Borders Closing: Another Nail in the Coffin for Brick-and-Mortar Retail?

After a failed auction attempt yesterday, Borders Group Inc. is now shifting into full liquidation mode. The nation's second-largest bookstore chain will close its remaining 399 stores and is likely to shut down for good by September.

The question now: What does Borders' closing mean for other small businesses that struggle to compete against online competitors?

Borders' collapse is both expected and disconcerting. The company filed for bankruptcy protection last February and has struggled ever since. After closing a first wave of retail stores, the bookstore chain had increasing trouble even stocking its shelves, as publisher after publisher refused to send inventory to Borders. This was because Borders delayed payment to publishers on books it had already sold, and the company wanted to establish delayed-payment plans for its future sales.

From personal experience, I can tell you that margins and cash flow in the book publishing industry are incredibly tight, and only the largest publishing houses would even be able to afford to contemplate such a plan, even if they were inclined to participate.

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