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Borderline?

Posted by David Mehegan  December 1, 2008 12:10 PM

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We spent an hour in a local Borders Books & Music store Saturday night, then went down the road to a Barnes & Noble. You couldn't fail to notice how relatively thinly stocked Borders seemed to be, compared with Barnes & Noble, which was so crammed with dumps (i.e., cardboard floor book displays) and tables covered with volumes that you could hardly walk.

It seems we were not imagining things, since last week Borders announced that it is no longer for sale, and that one of its key recent strategies has been to reduce inventory. The company lost $39 million in the quarter ended Nov. 1 -- roughly the same as a year ago -- and same-store sales (i.e., stores open at least one year) had dropped 12.8 percent in the Borders stores and 7.2 percent in the Waldenbooks subsidiary.

Reducing inventory is certainly one way to cut costs, but clearly that can't go on forever. You can't sell books if you don't buy them.

The economic crisis has hit the big guys hard -- in the third quarter, Barnes & Noble lost $18 million and Books-a-Million, a 200-store chain with no local outlets, lost $2.2 million. Sometimes a recession is just a dip, and businesses hunker down and get through them, changing essentially nothing about their business model. But if they're deep and long enough, they can force fundamental changes in an industry, through automation or reimagined business models. The newspaper business is going through this wrenching change now -- no one thinks the old happy days will come back, even after a recession. But it is possible that innovation and creativity can yield something truly new. We're guessing that the love of reading will never go away.

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