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July 19, 2011

Save Your Tears for Borders

By

The slow, painful end of Borders bookstores has finally arrived. After filing for Chapter 11 bankruptcy protection in February and taking actions to save the company, the 40-year-old chain with locations across the country will begin liquidation on Friday. All told, 399 stores will close, and 10,700 workers will lose their jobs.

For those who enjoyed perusing Borders's aisles of books, shopping its bargain bins, listening to music, or sipping coffee in its cafes, the company's closing will come as a loss, but its end is a story of how capitalism really works.

Borders got its start in Michigan and became an innovator in its industry. It is credited by some with popularizing the super bookstore, but ironically enough, it is criticized for putting independent bookstores out of business.

But the book business has changed radically since Borders hit its zenith. Amazon.com came on the scene, as did its Kindle e-reader. The result? Consumers can purchase more books at a fraction of Borders's price – all without having to travel to a store, wait in line, sort through shelves, and be disappointed when the book they want is out of stock.

Meanwhile, Borders failed to innovate, made poor business decisions, over-expanded, was late to the e-reader game, and hasn't made a profit in five years. In short, like the independent bookstores Borders supposedly helped put out of business, it just could not compete in the marketplace. That's capitalism.

And that's what many are lamenting. Detroit Free Press columnist Mitch Albom gushed over Borders's "magic" and the decline of "the American bookstore," remarking:

"The problem is people don't love books the way they once did, nor do they read them the same way. Cheaper electronic versions undermine the need for shelf-space. Younger audiences who haven't grown up with rainy afternoons spent inside book pages, don't snap up the latest great read – unless there's a certain vampire or wizard attached. The backlists of mid-level authors are not lucrative for the balance sheet. And the pressure for profits to keep the stock price high runs diametrically opposite to the slow, meandering, long-term customer approach that used to define bookstores."

Actually, people still love books. But they're buying them online in droves because they get more for their money – without having to pay sales tax. Amazon boasts of catalog of 900,000 books in its Kindle store, and the company posted $9.86 billion in sales in the first quarter of 2011 – up 38 percent from last year. And, by the way, it also creates jobs – unlike Borders, which has just lost them by the thousands.

With its relative success, Amazon may as well paint a target on its back. The same people who criticized Borders for gobbling up independent bookstores are attacking Amazon for putting their newly beloved Borders out of business.

Are those critics hopeless romantics, nostalgic for a bygone era? Is it success they loathe? The slaughtering of outdated sacred cows? Or is it that they love failed industries that can't stand on their own two feet? Undoubtedly, some read books on Kindles or listen to music on iPods. They probably get movies in the mail or online via Netflix. Some may even work for the companies that provide those new services. They enjoy the fruits of the free market, all while attacking its mechanics.

Borders had a failed business model whose time had expired. Some might miss browsing its rows of costly new books or obsolete CDs and DVDs, but something better and cheaper has taken its place.

Mike Brownfield is the assistant director of strategic communications at The Heritage Foundation.

First appeared in The Orange County Register

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