Bye Bye Borders,0,4159847.story

Borders is closing many of it’s stores in Chicago and around the United States, which means many employees are losing their jobs. I wonder what type of package, if any Borders is offering them?

Borders to close half its stores in Chicago area
Shutterings part of broader plan after chain files for Chapter 11

By Wailin Wong, Tribune reporter
February 17, 2011

Big, soulless chain versus plucky, independent shop. This well-worn theme in American commerce has been played out with music stores, big-box retailers and booksellers.

In the case of the book industry, independent stores fell victim to the rise of huge chains such as Borders and Barnes & Noble, which pioneered the concept of superstores where consumers could sip coffee and sit for hours as they read. Then those brick-and-mortar giants found themselves battling a digital wave, with shoppers increasingly turning to online retailers such as Amazon and eschewing paper books for e-readers.

On Wednesday, it was one of those big chain’s turn to fall. Ann Arbor, Mich.-based Borders Group Inc., the country’s second-largest bookseller, filed for Chapter 11 bankruptcy protection. It plans to close 30 percent of its stores during the next several weeks, including about half its locations in the Chicago area.

“What’s happening is digital reading,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based national retail consulting and investment banking firm. “And dramatically fewer people are reading books. There is simply less demand. It’s a transformational period for the book business.”

For years, customers have been able to order books and music online. More recently, smart phones, e-readers and tablets have opened new avenues for publishers to sell digitized content, further eroding the influence of brick-and-mortar retailers.

While Borders and Barnes & Noble faced increasing pressure from discount stores such as Walmart and Costco, which have become serious booksellers, industry observers say Borders also stumbled repeatedly in its attempts to navigate the changing landscape:

•The company outsourced its online operations to Amazon for years, ceding valuable business to a major competitor.

•It failed to seize on the e-reader phenomenon while Amazon, Barnes & Noble and Apple developed their own devices and e-book store platforms.

•And a revolving door of chief executives in recent years resulted in inconsistent management.

These missteps left its biggest rival in a more favorable position.

“Barnes & Noble has a better understanding of the wants and needs of the customer that walks through the front door,” said Albert Greco, a marketing professor at Fordham University’s Graduate School of Business Administration.

Greco, who is also senior researcher at the Institute for Publishing Research, noted that Borders maintained ample floor space for CDs and DVDs in its stores, even as it became clear that consumers preferred digital instead of physical media.

In contrast, Barnes & Noble has increased shelf space for certain popular categories of books, such as young adult fiction, and reduced inventory elsewhere to make room for toys and games, he said.

Borders’ primary missed opportunity, though, lies in its digital strategy — or lack thereof. The bookseller inked a deal with Amazon in 2001 in which it farmed out its e-commerce operations to the Web retailer. Borders ended the arrangement in 2008 and took control of its own online sales.

But the multiyear deal with Amazon was an indication Borders didn’t understand the online market and one of “a series of errors that set the stage for today,” Greco said.

Borders gave its rivals a head start in capitalizing on strong demand for e-books. Though Amazon’s Kindle debuted in 2007 and Barnes & Noble launched its Nook device in late 2009, Borders’ Kobo e-reader didn’t hit the market until last summer.

According to the Association of American Publishers, U.S. publishers’ e-book sales rose 164 percent in 2010 from 2009. The category accounted for 8.3 percent of the trade book market last year, compared with 3.2 percent in 2009. Overall net sales of books for 2010 were up 3.6 percent on the year.

Davidowitz believes Barnes & Noble, rather than a venture capital firm or other investor, will buy Borders.

“I don’t know if Borders can survive as a stand-alone company,” he said. “But it could be a deal with Barnes & Noble where the duplicative stores go away. I think they are the likely acquirer.”

Borders’ bankruptcy filing, rumored for much of this month, comes only three weeks after a $550 million financing commitment with GE Capital was announced. Borders listed $1.27 billion in assets and $1.29 billion in liabilities in its Chapter 11 filing. It has fewer than 50 creditors, mostly publishers. The top creditor is Penguin Putnam, which is owed $41.1 million.

At the Deerfield Borders on Wednesday, overcast skies and rumbles of the location’s imminent closing made for a somber atmosphere inside the two-story store, a fixture for years at the busy corner of Lake Cook and Waukegan roads. Its parking lot was nearly full in the early afternoon.

Debbie Katai, 37, said she’ll miss the Borders’ children’s department. She frequently shopped there to buy presents for her two kids’ birthday circuit.

“I do shop at Barnes & Noble too, but I like it better here,” Katai said. “They always have coupons, activities for the kids and the staff is really friendly.”

Robb Packer rushed to the store with his wife to redeem several gift cards after hearing about the Deerfield store’s closing. Packer, a 60-year-old building inspector from Buffalo Grove, said he shops at the store monthly and lamented the decline of brick-and-mortar stores.

“I know the trend is to go towards e-books, which is great when you’re traveling, but when I sit in my library, I get comfort from books,” said Packer, adding: “Stores like Borders are comfortable — they’re very user-friendly, they have great titles.

“Even though shopping online is great, there’s nothing like shopping in a store with walls and paper.”

(Emily Schwartz)


About internalmarket

This blog and its accompanying Twitter account have been established as social media learning tools for the Internal Communications and Employee Engagement class at Columbia College Chicago. Through this blog, we will share our observations about current events, change management and employee communications theory, and the application of social media in shaping employee engagement.
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