they had a very, very tenuous relationship with the Internet. They actually outsourced the sale of a lot of their books online from 2001 to 2008 to Amazon. And on top of that, they were very slow to come around to e-readers.

That, combined with some other strategic mistakes, having too many stores, having those stores be too expensive, ended up really hurting their business.

JEFFREY BROWN: All right, so take that apart a little bit, first the online sales.


JEFFREY BROWN: Now, that’s clearly where a lot of the business has gone, right, in the book business?

ANNIE LOWREY: Yes, absolutely. It’s increasingly migrated on to the Web.

And so what you had was these big-box stores which they always sold themselves as a place that you could come and find any book. All of a sudden, when you could go to Amazon or any of a dozen sites and get a much bigger selection of books, you didn’t need those big-box stores as much, and so they became places where you could go, you could sit, you could sip and — sit and have a cup of coffee.

But Borders also made some strategic mistakes there. They lost a Starbucks contract to Barnes & Noble, for instance, and the company just ended up being mismanaged.

JEFFREY BROWN: But people do go to those — to the real stores to look at the real books, but increasingly then they leave and order online.

ANNIE LOWREY: Exactly. Exactly. It’s very, very hard to compete unless you are offering a very boutique experience.

And Barnes & Noble has done pretty well to take advantage of e-readers and e-books and also to make sure that its stores are places that people want to go and congregate.

JEFFREY BROWN: Now, talk a little bit more about the e-readers. You mentioned Barnes & Noble with the Nook, of course, Amazon with the Kindle. This was an area where Borders fell way behind.

ANNIE LOWREY: Absolutely.

So the Nook is not as big as the Kindle, but it sells really quite well. And more so, every time that somebody buys a Nook, Barnes & Noble not only benefits from selling the Nook, but also then gets to sell e-books to that reader, so they develop a relationship over time. That reader comes back to them. And so it generates a lot of repeat business for Barnes & Noble. And that really helps them.

JEFFREY BROWN: Where are we in the e-reader and physical book situation? Now, the e-readers have grown and grown and grown. But is there any sense of reaching an equilibrium as to the number of books that will still be sold?

ANNIE LOWREY: Well, I don’t think that you will ever see the physical book die out as a form. I think that 50 years from now, physical books will still exist and I think people will still be buying them in bookstores.

But you’re going to see this migration towards e-readers and e-books, especially since there is a lot of competition in the market. Prices are going to come down. And so for consumers, it is going to make more and more sense. If you have an e-reader and you can get a book within — any book, almost, in seconds, basically, you know, in your lap, yes, that’s pretty powerful. And that’s a good thing for consumers.

JEFFREY BROWN: But what do you see — well, for those who — except for those who want to go to their bookstore, right?

ANNIE LOWREY: Sure. That’s true.

JEFFREY BROWN: And their corner bookstore is now gone.

ANNIE LOWREY: They have fewer and fewer choices in that sense, it is true.

JEFFREY BROWN: Now, what about the actual bookstores that are left? Particularly — you talked a little bit about Barnes & Noble, still — struggling, but still going, right?

ANNIE LOWREY: Sure. It’s absolutely still going.

And there are other national chains that are still doing well. Books-A-Million is doing well, for instance. And it seems like it might actually pick up some of Borders’ pieces. Independent bookstores, it remains a difficult climate for them, but a lot of them have diversified into selling thins like coffee and alcohol and have managed to stay afloat there.

But it is a very competitive market and a very difficult market for booksellers.

JEFFREY BROWN: And the impact of this, something we have talked about a lot here, but the impact on publishers, on authors of having a major chain like this impacting the whole business?


And I think if you are looking at the broadest trends, what this might do is help hasten the move towards e-books and e-readers. Again, another national chain has fallen apart here, and people going to be increasingly looking to making money and selling books on the Web.

JEFFREY BROWN: And another thing, the wider economic implications here of a major chain, because Borders, of course, is often found in malls, major malls, right?


JEFFREY BROWN: So here is a lot of malls around the country losing a kind of flagship store.

ANNIE LOWREY: Absolutely.

A lot of jobs have disappeared this week, more than 10,000. And if you look at some of the other big layoffs that there’s been this week, it is more jobs than we made last month, absolutely. And on top of that, you are completely right. Mall vacancy rates are very, very high. For big retailers, again, the climate is just not pretty out there, regardless of what you are selling.

JEFFREY BROWN: So there is a commercial real estate aspect to all of this.

ANNIE LOWREY: Yes. They will be unhappy about all this.


OK, Annie Lowrey, of Slate magazine, thank you very much.

ANNIE LOWREY: Thanks so much for having me.