Final chapter: Liquidation brings sad end to major bookseller

By Kurt Anthony Krug Legal News An end of an era approaches as liquidation sales continue across the nation at Borders Books and Music stores. The 40-year-old Ann Arbor-based bookseller hasn't turned a profit since 2006, having lost $605 million in the last four fiscal years. In February of this year, Borders Group, Inc.--which oversees all Borders stores--filed for Chapter 11 bankruptcy protection. Borders has $1.275 billion in assets and $1.293 billion in debts. As a result of Chapter 11, Borders closed down more than 200 stores. During its five months in Chapter 11, only 399 stores remained (259 Borders super-stores, 114 Borders Express and Waldenbooks, and 26 Borders airport outlet stores) and 10,700 people were employed. Also in that period, Borders attempted to reorganize its business model and reinvent itself. Elements of this plan included aggressively growing Borders.com; expanding its eBook market share; expanding and enhancing its retail offerings (including non-book items); and promoting Borders Rewards Plus, its loyalty program that boasted 40 million members last year, per the bookseller's website. At the same time, Borders executives were looking to find a buyer. Last month, a bid from Arizona-based private equity firm Najafi Companies fell through. There were talks that 30-35 Borders stores could be sold to rival bookseller Alabama-based Books-a-Million, but that also fell through. Once Borders goes out of business, Books-a-Million will become the No. 2 bookseller in the nation (Barnes & Noble--Borders' main rival--is No. 1). On July 21 in Manhattan, a U.S. Bankruptcy Court judge approved Borders' liquidation plan since a buyer could not be found. Consequently, Borders went from Chapter 11 to Chapter 7, which is when a troubled business badly in debt isn't able to pay its creditors and debts files for bankruptcy in a federal court. Liquidation firms Hilco Merchant Resources and Gordon Brothers Group are currently selling Borders' remaining assets, holding going-out-of-business sales at all Borders stores, which began July 22. "We come here a lot. It's very disappointing," said Lauren Anastos, 22, of Farmington Hills. She and her brother Drew, 14, took advantage of the sales at the Novi store July 22, where the parking lot was nigh filled to capacity as was the case across Borders stores all over Metro Detroit. Currently, sales at Borders stores are 40-60 percent off on all its products. Even furniture and fixtures are selling at a discounted rate. All stores are slated to close their doors for the final time in September. Mike Edwards, president of Borders Group, released a statement that read: "All of us have been working hard towards a different outcome, and I wish I had better news to report to you today. The truth is that Borders has been facing headwinds for quite some time, including a rapidly changing book industry, eReader revolution, and turbulent economy. We put in a valiant fight, but regrettably in the end we weren't able to overcome these external forces." Borders was founded in 1971 by brothers Tom and Louis Borders, who were University of Michigan students. Originally called Borders Book Shop, it was located in a 800-square-foot building on South State Street in Ann Arbor (currently, Borders in Ann Arbor is located at Liberty and Maynard in what was once Jacobson's Department Store--another defunct Michigan-based business--and is considered the flagship store). Louis Borders developed cutting-edge inventory management software, making Borders unique amongst its competitors. Borders revolutionized the retail bookselling industry. Its employees had to be knowledgeable about authors and were renowned for excellent customer service. It offered a wide variety of books and encouraged customers to sit and read in their plush, comfortable chairs. It also sold coffee, pastries, and other treats in its café. In 1992, the Borders brothers sold their business to the Kmart Corp. (another Michigan-based business that has seen its share of troubles), which also owned Waldenbooks, a bookstore chain located mainly in shopping malls across the U.S. Kmart merged both booksellers, forming the Borders-Walden Group. In 1995, Kmart spun off Borders in a highly-structured stock-purchase plan as the bookseller went public through an initial public offering. Additionally, the Borders-Walden Group was renamed Borders Group, Inc. In 2001, Borders formed a partnership with online bookseller Amazon.com, offering online shopping. This is believed to be the beginning of the end of