Wednesday, February 16, 2011
Borders Bookstores have filed for Chapter 11 bankruptcy. This is not something to celebrate, but it shows that the swinging pendulum of the business cycle is never stationary. When Borders began building their super-colossal stores, they forced a lot of small independent bookstores out of business. Many family-run operations with long histories found they could not compete with the giant. Now, the giant is learning that its business model has become obsolete, as book buyers have turned to online vendors and the remaining small independent bookstores. People seldom crowd bookstores anymore to browse through the shelves, and the lack of foot traffic has draped the albatross of outrageous overhead around the necks of megastore management. Small business flexibility in planning and ability to react to the marketplace are going to be the watchwords of the economy for the near and middle term future. Only a small business can redefine itself within a short period if necessary. The independent bookstores that are continuing to thrive do things like specializing in a few subject areas, offer products other than books that relate to key titles, sponsor community activities, and celebrate local author events. The huge bookstore chains have had to develop their online presence to survive. Borders didn't even do a good job of that, letting Amazon run the online business for them. Sooner or later, huge bookstores and other businesses with overhead structures that are not in proportion to their revenues will have to change or close. Just remember, in business there are two ways to generate profits: Bring in more sales; and reduce your costs for the same sales.