Borders goes into Chapter 11 bankruptcy

The Borders bookselling company announced today it is going into Chapter 11 bankruptcy, which allows the company to keep operating and reorganize.

I checked a few familiar locations on the store closings list. And I'm not sure on the face of it that they're making the most strategic selections.

In San Francisco, they are closing both their downtown locations, San Francisco Centre (845 Market St) and Union Square (400 Post Street). I've been to both of them many times. The Union Square is the central shopping location in San Francisco, and that store gets a lot of traffic. The cafe is typically packed or nearly so any time I go in there. It's right on the main cable car line, so it's hard to imagine how it could get better exposure.

The San Francisco Centre location is a bit cramped, and the cafe is small. But it's in a location that attracts a large number of shoppers. It's very close to Union Square.

In New Orleans, they are shutting down the St. Charles Avenue (3338 St. Charles Ave) store. I was only in that location once, last year. But it seemed to be in a prime location that was drawing quite a bit of traffic on that day. It struck me as being a particularly attractive store, and I was thinking that if I lived in the vicinity I would probably come to the cafe there relatively often.

They are also closing down locations in Alameda, Fremont, Los Gatos, Pleasanton, both San Jose locations, San Mateo, San Ramon, and Union City.

The only San Francisco location remaining open is in Stonestown Galleria, which is also a busy shopping location and near San Francisco State. But I can imagine it gets anything like the tourist traffic of the two locations being closed.

The Palo Alto store is remaining open, which presumably gets a lot of business. There's an Emeryville location (5903 Shellmound Street) across the Bay from San Francisco remaining open. It's in a busy shopping area but it's a bit out of the way and it's also a bit cramped. Plus there's Barnes & Noble very nearby that is a more attractive location, though the parking is more accessible at Borders. There are seven other full stores and one Borders Express staying open in other Bay Area cities, none of them prime tourist areas or particular regional shopping draws.

So, they are basically reducing their bricks-and-mortar presence in the San Francisco Bay Area by half. And doing it by closing down some of their most visible stores in areas most likely to attract shoppers and tourists. I would guess this reduces their physical visibility in the Bay Area by more than half.

So, it looks like in the Bay Area their strategy is to go from being a highly visible presence in heavy shopping areas to more of a niche presence in more lightly-travelled areas. Presumably someone ran the numbers and thinks that the reduction in expenses from closing down in the high-rent areas will leave them with improved profit margins overall. But careful financial calculations don't always drive these decisions.

There has been talk over the last few years of a Barnes & Noble/Borders merger. Maybe Borders is positioning itself for some sort of merger by reducing their outlets to areas that would be desirable additions for B&N or some other company.

See also Borders bankruptcy: 200 store closings point to the rise of e-books Christian Science Monitor 02/16/2011; Richard Bravo, Borders Gets $505 Million in Bankruptcy Loans Led by GE Capital Bloomberg News 02/16/2011.

Tags: borders