Economic Report #2: Books not so hot

Yesterday’s announcement that Borders was having a tough time coming up with financing for expansion and was contemplating a potential sale led to a bad day on Wall Street, but the outlook for chain book stores isn’t all that rosy over all says Marketwatch:

Shares tumbled more than 20% in morning trading [for Borders] ahead of the rescheduled conference call, and are down more than 70% for the year. Borders’ quandary would have seemed less gloomy in 2006, or even a year ago, when private-equity firms were falling over each other to snap up specialty retailers.

Meanwhile, its top rival Barnes & Noble Inc. posted a 9% decline in quarterly profit and said it expects fiscal first-quarter same-store sales at its namesake stores to be “slightly negative.” Its shares climbed, but it’s looking at a loss of more than 20% of its market value for the year.

Many things led the bookstores to this gloomy place. A book is the ultimate retail commodity, so shoppers either go for the lowest price — which leads to margin-killing price wars — or the best shopping experience.


According to the piece, both chains are rooted in their 90s heyday which saw consumers flock to the “third place” ambiance of free reading, comfy chairs and coffee bars.

Comments

  1. Torsten Adair says:

    I work for B&N, but this is unbiased analysis:
    Borders does not have an online presence. (They partnered with Amazon, and will debut their site in a few months.) B&N has storefronts which synchronize with the website. We continuously offer to order a book in the store and ship it to another address. We accept returns from the website.
    It is hard to browse books online. Websites generally do not recommend similar titles, only what other customers purchased. Bookstore employees, many of them bibliophiles, can not only help the customer find the book they seek, but also offer expert advice. Yes, libraries offer free books and expert advice, but the public doesn’t realize this. They come to B&N the day before a book report is due. They buy books they might read once and loan to a friend. And bookstores have better hours and better locations.
    Barnes & Noble offers a wide range of product for people to purchase: cafe, books, DVDs and CDs, magazines, greeting cards, clean bathrooms…
    I’ll start to worry when the number of new titles published each year in paper declines.

  2. David Oakes says:

    I am not saying you are wrong, but I am saying that a lot of your arguments in favor of bookstores sound a lot like the arguments made in favor of comic shops (over bookstores) that are constantly dismissed.

    (Got us on clean bathrooms, though.)

    Of course, Comic Shops are still here, too. Mostly.

  3. “Clean bathrooms” is relative. I know of at least one NYC-area B&N bathroom that is frequented by homeless people and/or drug addicts.

  4. Torsten Adair says:

    Yes, and the men’s restroom on the third floor of my store was once listed on a gay pickup site. We kept the restrooms clean. Dunno about the homeless. Of course, McDonald’s has clean restrooms too, and look what they sell…

  5. Yeah – what is the appeal of LA area Border’s bathrooms to the gangbanger degenerate populace?

    I mean, there’s graffitti everywhere you go but – I can’t figure why gangbangers love to hang out at a Border’s when they play hookey from school?

    I mean, don’t they have enough books to play with at school?

    ~

    Coat

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