Borders Headed For Liquidation, Remaining Stores Likely To Close
The Borders Books bankruptcy case hasn’t been going well, mostly because they’ve been unable to find a buyer willing and able to buy the company as a going concern:
Borders’ bid deadline passed Sunday without any offers to keep the U.S.’s second-largest bookstore chain alive, so the Ann Arbor, Michigan-based company moves closer to liquidation.
The company still has slim hope, however, as the Wall Street Journal reports Monday that Borders was in discussions late Sunday with Books-A-Million for some sort of deal. Books-A-Million is based in Birmingham, Alabama, operating 231 stores in 23 states.
But it’s not likely those discussions, or others being entertained at the last minute by Borders, will keep the majority of the chain’s 400 stores open, even if some sort of deal is reached.
Likely Borders, which employs 11,000, is working at the last minute to salvage some a partial solution, allowing some of its prime stores among the company’s 259 superstores to be salvaged, reopening under another brand, like Books-A-Million, while the Borders brand completely closes.
Borders had set a deadline for 5 p.m. Sunday for offers as the company navigates through U.S. Bankruptcy Court, trying to avoid liquidation, but no offers were obtained. The company could still pull together a last minute deal, however, but it must do so in less than two days, as liquidation looms.
Should Borders fail in finding a bidder, Barnes and Noble would be left as America’s only remaining true national chain.
Borders had appeared in the past two week to find a purchaser, but private-equity investor Najafi Co.’s $215 million offer for Borders is no longer on the table. The company’s head, Jahm Najafi, told Bloomberg through e-mail response his company would not participate in the auction. Najafi’s bid faced opposition in bankruptcy court from creditors who feared his company planned only to liquidate Borders.
Najafi says he tried to remove a clause in his offer allowing him to liquidate Borders to satisfy creditors by working with large U.S. publishers to get satisfactory shipping terms for new product, but at least one would not agree, and Najafi says he hs backed off completely — leaving Borders facing liquidation if another buyer is not found immediately.
The last minute Books-A-Million talks seem to be the only hope, but even there they’d be subject to approval from publishers who have been shipping content to Borders stores on a cash basis only for months now. In any case, Books-A-Million is a much different company than Borders and seems unlikely to fit in well in some of the higher end locations where Borders stores are located.
It’s inevitable, perhaps, especially since Borders failed to follow the example of Barners & Noble and develop a rival to Amason’s Kindle electronic reader. That, combined with the fact that Amazon itself put bricks-and-mortar book stores at a competitive disadvantage, probably meant that it was only a matter of time before either Borders or Barnes & Noble bit the dust.
Update: And it now looks like the last minute talks with Books-A-Million have failed:
NEW YORK (MarketWatch) — After a failed attempt to find buyers to stay as a going concern, bankrupt U.S. bookstore operator Borders Group Inc. said late Monday it will sell its store assets to liquidation firms Hilco and Gordon Brothers and submit the plan for bankruptcy court approval. The bookstore operator, the second largest after Barnes & Noble Inc. , operates 399 stores and employs about 10,700 employees. Liquidation is expected to begin for some stores and facilities as soon as Friday, with a phased rollout of the program to conclude by the end of September, the company said in a statement. “Following the best efforts of all parties, we are saddened by this development,” said Borders Group President Mike Edwards. “The headwinds we have been facing for quite some time, including the rapidly changing book industry, eReader revolution, and turbulent economy, have brought us to where we are now.”
Sad, but as I said this morning, inevitable
@Doug Mataconis
It’s worse than that. They actually outsourced their online order fulfillment to Amazon in exchange for a 10-20% percentage off each sale. I’m sure it created an income stream back before Borders was struggling, but it also gave all their online business to their biggest soon-to-be rival.
That’s one of the two biggest mistakes they made. The other was expanding like crazy to match Barnes & Nobles, which cost a fortune and netted a bunch of marginal stores that they’ve had to close since then.
@Brett:
I had forgotten about the Amazon partnership which was, as you say, quite odd considering that the two were competitors. I remember that some business analyst suggested at the time that it meant that Amazon might buy Borders — my response is why would Amazon have wanted to tie itself down to bricks-and-mortar stores when its business model was working so well?
There’s an argument to be made for a very different type of bricks and mortar bookstore.
1) All the major online bookstores suck at browsing, at stumbling on something. Their computerized suggestions are imbecilic, and there’s no equivalent of just wandering the stacks, seeing what you come across.
2) A physical bookstore could provide that browsing experience — along with coffee and community and flirting, all the usual bookstore stuff. They need to stock a lot of books but only in limited numbers of copies — one to three copies each. Then they need a store-specific QR code on each book.
3) You wander the shelves with your latte, you see a book you like, shoot the QR code and download right there in-store over free and fast WiFi.
4) The code ensures the sale is registered as coming from that physical store. They get a cut.
