Another Retailer Bites the Dust: Borders Doomed by Amazon Deal, Howard Davidowitz Says
The final days for Borders Group Inc. are just ahead. The country's second-largest bookstore abandoned last-ditch attempts to save the business this week after few bidders stepped up.
The nearly 400 Borders stores still open could start liquidating and selling off assets as soon as Friday. The plan is for all to be shutdown for good by September, leaving nearly 10,000 employees without jobs.
There were many missteps that caused this business to fail from holding too much debt, opening too many stores as well as jumping into the e-reader business to late. But above all, there was one "disastrous move" that put the final nail in Borders' coffin, says retail expert Howard Davidowitz of Davidowitz & Associates.
"I think the biggest thing Borders did wrong is when they turned over their online business to Amazon," Davidowitz tells The Daily Ticker's Aaron Task and Breakout's Jeff Macke in the accompanying interview. "That move finished them off because they gave away the future."
Speaking of future: Where does this leave the future of the U.S. bookstore and Barnes & Noble?
With a $1 billion market cap, Barnes & Noble (BKS) faces an uphill battle against Amazon's (AMZN) massive $100 billion valuation. But Davidowitz is not willing to put the last big-box book chain down for the count just yet.
"I don't believe in inevitable things because I have seen a lot of great changes done in the retail business," he says, pointing to his favorite retailer Wal-Mart (WMT). Not only did Sam Walton change his business from a small variety store model to a discount retail chain, he grew his single Arkansas store into America's largest retailer and employer.
Davidowitz is not giving up on the U.S. bookstore either.
"The retail business is a business of change," but there is still a room for the bookstore in the hearts and lives of many Americans who use them as a place for meetings, gatherings and to just hang out with friends. Davidowitz says the bookstore is going nowhere soon, but we can expect to see a lot fewer of them.
As for the 10 million square feet of empty retail space, Davidowitz predicts the big multi-level stores will likely lay vacant for some time, which will put pressure on small developers and community banks in those areas. Most of the smaller Borders' stores will be gobbled up by retailers that are currently thriving, like Bed Bath & Beyond (BBBY), he says.