Borders, according to Heath Richards, of Florida, a former Borders employee from 1999 to 2001. Richards worked at the Borders store in Arborland -- the second of three Borders stores to open in Ann Arbor, in which he was one of the initial employees. He also worked in the bookseller's online customer service department in its Ann Arbor-based headquarters until he was let go due to the Amazon.com partnership. "First, I have no sympathy for the Borders higher-ups whatsoever," Richards said. "They ran a great company into the ground and destroyed a great Michigan business. I know a lot of former fellow employees will not like me for saying that, but -- frankly -- I don't care. When a company sells off its website to a competitor and continues to expand its brick-and- mortar stores, even though they are continuously losing money on them every year, and the competitor in turn destroys the website... well, then, yeah, they deserve to fall. Will I miss Borders? Heck, yeah! It had a charm to it that Barnes & Noble doesn't have... Borders employees were the best." Borders eventually launched Borders.com, its own e-commerce site, in 2008. Other milestones include purchasing Paperchase Products Limited, an England-based company offering an assortment of stationery in 2004. Also in 2004, it opened its first store in Malaysia. In 2005, the largest Borders store in the world -- 60,000 square feet -- opened, also in Malaysia. In 2006, Borders announced it would open franchise stores in the United Arab Emirates. Despite opening new stores, Borders announced the sale of its England and Ireland subsidiaries in 2007, as well as the sale of its businesses in Australia, New Zealand, and Singapore in 2008. It was also in 2008 that Borders announced the sale of its Paperchase division. Ramzi Khzouz, of Dearborn Heights, is more outraged than sad at the prospect of Borders closing down. "Where is the joy of opening a book and experiencing your favorite author? It's not on Kindle," said Khzouz. "For me, from my experience, Borders has more to choose from than Barnes & Noble. Borders is for everybody. It gives you the feeling that everyone is there for the sake of literature than coffee." Businesses such as Dearborn-based Green Brain Comics are feeling the ripple effects Borders will leave in its wake. "We've always thought that our store has benefited from Borders' ability to create a market for trade paperbacks and graphic novels. And that has helped us, in turn, to fill the need that those customers had for items that Borders didn't stock or restock promptly," explained Dan Merritt, who co-owns Green Brain with his wife Katie. He continued: "Borders closing is a huge deal for the comic book business. First, they leave behind millions of customers for us hardworking mom-and-pop-owned bookstores to cozy up to and impress with our awesome service and unparalleled selection. And secondly--and most importantly--Borders left behind a bazillion dollars in unpaid bills to distributors like Diamond Comics Distribution. Our biggest vendor is on the hook for nearly 4 million dollars of unpaid invoices, of which they can only expect pennies on the dollar through Federal Bankruptcy Court. This is a tragic example of how giant corporations sometimes poison the waters for us small business people." Authors also feel the loss. New York Times best-selling novelist Brad Meltzer, a U-M alumnus, would only go to the Borders in Birmingham when making appearances in Michigan. "They hosted me from the start. When no one would," said Meltzer, of Florida. The end of Borders will cut down tremendously on opportunities for people to discover new authors, making that much harder for someone trying to break into print, according to novelist Colleen Gleason, best-known for her "Gardella Vampire Chronicles" series. "I'm terribly sad, I'm absolutely devastated," said Gleason, of Livingston County. "I wrote 12 of my books at the café in the Borders in Brighton. It's the right environment, the right place to work from the employees to the table I wrote at, and the music wasn't so loud. I'm absolutely devastated. We can look at the things they did wrong, but at the end of the day, we're short a bookstore chain people loved. We now have one fewer bookstore chain where people could browse and go to meet other people." Published: Thu, Aug 25, 2011

––––––––––––––––––––
 Subscribe to the Legal News!
 http://www.legalnews.com/Home/Subscription
Full access to public notices, articles, columns, archives, statistics, calendar and more
Day Pass Only $4.95!
One-County $80/year
Three-County & Full Pass also available