Is Borders’ bankruptcy good for Amazon and great for B&N?

It’s a question worth asking.

Reasons Borders’ bankruptcy is a bad sign for both Amazon and B&N

It shows a weakness in physical book sales and both Amazon and B&N are still heavily dependent on physical books. An aphorism about falling tides and shipwrecked boats would be awfully convenient.

Without physical books there’s nothing to keep book sales from falling precipitously. While there were $20 hardcovers and $10 paperbacks it was easy selling $5 and $10 ebooks. As physical books become less popular, digital book prices will dictate digital book prices and that will mean severe drops in price.

Borders’ bankruptcy affects everyone and everything – grocery stores will wonder whether they should promote books as much, Borders owes tens of millions of dollars to each of the major publishers, customers will have fewer places to browse for books, there will be fewer options for distributors and publishers.

It’s a tough choice – Would you rather be #1 in a business that is booming and where even the #4 and #5 companies are doing well, or would you prefer to be #1 in a market where even a #3 company can’t survive?

The bottom line is that physical book sales are crucial for both Amazon and B&N and Borders’ demise clearly shows that physical book sales are under threat.

Reasons Borders’ bankruptcy is good for Amazon

More people will have to buy books online.

One competitor is gone. A competitor that was selling lots of non-Kindle eReaders and supporting Kobo, which is a very dangerous ebook rival.

It might mean that B&N is under threat. If nothing else, Borders’ troubles might worry B&N into making stupid moves.

It helps increase eReader sales and ebook sales. It hugely speeds up the shift from physical to digital. Publishers and Authors and Customers will start feeling that the future is ebooks.

Reasons Borders’ bankruptcy is great for B&N

Its biggest retail rival is dying. B&N will benefit greatly from book buyers having only B&N stores to go to – At least for the next few years.

Some of the people who choose online will choose BN.com. Some of the people who choose eReaders will choose Nook.

Its power with Publishers will grow immensely.

Nook’s rivals like Kobo will be weakened as Borders slowly dies. 

B&N will be the only retail chain left that has customers of very good intent, i.e. customers who love books.

All the people in love with physical books will gravitate to B&N. They have to – if B&N goes down, their options go down drastically.

It’s very puzzling

It’s almost as if Borders is sacrificing itself so that B&N can do well and make a smooth transition into ebooks and eReaders. If there were any doubts about B&N’s viability and future (and there have certainly been reasons to wonder) – Well, now there’s very little to worry about.

B&N will now get most of the in-bookstore purchases. Nook Color is doing well. B&N should be fine.

It’s also good for readers as Amazon will now face competition from a stronger B&N - forcing Amazon to improve faster. It’s good for Amazon too – a good, healthy competitor keeps you alert and focused.

14 Responses

  1. Don’t forget that there is a massive part of the book business that couldn’t care less whether Borders or other bookstore chains survive. The gift shop market, museum stores, special sales distributors, and all the many, many grocery and department store venues where books are sold. Add in the growing market for ebooks and you’ve got a healthy book world even if Borders shuts down completely. My small press stopped doing much business with Borders several years ago, and we’re doing just fine without the chain.

  2. I fear many sales will be lost. I see some pick up by B&N, Amazon and possibly Target. But in the end I think many consumers will buy something other than books.

  3. It’s a bookstore chain massacre:”Australian book chains Borders, Angus & Robertson and the Whitcoulls chain of newsagencies in New Zealand have been placed into voluntary administration…”

    http://www.booktrade.info/index.php/showarticle/32042

    Going down like dominoes, any speculation for what this means for Kobo?

  4. Amazon will take over the world if you let them. Not just books, but homeware, clothes, even food now. It honestly scares me a little bit.

    • Well, there’s nothing wrong with them wanting to take over the world. It should be pretty obvious given how willing they are to sacrifice today’s profits for tomorrow’s something.

  5. This speculation is all reasonable, however you need to keep in mind that Borders stores are going to stay open for a long time, if not indefinitely. Bankruptcy doesn’t alway mean the store goes out of business. Bankruptcy can mean that a judge takes over and sorts out the financies, the creditors agree to forgive some debt, and the business is “restructured.” In fact, lots of business declare bankruptcy and come back stronger than ever. Example: Marvel Comics.

  6. Have you ever purchased a book from Borders, without a 30% off coupon, that wasn’t a bestseller (or in some other discount category)?

    Amazon’s prices are easily 40% lower across the board. That’s one of the big reasons Borders couldn’t make it. Five years ago I bought a lot of overpriced books at Borders. Since then I could count them on one hand.

    It shows a greater weakness in their business plan than in the overall market.

    Will Borders spring back to life? Are they going to be selling more per store now that they’ve shut many down? I find it doubtful. Borders is now in the business of prolonging their demise.

  7. I agree that Borders will most likely be going out of business. My post wasn’t meant to suggest that I believe it will survive. I was just pointing that bankrupty doesn’t 100% guaranty that a store will go out of business. There’s a common mispercption that those two ideas — “bankruptcy” and “going out of business” — are the same thing. They’re not, though bankruptcy does typcially lead to going out of business. There is a chance, albeit a small one, that Borders will survive. Crazier things have happened.

    Other major companies that survived bankruptcy: Texaco, Dow Corning, Delta Airlines, United Airlines, and Marvel Comics.

    • Yeah, it was a good point. I shouldn’t have assumed that Chapter 11 = bankruptcy. It’d be best for everyone in books if Borders survives and keeps pushing B&N and Amazon to do better.

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