Tag Archives | Borders

Borders Did Itself In

In an excellent story, Ben Austen of Businessweek confirms that the death of Borders had more to do with bad decisions on its part than e-books rendering dead-tree books obsolete anytime soon:

Nashville’s story is not unique. When Borders declared bankruptcy in February, more than 200 of its 400 outlets were still “highly profitable,” says its final chief executive officer, Mike Edwards. There’s no question that the book industry is in flux, with digital sales last year making up about $900 million of the $28 billion-a-year market and increasing fast. But a sizable portion of the book business is still taking place in actual stores. Barnes & Noble (BKS), the nation’s largest book retailer, hasn’t been forced to close its 700 locations. Thus, it wasn’t Amazon (AMZN) —or Amazon alone—that sank Borders. “When there’s a massive transition in an industry, the strong players make it through to the other side,” explains David A. Schick, a retail analyst who covers booksellers for Stifel Nicolaus Equity Research (SF). “What gets caught up in the change are the weaker players.”

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Borders is Toast–But Don’t Blame E-Books

And so it ends. Borders, which went bankrupt and announced plans to close hundreds of  stores last February, is going to finish the job. Hilco Consumer Capital and Gordon Brothers are buying what’s left of the chain, and plan to liquidate the 399 remaining stores and lay off 11,000 employees. (The companies specialize in buying up once-mighty brands: they also acquired Polaroid and The Sharper Image.)

It’s tempting to blame e-books for Borders’ death. Amazon released the first Kindle in 2007; Barnes & Noble, while slow to respond, came up with the Nook two years later. Borders, however, only dabbled in e-books–selling Sony e-readers at first (via kiosks that shoppers always seemed to ignore when I checked) and more recently partnering with Canadian e-book company Kobo. The last time I was in a Borders, which was last week, the first thing I encountered when I entered was a great big table of Kobo readers. But it was clearly far too little, far too late.

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The Decline and Fall of Physical Media Retailing: A Timeline

Some of you may find this difficult to believe, but there was once a time when this country was positively bulging at the seams with cavernous retail establishments that offered books, recorded music, home video, or some combination thereof. Okay, there are still some of them left. But with Monday’s news that bookselling behemoth Borders is filing for bankruptcy and shuttering at least 200 stores, it’s worth taking a look at what’s happened to the retailing of physical media in this country in recent years. It’s been a remarkably bleak time.

The music retailing business has almost completely collapsed; the nation’s biggest video-rental outfit is bankrupt and its largest competitor folded last year; Borders is threatened with extinction and its larger and more successful rival, Barnes & Noble, faces serious challenges. All this woe has befallen these industries at the same time that digital media–from music downloads to streaming movies–has boomed.

You can’t blame digital content alone for media retailing’s hard times. Storekeeping has always been a tricky business, especially during economic slumps. (I don’t think that MP3s or iTunes had anything to do with the demise of big chains such as Linens n’ Things. Long before Amazon and Netflix started distributing content digitally, they up-ended their respective industries by shipping physical goods through the mail–Amazon has better prices every day than Borders has when it’s having a going-out-of-business sale.) And several of the giant retailers that have crashed seem to have been the victim of their own boneheaded business decisions more than anything else. (Borders opened three locations within two miles of each other in San Francisco, all of which are now toast; the management of Hollywood Video mocked Netflix-style mail-order DVD distribution as a blip they didn’t need to concern themselves with.)

Anyhow, here’s a timeline of what’s happened to the nation’s largest physical-media merchants over the past eight years. It starts in February of 2003–a little over four years after Diamond Media released the Rio PMP300 MP3 player, a moment that I, at least, consider the real beginning of the digital revolution.

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Borders Goes Bankrupt

Borders, the second-largest bookstore in the United States, has filed for bankruptcy and will close 200 of its 642 stores. It may close another 75 if the company can’t get concessions from landlords.

