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Borders struggles amid rapid changes in book sales

Borders was once an industry leader in bookselling, but Amazon, Kindle, iPads and other factors have moved the industry away from traditional brick-and-mortar businesses.

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So the brothers spread the use of their software by opening more stores of their own - bigger and bigger, farther and farther from Ann Arbor. Meanwhile, Riggio was opening large stores in once unthinkable places, like Cape Girardeau, Mo. Superstore bookselling was born.

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"They elevated book-buying to the same status as any core retail experience," said John B. Thompson, a University of Cambridge professor and author of "Merchants of Culture," a history of the publishing industry. "They were reaching parts of America that had simply never been reached before with books - not just New York and Los Angeles, but small towns, other urban centers, a whole untapped market of people who wanted to buy lots of books."

In 1992, the Borders brothers sold their chain to Kmart, which wanted in on the new retail bonanza, having already snapped up Waldenbooks. The stores and their coffeehouses had become hangouts, even destinations for dates. The wide, discounted selection eventually put hundreds of smaller bookstores out of business. Malls such as White Flint brought in book superstores as anchors, on a par with Macy's or Bloomingdale's. The stores then moved into urban downtowns, including Washington's, as sought-after tenants in busy office buildings.

The chains became so ingrained in pop culture that they provided the backdrop for the 1990s romantic comedy "You've Got Mail," starring Meg Ryan as an independent bookshop owner and Tom Hanks as owner of the behemoth Fox Books.

"We are going to seduce them," Hanks' character says as he plans a store near Ryan's. "We're going to seduce them with our square footage, and our discounts, and our deep armchairs, and our cappuccino."

The goods the stores peddled at cut-rate prices became the nation's culture. Film and TV producers converted the hottest titles to screen productions. Readers rushed in for the latest Oprah Book Club pick. John Grisham became very wealthy, with one bestseller and movie after another. "These stores created a broad diffusion of literary goods, whether commercial or not, that undoubtedly had a further impact on related industries like film and television," Thompson said. "They had a tremendous impact on society."

Cultural shift

But as the two book mega-stores clobbered each other in their battle for market share, the chains, and especially Borders, missed the next big cultural shift, analysts say.

It started with Amazon. Launched in 1995 by Jeffrey Bezos, the company aimed to be the biggest bookstore on the planet, and it shipped books anywhere at prices so cheap that it lost money on many sales. The jokes came fast: Amazon dot bomb, some people called it. Amazon dot gone, others said.

But it turned out that Amazon knew what it was doing, building an infrastructure that eventually displaced Borders - then known as the more bookish of the chains - as the preferred way to get the right book into the hands of the right customer. Amazon built software that suggested other books to customers, based on their orders. As Amazon got better at such tactics, "Borders lost that patina they had, that special place of a bookstore, and they became just another discount retailer," said Albert Greco, senior researcher at the Institute for Publishing Research.

As customers drifted one way, Borders went the other direction. Analysts say Borders executives, who seemed to turn over at the same rate as bestsellers, did not pay enough attention to the social change. They spent hundreds of millions buying back stock from shareholders. They embarked on an expensive foreign expansion. And they were too slow to build their own Web sales operation, finally giving up and partnering with, yes, Amazon.

"It would be as if Ford asked General Motors to make their cars and distribute them," Greco said. "It was a very bad strategy."

Then came e-reading. Borders, unlike Amazon or Barnes & Noble, failed to invest in the technology until it had won a mainstream following. "All of these consumer trends were there and anyone could see them," said Zeynep Ton, a Harvard Business School retail expert who has studied Borders. "These trends were not a secret. They should have seen them coming."


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