Opportunity emerges courtesy of Borders

Borders Group on Thursday won bankruptcy court approval to liquidate approximately 200 stores in a deal that may bring in $175 million to creditors. The sales will begin Feb. 19, allowing Borders to take advantage of the President’s Day holiday, typically a major shopping weekend.

Hilco Merchant Resources LLC, SB Capital Group, Tiger Capital Group LLC and Gordon Brothers Group won the bidding to handle the liquidation sales, according to Bloomberg.

The stores to be shuttered operate under the Borders, Waldenbooks, Borders Express and Borders Outlet names, according to a court filing.

Like clockwork every time a notable retailer fails, familiar questions surface about what went wrong and what the implications are for the rest of the industry. In this case, the lingering question is whether there are too many stores in the United States.

Borders failed to keep pace with change, didn’t take upstart competitors as seriously as hindsight reveals it should have, and when confronted with an abundance of alternatives consumers simply didn’t allocate enough of their dollars to Borders for the company to operate profitably. And yes, there are too many stores in the United States.

Such is the cycle of life in the retail industry where only the strong and adaptive survive.  Now, Borders plans to close about 200 of its flagship stores, which average about 24,000-sq.-ft. You have to wonder if liquidation isn’t far behind given the track record of retailers who attempt to reorganize themselves through the bankruptcy process. Circuit City and Linens ‘N Things stand out as recent examples of struggling retailers who went the liquidation route.

As was the case with those companies, the demise of Borders will create new opportunities for other retailers to grow. It could be other book sellers such as Amazon.com or Barnes & Noble, or it could be other brick-and-mortar chains interested in developing new formats who want to pick up leases on some quality real estate. Borders stores tend to have attractive exteriors and decent locations, which could make them appealing for a company such as Walmart that has a long-running interest in the development of smaller format stores.