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Borders bust and Amazon in takeover mode

25 July 2011

There have been a series of events on the bookselling front which may mark a seismic shift. In the States, Borders have gone into liquidation after what seems like months - or even years - of teetering on the brink. And in the UK Amazon has swooped on its successful competitor, The Book Depository, buying out the competition.

There's still a chance that some of the Borders bookstores will be picked up by someone else, but that apart, hundreds of stores are closing and 10,000 people could be losing their jobs. The immediate effect for publishers will be that thousands of books are returned to them and, with fewer sales outlets, publishers will have to cut their print runs going forward.

Authors will suffer because this is removing a great slab of bookselling from the American market and there is no way it can be replaced. Publishers will pay less, print less and sell less, although first there will be a great upheaval in the market.

The Borders saga seems to have been a catalogue of mismanagement, as the once mighty bookstore chain has gradually been brought down. Ten years ago it had 2,000 stores, 360 of them superstores and 50 of them overseas. It earned more than $3 billion (£1.839 billion) in annual revenues. But then new management brought in "category management," and the decision - in retrospect disastrous - to do web sales through Amazon was taken. Too late the management realised that it had bolstered the competition rather than competing with it.

Anyone can see that it is sound strategy for Amazon to buy the competition, the extremely impressive and fast-growing The Book Depository, which has been beating Amazon at its own game by developing a highly efficient sales operation which offered a vast range of titles to serious readers, and also had a rapidly growing international business.

The Office of Fair Trading is investigating the proposed purchase and both the Publishers Association and the Independent Publishers Guild has come out against it. Richard Mollet, CEO of the PA, said: "This proposed merger is of great concern to us and our members. We feel that the merger would reduce competition, plurality and diversity in the book retail market, and that it raises questions that have long been asked about Amazon's strikingly dominant position."

The latest organisation to object is the Society of Authors. In its submission it said: 'Of course the pressures on bookselling and publishing are many and varied, and the threat is by no means solely down to the rise of Amazon, but to approve Amazon's takeover of The Book Depository would in our view be a further step towards unhealthy domination by a single company.'