Borders bankruptcy shakes up book industry

Borders bankruptcy will mean the closure of some 200 superstores, reshuffling an industry that's already reeling from technological change.

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Mike Blake/Reuters
A sale sign is seen at a Borders bookstore in San Diego, Feb. 16, 2011. The second-largest US bookstore chain filed for bankruptcy protection and said it planned to close nearly one-third of its bookstores, after years of shriveling sales that made it impossible to manage its crushing debt load. The Borders bankruptcy sent a chill through the book industry.

The bankruptcy of Borders Group has sent a shockwave through the book industry, not because it was unexpected, but because it reshuffles an industry that's already going through a wringer of technological change.

On Wednesday, the Ann Arbor, Mich., based company announced it was filing to reorganize under bankruptcy and would close some 200 of 642 stores around the United States. The immediate effects aren't all negative.

Consumers could see clearance sales begin as early as this weekend. Rival booksellers could pick up new customers as the Border's stores close.

But "it's certainly not a hurrah," says Daniel Goldin, owner of Boswell Books in Milwaukee. "I worry more about the publishing industry.... With a competitor gone, it puts more power in the hands of Amazon. It brings thee players down to two."

The bookstore chain reportedly owes $41.1 million to Penguin Putnam, $36.9 million to Hachette Book Group, $33.8 million to Simon & Schuster, and $33.5 million to Random House.

In Milwaukee, all three Borders stores are slated to be shut down. The company claims it was losing some $2 million a day on the stores it is planning to close. In Milwaukee Couty, that leaves three Barnes & Noble stores, Mr. Goldin's store and one other independent, and then a handful of college-textbook and smaller specialty bookstores.

The Border's closures also represent a kind of comeuppance. When they appeared on the scene two decades ago, they were considered the future of the book industry. The superstores had 40,000 square feet and put many independent bookstores out of business.

But the advent of online bookstores and the prospect of e-book sales threw the superstore model into question. And Borders was slow to adapt. Customers who buy only on price have moved to online venues, such as Amazon.com or Barnes & Noble's online store.

E-books represent an emerging threat. By 2015, a quarter of all books will be sold in digital form, Forrester Research forecast in a report last year.

That leaves independent booksellers like Goldin scrambling to hold onto their customers with a combination of local outreach and service. The store has to have enough variety but not be too big and expensive to run. "Forty thousand square feet? We're pretty sure that's too big," says Goldin, who's store is around 8,000 square feet.

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