It has been six weeks ago since Borders declared bankruptcy and announced the closing of more than 200 stores in an attempt to restructure their retail business model. I went to New Orleans to the beautiful Borders on St. Charles (a former funeral home) for the opening weekend of closing sales.
Borders is in the process of dumping heavily discounted books on the market. In local markets where this is taking place, retail book value is crashing for this limited time period until actual closing takes place. I presume that most of this devalued inventory was not paid for since inventory debt to the publishers is now frozen. Borders is able to raise their capital reserves since they did not pay for much of the product they are selling. (see previous blog with publisher debt figures)
Flooding these local markets in this way keeps readers from shopping the local independents. It seems to me that publishers are losing in two ways:
1. Unpaid-for inventories are being sold.
2. The lost sales by independents means less purchases from publishers, which means less paid-for inventory will be sold.
I completely understand the independents will be better off in the long run, but all are temporarily affected by Borders’ way of doing business.
Friday, March 25th Borders released a proposal to handout $8.3 million in executive bonuses. One would have to assume these monies would have to at least partially come from Borders dumping of devalued/unpaid-for books on the market.
I’m curious as to what deal Borders and the publishers will make next. Will the publishers play hardball with the the Borders transition? Whose demands will swing the most weight? How many unpaid dollars will Border’s use to try and restructure their tool box?
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