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Borders sees new e-bookstore taking share
NEW YORK |
NEW YORK (Reuters) - Borders Group Inc's electronic bookstore went live on Wednesday, and the company set an ambitious target to secure 17 percent of the digital book market in one year, sending its shares up more than 9percent.
The launch comes nine months after the debut of the Barnes & Noble Inc Nook e-reader and three months after Apple Inc introduced its popular iPad tablet computer. E-books had already gained popularity with Amazon.com Inc's Kindle reader.
Mike Edwards, chief executive of the Borders Inc operating division, dismissed concerns about competition in the e-book business.
"We'll take market share just by turning (the e-bookstore) on," he said in an interview. "A lot of people have said, 'You're kind of late to the game,' and I'm saying the game actually just started."
The urgency for Borders is clear. Sales fell 11.4 percent at its namesake stores open at least a year and on its website during the first quarter, the latest in a long series of declines.
The company's e-bookstore will have 1.5 million titles, including books that can be downloaded for free. Amazon offers 620,000 books as well as 1.8 million free out-of-copyright titles, and Barnes & Noble says it has 1 million titles.
Barnes & Noble told investors last week that it had won 20 percent of the U.S. e-book market since launching Nook, exceeding its share of physical book sales.
Borders does not have its own e-reader, but sells digital books for download on various devices, like one made by Kobo Inc.
Gartner analyst Allen Weiner said he did not expect Borders to use pricing to differentiate itself, Instead, he said it would have to get extremely creative with marketing and make compelling offers like a discounted book club membership with every device purchased.
The company also faces competition from third-party players like Google and LibreDigital, which are creating e-book distribution businesses for independent bookstores.
"The competition for Borders is above and below them," Weiner said. "That's what makes me wonder why they would make such lofty (market share) claims."
Shares of Borders were up 9.4 percent at $1.28 in afternoon trading, while Barnes & Noble slipped 1.1 percent, and Amazon gained 1.3 percent.
While Barnes & Noble and Amazon.com have relied on their own readers to spur e-book sales, Edwards said Borders was wise not to get into the expensive game of developing devices, citing a sales-sapping price war that has erupted between his rivals.
"I'm ecstatic that we decided we're not going to be in that game," Edwards said. "We are not a device maker. We're a bookseller."
Instead, Borders e-books can be read on recently launched applications for Apple's iPhone and iPad. On Wednesday, Borders introduced new applications for Research In Motion's Blackberry smartphones and phones with Google's Android software and expects to sell 10 different kinds of e-readers by the end of the year.
A Goldman Sachs report in April said e-book sales made up 3 percent of overall U.S. book sales now and would rise to 12.8 percent by 2015.
Currently, about 5 percent of Borders sales, including physical books ordered online, go through its website, representing about $100 million this year.
Edwards expects that ultimately 20 percent of book sales will shift online. Yet he and Barnes & Noble Chairman Len Riggio both separately said store count would remain stable.
The two retailers run a combined 1,500 or so U.S. stores, and Edwards conceded that might be high in the long run.
"The store base at large would probably shrink," he said.
Until then, booksellers are trying to decide how to stock shelves being emptied of physical books. Borders is considering everything from children's merchandise to consumer electronics and apparel.
"The pressure on us is not on the digital side," Edwards said. "How you create that new retail experience, that's where the art is going to be."
Last month, financier Bennett LeBow, Borders' chairman and largest shareholder, was named chief executive officer. In March, the company repaid a loan to Pershing Square Capital Management and secured access to $700 million in credit.
Now that Borders is on stronger financial footing, the company can concentrate on reigniting its brand, Edwards said.
"We're kind of a sleeping giant," he said. "We will take our share."
(Reporting by Phil Wahba and Dhanya Skariachan; Editing by Michele Gershberg and Lisa Von Ahn)
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