The collapse of the book retail empire Borders, which filed for Chapter 11 bankruptcy protection Wednesday, is weighing heavily on the minds of many business leaders and observers. Though it came as a surprise to no one following the issue, the company’s stated plan to close 200 stores nationwide over the next few weeks kick-started a discussion of what went wrong and what it means for the publishing industry and business in general. 

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The issue came up offhandedly Thursday afternoon at a luncheon at which the Los Angeles Economic Development Corporation discussed its economic forecast for downtown L.A. with local business leaders.

During a rundown of the issue of non-residential real estate vacancies in the downtown area, LAEDC chief economist Nancy Sidhu mentioned that there were no Borders locations in downtown, as far as she knew.

“Thank God,” someone in the audience said, giving an idea of what kind of ripple effect the chain’s demise might have.

This may have come up because of the Borders stores’ infamously long leases for locations that made no money. The Wall Street Journal explains:

The bankruptcy process allows companies to break their onerous store leases, which have been a particular problem for Borders. The company’s lengthy leases has hamstrung the unprofitable book retailer. But while breaking leases is great for Borders, the moves also will be a big headache for the landlords. Downtown can count itself lucky for avoiding this migraine.

However, many L.A. area Borders stores will close, including spots near Santa Monica, Pasadena, Culver City, Glendale and Lynwood.

In its profile (or obituary, however you look at it) of the condemned Pasadena branch, the L.A. Times writes:

High bookshelves were unfilled. Near the upstairs entrance (off the parking structure), a good-sized area with plenty of space for tables or shelves simply sat empty. The corner selling music and movies was limited and dusty. A several-shelf section labeled Biography/Autobiography was taken up on one side with multiple copies of the Kardashian sisters’ book, shining pink, and on the other by Jonathan Franzen’s “Freedom” (which is not Biography or Autobiography, of course, but a novel). The upstairs registers were closed. And the women’s restroom was covered with tape barring its entrance, with notice that it would be closed indefinitely and directing customers in need to the nearby Macy’s.

The company’s 3rd quarter net sales dropped $100.5 million (17.6 percent) in 2010 from 2009. “This decrease was driven by declining comparable store sales of $65.3 million and by non-comparable sales of $34.1 million associated with 2009 and 2010 store closings,” the company stated.

Sales at physical retail stores have been bad, but even the company’s push to put more of its business online has not worked out terribly well. Borders.com sales dropped by $1.1 million in 2010.

In its report, Borders points out some of its own missteps, including the presence of too many physical stores that lose money, which explains the decision to torpedo 30 percent of its retail locations. Many following the industry note the company’s lack of foresight about the rise of electronic books, even after it turned it online bookselling to Amazon.com.

Also, in its position as a retailer for not only books but also music and magazines, the Borders had the misfortune of being the face of a trifecta of collapsing industries.

Whatever it does, the company will have to undergo a swift and thorough restructuring if it wants to avoid becoming the next Tower Records.

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