Hello, Goodbye

This is my very first evaluation of several companies, based on my personal opinion and what little research I've done on the subject matter.

I've started working last month in a small attorney's office near Wall Street. During my lunch breaks I would roam around and I discovered a great place to kill time: Borders, a book store. I spent whatever time I had left of my break there to look at book titles and read manga. It was a great place to be, and very similar to Barnes & Noble. However, on Tuesday, I saw this dreaded poster in front of the store.

20-40% off means 20% off 99% of the time.

I've only recently been going there and it's going to be closed soon. Just my luck, this was like a library for me during lunch breaks. I did a little research on the matter and found out that the company is filing for bankruptcy (Feb 16th). To be honest, I am not surprised. Here's why:

Most people simply don't buy new books from the bookstore anymore, it's not economical. The price of a book from the bookstore is outrageously high. First of all, any book at their original retail price at the bookstore can be beaten by a search on Amazon. At a competitive pricing viewpoint, Amazon wins hands down when it comes to buying books for a good price. Buying a book used is the same as buying it new, if you're a student like me. We are in it for the content, not so much for the condition of the book. Even when Borders was trying to get rid of their inventory by slashing retail prices by 20%, their prices were still substantially higher than sellers on Amazon.

Second, the trend nowadays is to go digital and to be eco-friendly. E-readers are becoming ever more popular. Everyday on the train, I would see at least two people reading from an Amazon Kindle. Brick-and-mortar bookstores have become absolute, just like how Blockbuster was driven to the ground by Netflix. I predict that over the next ten years, 70-90% of books will be read off of e-readers. I am fond of holding a book and reading by having the book in my hands. I haven't tried reading from an e-reader yet since I don't have one, but I feel that the upcoming generation will be more technology savvy and go for the e-readers. My other point is that Amazon emerges as a leader in this industry. The Kindle is the leader of the e-reader industry at the moment, much like how the i-Pad is the leader of the tablets in the market. Market share of the Kindle amounts to 40% of total e-readers, which is extremely impressive.

What does this mean?

Let's take a look at some stock historical graphs.

Barnes & Noble

Borders Group

Amazon

The Amazon Kindle came out in late 2007. At the same time, the stock prices of both bookstore companies fell continuously. Remember that the height of the mortgage bubble was in 2007 before the market took a jump off the cliff. Therefore we can not attribute the fall of the stock price of the book companies to the financial crisis. In the same year the Kindle came out, Amazon's stock almost doubled during the year. Amazon has been steadily climbing while the two bookstore companies continue to suffer, with one of them bankrupt.

Okay so Borders Group is down under, what does this mean for the other two?

Amazon - bullish. Amazon will continue to dominate their market share, as long as they continue to innovate. Their brand name is already built into the e-reader market. In addition to that, Amazon sells all kinds of products, not exclusively books. If I had money to invest at this point in time, I would definitely invest in AMZN.

Barnes & Noble - uncertain in the long run. From research, I've learned that B&N plans to purchase closing Borders' bookstores at attractive locations. This might temporarily add to their revenue, but in the long run, brick and mortar bookstores will not survive. Bookstores are more like libraries because people literally go in and take a book out to read it inside the store for hours. I don't know what the return policies are for them, but if books are returnable, I would imagine it can be abused quite easily. So my predictions are: B&N will survive, but only because they have their own e-reader (the NOOK). They will have to close down many more stores in the upcoming future, but they won't die out like Borders because B&N is the largest retail bookstore in the US, the other reason being they also sell their books online.