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Quick Hits: Borders Sees Writing on the Wall


Brief scrutiny of today's headlines.

Borders Group (BGP), the nation's second-largest bookseller by revenue, has agreed to accept books from HarperStudio on a non-returnable basis, the Wall Street Journal reports.

This upends a decades-old practice in publishing.

In return, Borders Group will get a discount of 58% to 63% off the cover price on initial orders from the publisher, a new imprint of News Corp's (NWS) HarperCollins. Typically, the discount is about 48%.

Under the deal, Borders won't return unsold books to the publisher. This could be a gamble, because an estimated 30% to 40% of adult titles are eventually returned to the publisher.

The new agreement may mean remainder bins filled with steeply discounted books will be sittng next to bestsellers, or at least tucked away in the back of the store.

Will Borders Group's attempt to cut costs during the economic downturn work?

The new practice may encourage penny-pinching readers to wait until the price comes down, a move that could erode profits. Many consumers routinely wait for end-of-year sales or paperback releases, and the price on many books is likely to come down after the initial flurry of publicity.

This could be offset by increased promotion, but that would mean added expense.

No wonder selling books is a slow-growth, tight-margin business.
No positions in stocks mentioned.
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