You might think Borders was the first major casualty of the digital book boom, but the store’s problems may actually be tied up in the previous digital revolution. An Engadget commenter who claims to be a former Borders employee makes a good point to that end:

“Borders made a big commitment to selling CDs & DVDs — large sections of the stores were devoted to this content in the 90s and early 00s. new stores were designed and built in an effort to give multimedia a large segment of the store space.

“In the end, Borders has failed because [its] stores got too big and the demand for CDs and DVDs dropped — there was just no way to pay the bills.”

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E-Reader Price Wars: Kobo Tries to Keep Up

When cool products cost a lot of money, there’s plenty of opportunity for other manufacturers to introduce less-cool competitors–or ones with fewer features, at least–at lower prices. But what happens when the cool products get radically cheaper? We’re seeing that entertaining scenario play out in the e-reader market.

When bookstore behemoth Borders announced in March it would start selling a basic reader called the Kobo for $150, it was $110 less than the Kindle and Nook. And even though it didn’t have a 3G connection–it made you buy books on a computer and sync them via USB–it was a deal.

But then Barnes & Noble set off e-readers price wars by cutting the price of the Nook from $259 to $199 and introducing a $149 Wi-Fi-only model. Amazon knocked the Kindle’s price down to $189 a few hours later–and last week, it shipped the third-generation Kindle in both a $189 3G model and a $139 Wi-Fi only one.

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Borders Sort of Responds to the E-Reader Price Wars. You Out There, Sony?

As of Sunday night, the Kobo e-reader sold by Borders was a $150 gadget that dramatically undercut the $259 pricetag on Amazon’s Kindle and Barnes & Noble’s Nook. Then B&N cut the Nook’s price to $199 and introduced a $149 model, and Amazon responded by knocking the Kindle down to $189. The Kobo is still a cheap e-reader, but not strikingly so–especially considering that it has neither a 3G connection nor Wi-Fi.

So Borders has taken action, but not in the form of a straight price reduction: It’s including a $20 gift card with purchase of the Kobo, reducing the effective cost of the e-reader to $129. I don’t think Kobo matters enough (at least not yet) for Amazon or B&N to feel forced to react to this price cut. But I suspect that before all the product introductions and price reductions are done with, we’ll see three standard price points for e-readers: $200 or thereabouts for 3G models, $150 or thereabouts for slightly less fancy ones, and $99 or thereabouts for basic models that you might still plausibly want to own.

Still to be heard from: Sony, whose $169.99 Reader Pocket Edition and $199.99 Reader Touch Edition are now a tad pricey–and whose already-big-ticket $349.99 Daily Edition is totally out of whack with the e-reader economics that Barnes & Noble and Borders established yesterday,


Borders Starts Selling the Kobo E-Reader

Borders is taking orders for the Kobo e-reader, a new device from a startup partially owned by the bookstore megachain. It says it’ll start shipping Kobos in June.

The most intriguing thing about the Kobo has nothing to do with its hardware, software, or service. It’s the price–at $149.99, it’s the cheapest e-reader yet that’s backed by a big brand. (Sony has been selling its Reader Pocket Edition for the same price, but it’s a sale that’s scheduled to end on Sunday.)

Amazon’s Kindle and Barnes & Noble’s Nook both go for $259. Both sport 3G wireless and other features that the Kobo skips in order to hit a low price point. (The Kobo doesn’t even have Wi-Fi–you buy books on a computer, then download them to the e-reader via USB.) But you gotta think that if Borders promotes the Kobo energetically enough, it’ll still put pressure on Amazon and B&N’s fancier rivals. There are already rumors of a cheaper, simpler “Nook Lite,” and I’d be startled if Amazon doesn’t do something to make the Kindle more affordable.

Then again, it’s not a given that Kobo will be a hit. Borders has sold Sony’s Readers in its stores for years, but hasn’t exactly pulled out all the stops–they’re displayed at  kiosks which usually look pretty lonely when I wander by them. Kobo gives the bookseller a second chance to get serious about the future of reading, and it’ll be interesting to see if it invests more energy in the idea this time around.

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