You could have more books in smaller stores, service both the physical book-lovers and the downloaders. You’d also have the ability to push lush coffee table books that need to be physical, as well as author signings, tchockes, etc…
I live about 20 minutes from the King of Prussia Mall in Pennsylvania, which is (depending on how you measure it) either the biggest or the second biggest mall in the United States. It’s kinda sad to walk around it and realize there’s not a single store where you can buy music, books, or DVDs there now.
That’s too bad.
I always enjoy a trip to Borders.
@Michael Reynolds
Is that including Amazon? The “read the first chapter free” feature for their e-books is very useful for browsing purposes. I’ve sampled dozens of books both for purchase and library loan that way.
I think “stumbling” on things in person is overrated. I can do that in a decent library section for new arrivals, and even then I still identify most books for future reading by what comes up on the forums and blogs I follow.
@michael reynolds:
A nice idea, perhaps but I’m not sure its justified by the costs, at least not on the scale of the superstores that Borders became known for. The main reason that Amazon has succeeded (even before the Kindle came out) is because they are able to operate without the overhead associated with keeping hundreds of massive stories open.
Try looking for history of 16th century England in Amazon. Or just an interesting mystery. You do better in brick and mortar stores. Now if you know in advance what you want, sure.
Doug: no it’s not a salvation for Borders. It’s an idea for Indies.
Just want to pick a nit here, but this metaphor is terrible. Headwinds actually make it easier to generate lift; that’s why planes generally take off and land heading into the wind.
@michael reynolds:
As other people have pointed out, you can browse book contents on Amazon, along with looking at lists of books sorted by category, best-seller status, customer ratings, what other people who bought a book you like also bought, etc. When you described your business model, one the thing that struck me is the question of why the store needs physical copies of books at all, aside from expensive coffee-table books or other publications where graphics are crucial, if buyers are going to purchase them electronically anyway?
Your second post gets at the nub of what I think you really want: It’s not the ability to “stumble across things”, per se, but the ability to stumble across good things. The problem with Amazon is not that you can’t stumble across things. I can search for “sixteenth century England” or look at their mystery section and, while there are lots of things to stumble across, it’s all a bit overwhelming in terms of choice. An advantage of the well-run old-style book store is that there is someone doing the winnowing for you, so the mysteries you do stumble across are more likely to be interesting.
But, aside from coffee-table books, etc, and providing a non-virtual place for book lovers to congregate and flirt, I have trouble seeing why your proposal is much better than sitting in the local coffee shop with your laptop, if you can find web sites that do reliable book recommendations as opposed to depending on what a shop owner decides to put on the shelves. And, by “much better”, I mean so much better that it would make for a profitable business model.
Many of my friends were laid off during the first set of Borders store closings and we’ve created this little tribute to all the Borders employees who are going through an incredibly difficult time right now. I hope this can at least put a smile on the face of those Borders employees who stumble onto this article as they face the upcoming store closings: http://www.youtube.com/watch?v=TfgTsMM52KM
@Michael,
Totally agree with your general proposition. Most of the progressive publishing people I know have been advocating for something similar for quite a while.
I think what some people miss is that the idea of a bookshop/coffee/bar/community hub can be a major point of differentiation. And while many might have shuttered in the 80’s, 90’s and early 2000’s due to competition from the expansion of Mega Stores, the bottom has largely dropped out of book discounting (hence Borders problem). So there’s a real opportunity for small shops like this — which offer a number of value adds — to start to reclaim urban and suburban spaces.
They’ll never be megastores for books again. But as with letter press, we’re going to hit a point where a premium can be charged for a certain book experience again.
I’m not sure the small bookstore/coffee shop model is viable even with Borders out of the way. There’s two basic type of readers, neither of which that model can compete for:
The “long tail readers” looking for less well known books that may have been around for a while aren’t going to go there because a small shop can’t carry enough selection and the best seller readers aren’t going to go there because they’re being undercut by Walmart and Target.
So most you get the people who don’t really want to buy books at all, and just want to hang out skimming and drinking coffee. At that point you might as well forget the books and just open a coffee shop.
Hmmm. Maybe someone will open one in the bay area using this model. Nothing quite like a good bookstore…
I was at Borders just last week. I didn’t know to say goodbye. I’m going to miss their tie-in with Seattle’s Best (which was why I was at Borders just last week). Hasting’s little coffee shop is good, too. I hope they stay around. I half-thought Hastings might buy Borders, but apparently they’re struggling pretty mightily, too.
As for bookstores, I think Michael Reynolds has it about right. Even in a town as small as ours, there’s a bookstore. I think there will continue to be. Combining bookstores and coffee, even if not in a gymnasium like Borders/B&N, will likely still make sense. Not everybody wants to buy all their books online, and there will be a place for those that don’t. I do think that there will be a shift towards more bookstores being used bookstores.