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Borders UK goes into administration

30 November 2009

The troubled British book chain Borders went into administration last week. The chain, which had been the subject of a management buyout in July, proved unable to trade its way through the recession. It was already in the process of closing down its Book Etc stores when the end came.

A loss of £10.3m ($17m) in 2007 was followed by a loss of £13.6m ($22.45m) in 2008 and eventually the firm ended up with problems getting credit insurance. The big publishers stopped supplying the chain and efforts to sell at least some of the shops to W H Smith proved unsuccessful, although it may be a different picture if the high street giant can now cherry-pick the stores it wants at a bargain price from the administrator.

Borders is thought to be holding £10-15m ($16.5m-$24.7m) of stock and it is currently continuing to trade, although it can only get new stock through wholesalers. The future of its 45 stores and 1,150 staff seems uncertain at best.

For publishers, the timing could not be worse, as the trade goes into the key final few weeks of Christmas trading. Last year the collapse of Woolworths in the same period wreaked havoc with book supply with the loss of the Woolworths stores and suspension of supply from linked company, the wholesaler Bertrams. It was only because of persistent and cool work by the Publishers' Association that Bertrams survived. This year it looks as if there will be no such happy outcome.

Neill Denny, editor-in-chief of the Bookseller, said: 'Borders' essential problem has always been trying to make a big box US retail format work here, where on average retail square footage costs about twice as much. They expanded fast in the late 1990s and the early part of this decade and may well have overpaid for leases. It may be that in a tightening book market, there just isn't room for three national chains, particularly when you consider the continuing growth of the supermarkets and the web.'

It is generally thought that the accelerating percentage of sales through the web has been the main factor in Borders' demise, but the company's severe cash flow problems became worse as sales fell.

Verdict retail analyst Neil Saunders says: 'The books industry is still a very difficult market to trade in. Margins are very thin in books, and a lot of people are increasingly focused on price. But there's still a place for the bookshop on the High Street because people do like to browse, and a lots of people go into bookstores for reading inspiration - that wasn't really the case with the music industry, and it's a key differential.'

He added: 'Local bookshops with extensive back catalogues and specialist areas are carving out a niche, and they can still do well.' And perhaps this is the encouraging message we should take from Borders' collapse. Many will miss Borders' breezy superstores, with a mix of music and magazines but also a surprising amount of book stock, which seemed to offer something different and attract a younger market. But for all that it's a sad day when 45 bookshops seem likely to be lost and there is a further narrowing of competition in book retail on the high street.