Sunday, July 31, 2011
Borders Closing and the New Economy
The somewhat surprising - and disheartening to book lovers - failure of Borders Books to reorganize and emerge from bankruptcy represents a bellwether of the new economy as a result of the creative destruction that comes from improvements in technology. The failure of this business wasn't about corporate taxes or the national debt or a decline in literacy habits or poor management decisions. It was bound to happen the minute Amazon arrived on the scene - and Congress exempted online retailers from any state taxes where they didn't have a physical presence. Ultimately, brick and mortar retailers face an incredible challenge to compete against companies with much lower cost overhead - or underfoot as the case may be.
The closing of the Borders simply represents a new direction in a new economy that has yet to really define itself. Who knows what the landscape is going to look like as companies like Amazon continue to take more of the retail effort? Who knows where the people who worked at Borders are going to work? Who knows how an entire corporate structure simply vanishes and leaves in its wake a group of people and a pile of assets that must be reapportioned around the economy?
Even now as Congress begins serious discussion of a national solution to the online retail tax issue, the economy is unfolding and redefining itself. It is going to be uncomfortable and confusing and messy, but it is the new face of the retail world.