Borders, a global bookstore chain, began in 1971 in Ann Arbor, a university town, as a bookstore for used books. It expanded rapidly, offering an enormous range of products, at attractive locations, and harnessing technology for inventory management and distribution. At one time, it operated about 1,250 stores worldwide. But bad times struck and the company filed for bankruptcy protection this February.

A buyer appeared on the scene, but creditors pushed for liquidation since they felt that they would recover more if it shut down. So liquidation is in process and about 10,700 employees will be looking for other jobs. By end-September, it would be a ‘borders-less world' and that saddens many book lovers.

Whenever a bookstore shuts down, news reports are tinged with a tone of regret. The event is interpreted as not just a business failure but as a comment on the value of learning in society! The failure of Borders also serves to highlight the drastic changes taking place in the book business and how people read.

BUYING BOOKS ONLINE

Changes have truly been game-changing. First, the big super bookstores occupying almost 40,000 square feet of space came onto the scene. With their offerings and discounts, they seemed to ring the death knell for the small neighbourhood ‘independent' stores. Many closed, unable to face the competition, but the more savvy ones managed to step up their customer service, target their books carefully to serve their clientele, and innovate. In addition, bookstores developed specialties that would distinguish them from others. This distinguishing feature could come from a specialised collection (only place for ‘foreign language' books, for instance) or knowledgeable staff.

The next big wave in the industry was digital with on-line buying pioneered by Amazon. Generating high volumes by offering heavy discounts and convenience, it put the fear of survival into the big super stores. The brick-and-mortar chains responded by making their physical facilities more attractive to their customers.

They opened coffee shops in their premises, and put comfortable couches for people to sit and browse, and offered free Internet. The place filled up with people buying coffee, doing their surfing or homework, and then going home to buy books on-line! The megastores then also launched their own on-line stores to keep up with the trends, but the impact was weak.

I've seen the huge Borders store in Boston's business district quite full during the lunch hour. A newspaper reporter interviewed some of the patrons when the store announced its closure. They were all uniformly full of regret and most of them admitted that they only browsed the titles there and rarely bought except online!

Borders was plagued with other problems such as a high management turnover, and was considered to be slow in moving with the digital times. It initially had an arrangement with Amazon and then tried its own on-line sales site. It tried its hand at promoting the Kobo e-reader which didn't really take off. It had been losing money for about five years before it went belly-up.

Barnes & Noble, the other large bookstore chain with about 700 stores has kept pace with the technology and changes taking place. It also invested in its own on-line store and also an e-book reader, the Nook. But Barnes & Noble also put itself up for sale last year.

AMAZON'S STRATEGY

With the arrival of digital books and electronic readers, people's reading habits are changing. You can buy the book online, download it to your iPad, or Kindle, or Nook or whatever, and read it on the way to work.

Amazon, which began by selling heavily discounted new and used books on-line, not only moved on to sell a whole range of consumer products on-line, but is now again reshaping the book industry. Book publishers are trying to adjust to a situation when a major distribution chain like Borders is no more. Many are also shifting their business models as reading habits change. Although over 75 per cent of books sold are still physical versions, the trend is clear. Print runs are reportedly shrinking, as are book advances to authors.

The costs of printing, carrying inventory, and return costs are making e-books more profitable than printed books and one can expect more and more publishers move towards them, offering customers attractive discounts to make them switch their reading habits. But a bookstore also offers an opportunity for buyers to browse. As buyers' habits change, without a store to wander into, will they divert their spending to some other forms of entertainment?

Meanwhile, the Harvard Bookstore, an independent bookstore that I frequent, is fighting back. It is trying to make a direct connection between the service its provides and its existence. It sends out an on-line newsletter to subscribers, giving information about books on sale, and events such as author presentations. This store has also installed a machine on its premises called (appropriately) ‘Paige' where you can access over 3.6 million titles from a digital database and print (within minutes) a paper version of the book. The machine can also be used by budding authors to publish copies of their own works. The number of readers who like the feel of paper between their fingers may be shrinking, but stores who are looking at that market need to be creative to survive.

(The author is professor of International Business and Strategic Management at Suffolk University, Boston, US. >blfeedback@thehindu.co.in )

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