Borders, Barnes, & Noble?
The recent US court decision greenlighting the merger of Whole Foods Markets and Wild Oats, the US organic grocery chains, in opposition to federal antitrust regulators, is already getting the rumor mills spinning, Retail categories are likely to become blurrier, allowing for more deals that might seem anticompetitive.
A growing speculation is that the decision might open the way between book sales giants Borders and Barnes & Noble, the two largest US booksellers. While Barnes & Noble is expected to lose money this year, Borders is in a particularly bad way, having lost $25 million in the past quarter. Borders recently announced a restructuring program.
According to a story in the Crain's New York Business, the booksellers feel they are hit on all sides. The article ("Bookseller chain merger eyed", 8/30/05) notes: "Historically, Barnes & Noble and Borders have been one another's biggest competitors. But with the advent of online sales, particularly at Amazon.com, and an increase in sales at non-book retailers like Target and Sam's Club, Barnes & Noble and Borders are finding themselves on the same side of the fence."
The argument well be of course that there are plenty of other ways people can buy books, so the concentration will not be anticompetitive. But big box retailers like Wal-Mart and Target sell a very limited slate of "hit" books. The virtue of the two book superstores is that they stock a wide variety of books. And they have driven out of business the majority of small booksellers, which might otherwise fill some of the vacuum if Borders and Barnes & Noble merged. The victim will be the reader, and, above all, the major publishers, which will be even more under the thumb of a suddenly unified bookseller for mid-market books, one that can dictate even more concessions from the presses. True, books can be sold on Amazon, but that is not the same experience for many readers, who want to read the cover blurb and skim through a book before buying.
This is part of recurring oligopoly motif (see hardware stores, record companies, movie rentals). The superstores take all the oxygen out of the market and build stores everywhere. Soon, they find they have built too many stores to sustain profits. The result: even more consolidation.
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10:08:04 PM 
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