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Borders files for bankruptcy

Jangler

By Jangler,
in Huddle Lounge

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Jangler

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http://blogs.wsj.com/deals/2011/02/16/borders-bankruptcy-what-went-wrong/

Borders filed for bankruptcy protection today, turning what had been a business success story (small-town bookstore turns crazy successful national mega-retailer) into a cautionary tale.

Some of Borders’ problems weren’t the company’s fault. There are now hundreds of places to buy books online or in physical bookstores. That forces all book sellers to compete over price.

And, of course, Borders made a lot of mistakes, too: Ill-fated expansion plans, too many stores that lose money and being late to realize the popularity of electronic books.

Too Many Unprofitable Stores

This is a big lodestone. Borders is planning to close 200 or more of its stores -– about 30% of its current locations –- because too many stores lose money. Borders said the stores it plans to close are draining $2 million a week out of the company’s profits.

Borders said it “found that they…have a number of stores which are simply unprofitable and are substantially impacting the [company’s] overall performance and ability to pay their debts.” Borders said the store closures will leave the company with a “sizable core” of profitable stores.

Bad Economy and Changing Book Business

Borders said people have been less willing to spend money on optional purchases like books and music, and the company is facing more competition in book selling. Think about how many places now you can buy a physical or digital book – everywhere from the grocery store to Amazon.com to your mobile phone.

Borders also said the book retailing business has experienced little or no growth in recent years. And Borders is now forced to compete fiercely over price of books, DVDs and other goods it sells, even as people are buying more digital books, digital movies and music

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