Borders bites the dust

Borders' filing for bankruptcy this week was the expected outcome of the long slow decline of the second-biggest US bookstore chain, as it gradually ran out of impetus and money.

The book retailer has been struggling for months, with Ingram as the chain's main supplier of books, and most publishers putting them on stop. Borders had proposed that publishers receive interest-bearing notes instead of payment but publishers, not surprisingly, were cool on that proposal.

Borders's finances have crumbled over the years amid declining interest in bricks-and-mortar booksellers, a broad cultural trend for which it offered no answers. The bookseller suffered a series of management gaffes, piled up unsustainable debts and failed to cultivate a meaningful presence on the Internet or in increasingly popular digital e-readers.

Meanwhile in Australia the biggest bookselling chain, Angus and Robertson, went into receivership, threatening 103 directly-owned stores and 61 franchisesd stores. This also affected Whitcoulls in New Zealand, with their 65 stores.

Mike Shatzkin of Idea Logical said: "Disruptive change is coming to the book businesses of the world and they're looking to the US experience to understand the nature of that change and what to do to prepare for it." He claimed that within 10 years, bricks and mortar bookshops in the US would slump by 90%, from more than 1,200 large bookshops to around 150 stores, as the book business switches over to e-books.

Borders currently operates more than 650 stores, including about 500 superstores, and employs 19,000 people. It had been suggested that the company could close more than 150 of those locations, but now 200 looks likely, or even 275.

The move to file for bankruptcy protection was accepted by publishers as an inevitable move after years of declining profits and management turnover. In a desperate effort to preserve cash, Borders abruptly stopped paying publishers at the end of December.

Publishers stand to suffer a devastating blow: Penguin is the largest unsecured creditor with a $41m claim. Hachette Book Group has a claim of $36.9m and Simon & Schuster Inc. has a claim of $33.8m. Random House has a claim of $33.5m.

Borders was also affected by the difficult retail climate during the recession and by other strategic decisions. It was slow to retire its rather unsuccessful small-format Walden bookstore locations, and, fatally, the company was late in developing its own e-commerce site. Even by this year, as e-books boomed to make up about 9 to 10% of trade book sales in the US, Borders's online efforts never took off in a significant way.

Borders was once seen as one of the best booksellers in the business but lost its way and did not keep up with changes in the retail environment. Analysts said that Barnes & Noble, its chief rival in bricks-and-mortar bookselling, made savvier real estate decisions. In Manhattan, for instance, Borders took on expensive leases that were seen as unsustainable.

So, is Shatzkin right? Only time will tell, but the slow death of one of the great bookstore chains will leave many publishers with big write-offs and a declining market. Authors will see a drop in their sales. Many book-buyers will have to go somewhere else to find the books they want, so the independents may do well out of it and the internet sellers, especially Amazon, certainly will. But this huge loss of bookshops can only mean a major decline in publishers' sales.