Borders' fall to shrink trade by £35m a year

04.12.09 Graeme Neill and Neill Denny in The Bookseller

Borders' collapse could lead to more than £35m in sales permanently lost to the book trade, as around half its market share consisted of incremental trade.

An observer familiar with Borders said that of the chain's 4% market share, around half might move away from the book trade forever if, as seems likely, the chain no longer trades in any form. Total book sales last year were £1.77bn meaning 2% is equivalent to £35.4m. While administrators MCR have been searching for a buyer for Borders, it appears highly unlikely another bookseller will purchase the entire 45-chain portfolio.

Publishers believe that the business was unable to get any more cash and could not continue trading as a result. The observer blamed poor non-fiction sales in particular. "The turning point was half-term. Traditionally, it is the start of the Christmas selling period. But for us it was just another week. Sales of celebrity biographies in particular just haven't been happening."
In the weeks before administration, some major publishers had been trading with Borders at a reduced volume.
Despite backers' optimism about the business at the time of the Valco-backed management buy out in July, it is understood that there had been a marked subsequent decline in book sales. While sales of non-book product had grown, they had not increased at a fast-enough rate to make up for lost book sales.

Sales of backlist titles were also under pressure. "If you haven't a reliable bedrock of books that will sell at full price, you can't sustain a business by heavily discounting the frontlist."

Borders has been criticised by staff, publishers and analysts for selling the likes of jewellery boxes. "There's been some tat in there but some of the new products—toys, confectionary—have been very successful," said the observer.

Meanwhile, Jim Thompson, m.d. of brand consultancy 20|20, said: "Borders was a well recognised name in the UK but never managed to get into our hearts. This differs to Waterstone's who created a dialogue with customers and got loyalty from them. Borders never really achieved that through its shop or online offer. I don't think it changed enough."

Borders had placed an ad for a buyer in the Financial Times on Tuesday 17th November. Two days later it was reported that W H Smith was looking to buy some of the stores.

Since the business went into administration last Thursday, administrators MCR have instituted a chain-wide closing-down sale and laid off 36 head office staff. A skeleton staff of four buyers are now working in the book department.