Posts Tagged 'Borders'

A book retailing success story

In contrast to the bad news about Borders and the underlying changes driving its closing, there is a success story worth celebrating: Half Price Books. Here’s my comment about its success building a niche, from a recent RetailWire discussion on the subject:

At this point the price of e-books isn’t falling fast enough to threaten Half Price Books. More importantly, Half Price Books has a very specific niche and brand identity. As Gene pointed out, there is a “treasure hunt” aspect to shopping at their stores that is very appealing to book browsers and value-oriented consumers. Combine the strategy with sensible approaches to e-commerce and expansion, and Half Price Books looks like a viable concept.

 

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Borders: The post-mortem

No surprise that Borders recently threw in the towel and announced the closure of its remaining stores. My point of view, from a recent RetailWire commentary:

Barnes & Noble may cherry-pick some of the remaining sites where they have an opportunity to fill in a market or enter another one. And it’s also possible that an independent bookseller might find a suitable location and a ready-made audience. But the writing was on the wall when Borders began its Ch. 11 proceedings and went through its first wave of store closings. It left Borders with little “critical mass” to support its remaining infrastructure and less relevance to the book publishing industry.

Of course, the underlying issue is the change in technology that made most traditional booksellers about as relevant as record stores. The advent first of e-commerce and then of e-books changed the marketplace and left little room for “second best.”

 

A retail footprint for Amazon?

From a recent RetailWire discussion about Amazon having an interest in some old Borders locations:

The concept of “the publishing business at retail” is the real issue here. The definition is changing rapidly, as digital content delivery turns traditional bricks-and-mortar retail on its ear. (Just ask Blockbuster.) As I said a couple of months ago when Borders announced its big wave of store closings, there was a Borders, a B&N and an independent within a five-mile radius of my house. Meanwhile, I have not bought a printed book in the two years that I’ve owned a Kindle.

Having a retail footprint may make sense for Amazon, as long as it can cherry-pick the best locations. It apparently serves a tactical purpose pertaining to the looming issue of sales taxes, but won’t be a significant part of Amazon’s overall business.

 

Will Borders survive reorganization?

There is a Borders about five minutes from my house and it’s one of three stores being shuttered here in the Milwaukee area. Based on my own shopping patterns (especially since I bought a Kindle about 18 months ago), it’s hard to see how the traditional brick & mortar bookseller will survive without this sort of consolidation.

The big winners short-term are Barnes & Noble (in this trading area, about four miles away) and a local independent bookseller (about three miles away in the other direction). But the lesson learned is that the demand for printed books is simply too tenuous to support three competitors in a 10-mile radius, even with a high density of affluent, educated readers. What looks like a short-term benefit to B&N should really be interpreted as the writing on the wall.

As to Mr. Ackman’s declaration (within the last 2 weeks) that Borders would not have to declare Ch. 11 bankruptcy…right now his track record investing in retail looks pretty similar to Eddie Lampert’s. If I were on the board and management team at JCP, I would take whatever he says with a grain of salt.

Borders wants to buy Barnes & Noble: Really?

Here’s my reaction (via RetailWire) to the news that Borders and its “activist” lead investor William Ackman want to take a run at its much bigger and (relatively) healthier competitor, Barnes & Noble:

This reminds me of the 2004 “merger” of Kmart and Sears, in which the much smaller and weaker company had the financial resources to swallow up a retail giant. Without turning this into another exercise in Sears-bashing, the results speak for themselves, because the combination of two weak players does not usually result in a win. (Compare this to the Macys/May merger, in which the two industry leaders formed a stronger company over the long run.)

The parallel to Sears Holding extends to the company management: Eddie Lampert was a celebrated financial wizard who has not shown aptitude for running a retail business over the past six years. Likewise, William Ackman is a noted hedge fund manager who has parlayed his investments in several retail companies into a reputation as an “activist investor,” but without much of a track record of management or results to show for it.

There is one key difference worth pointing out: B&N and Borders are the “last ones standing” in the bricks and mortar bookselling industry. (The real competition is from e-commerce and digital books.) Some consolidation seems inevitable, but is Borders the company that can pull it off? And how does the business model avoid becoming another Blockbuster?

Barnes & Noble: Struggle to survive?

Barnes & Noble has been too slow to react to the sort of “outside the box” competition provided by Amazon…both in terms of printed books and now in terms of e-books. While B&N claims that the Nook e-reader is a big success, the company still stakes its future on traditional bookselling in an era when Amazon has already migrated over half its sales from hardcovers to e-books and continues to promote the Kindle very aggressively. B&N seemed to be satisfied with the slow decline of Borders instead of eyeing the true competition.
Regardless of the outcome of the battle for control of B&N stock, the company has a lot of work to do. The model of megastores with massive assortments may be harder to support — and there is evidence in the growing number of out-of-stocks. Other companies are developing smaller-format concepts in order to provide more focused assortments in a more flexible and cost-effective real estate model…Best Buy Mobile and SA Elite (from Sports Authority) are just two that come to mind. So it’s time for B&N to reinvent its bricks & mortar experience at the same time that it continues to push e-book sales.

Ron Burkle ups the ante

Ron Burkle is a well-known investor with active positions in Barney’s and Barnes & Noble. In today’s RetailWire, panelists discussed his interest in bigger stakes in both retailers. Here’s my take:

It’s probably a good time to buy into the luxury segment after a period of depression and some prospects for stronger growth. Mr. Burkle will want to demonstrate that he has a credible growth plan for Barneys, however, since it has expanded in fits and starts over the past several years. On the bookselling front, “be careful what you wish for.” Yes, there are market share gains to be made at the expense of Borders’ struggling bricks-and-mortar business…but B&N has entered the e-book fray just before Apple promises to turn this segment on its ear.


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