Borders Prepares for Chapter 11 Bankruptcy Law Protection

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Borders is preparing to file for Chapter 11 Bankruptcy, according to the WSJ.  Although smaller mom-and-pop bookstore owners will be celebrating the demise of this big-box retail competitor, it’s just another signal that brick and mortar bookstores are in crisis.  Ever since Amazon showed up on the scene, local bookstores have had a hard time competing with their huge selection and cheaper prices.  Throw in the e-reader phenomena, and many physical bookstores are in real trouble.

Missing out on those online sales has clearly cost Borders, and the numbers speak. According to Fonerbooks.com,

Book sales through retailers fell in 2009, and overall bookstore sales have been treading water since 2003….The combined total for media sales (mainly books) of the Barnes&Noble and Borders chains plus Amazon North America and BN.com was $13.5 billion, with all the gain comng [sic] from online sales.

Borders’ major problem was that they didn’t do a good enough job keeping up with consumers’ desires to go digital.  Unlike Amazon and Barnes and Noble, Borders didn’t get on the e-reader bandwagon.  In addition, Borders actually transferred its internet operations to Amazon, and although it’s unclear to what extent this decision impacted the bankruptcy, common sense screams “conflict of interest”.

So what now?  A bankruptcy isn’t necessarily the end for Borders.  Chapter 11 filing allows the retailer to continue operating the business, and is primarily used for businesses that want to reorganize.  Still, that’s little consolation to the people who work at Borders stores. Even though the company may be able to “keep their doors open” metaphorically,  many of their actual stores may be closing, and that means that people will lose jobs.

Hopefully Borders will find a way to rally so it doesn’t come to that.  But using your Borders gift cards now isn’t a bad idea.

Related articles

• Borders Nearing Bankruptcy: Everything You Need to Know (blogs.wsj.com)
• Borders may file for bankruptcy this month: source (reuters.com)
• Borders near bankruptcy after e-books weigh it down (electronista.com)