Death of a bookshop: the combined perils of Amazon and private equity

The Borders chain of bookshops is in administration. The shops are being stripped of not just the books but also the shelves, magazine racks, chairs and desks; everything is being sold to leave only an empty, soulless shell. This is rather depressing. There are few enough bookshops on high streets as it is, and with the closure of Borders what is left? There are indeed still plenty of branches of Waterstones, busily expending all their energy promoting the latest celebrity ‘auto’biography and mass-market TV tie-ins. Always in the midst of a closing-down sale but never actually quite getting round to shutting, The Works trundles ever onwards with its emphasis on low price and even lower quality. WH Smith's doesn't really count and Foyle's and Blackwell's chains are too small to really be noticeable; a smattering of independents try hard but invariably struggle. In short, the book industry is in a bit of a crisis.

Why is this? People still buy books and there are more and more published every year. Around 118,000 books were published in 2007 in the UK (according to a Nielsen Book report); admittedly most of these will have sunk without trace, but sufficient were sold to net the book trade around £3 billion (according to their Publishers Association). However, more and more of these books are being sold at heavily discounted prices in supermarkets and at Amazon, bypassing dedicated bookshops and drastically reducing the income that authors and publishers receive for their work. Being an online retailer Amazon can obviously offer low prices due to its lack of overheads, and with its vast warehouses it can afford to stock even very obscure books. Supermarkets on the other hand will concentrate on a small handful of surefire bestsellers (think Dan Brown and Katie Price) and will use their great clout to arrange it so that they pay the publishers mere pence for each copy sold. Proper bookshops just can't compete.

In the case of Borders such increased competition wasn't the only problem. It only arrived in the UK twelve years ago, back then part of the huge bookstore chain in the USA. In 2007 however, it was sold off to a private equity firm called Risk Capital Partners before being sold again earlier this year. Alarm bells start to ring whenever private equity becomes involved with a business, as where private equity appears doom is sure to swiftly follow. These companies seem to operate according to the following formula:

1. Borrow a huge amount of money at low interest rates.
2. Use this to buy a profitable business.
3. Asset-strip the business, selling off everything in sight and thus making megabucks to be paid in bonuses, dividends etc.
4. Watch company disintegrate into bankruptcy as it is saddled by huge debt and now bereft of any means of repaying it.
5. Run away.
6. Pick another profitable business, and repeat.

Against such rampant greed, Borders didn't have a hope in hell.

I went to the Borders branch in Kingston upon Thames yesterday and I must confess I bought all the books I could carry. Many others were doing likewise. The poor staff, all about to lose their jobs, were working extremely hard to keep everything under control. Incidentally, they only found out that their company was going into administration when they heard it on the evening news; such is the calibre of the upper echelons of management that they chose to communicate nothing to those actually doing all the work. It must be rather stressful to be a Borders employees right now. I was therefore shocked and rather disgusted by the behaviour of one fellow customer who decided to kick up a huge fuss.

She had apparently phoned in to reserve a book about a week beforehand and had yesterday come in to collect it, by which time it had not surprisingly gone AWOL. Instead of accepting this as inevitable in a shop with an air of barely-contained chaos and where all the stock had to be got rid of as soon as possible, she got very annoyed and demanded some form of compensation. Somehow, the soon-to-be-unemployed staff managed to be extremely polite to her, even when it became apparent that she couldn't even remember what the book was called and began to rant on about the much-diminished nature of the children's selection. I think if I had been in charge, she would have got a slap!