Borders, Costco Kiss Off Sterling

The acquisition of Sterling Publishing by Barnes & Noble led two major retailers to terminate their relationship with the niche book publisher.

Costco Inc. and Borders Group Inc. stopped carrying titles published by Sterling. They say Sterling's purchase by bookseller Barnes & Noble transformed the publisher from vendor to competitor.

Barnes & Noble acquired New York-based Sterling for $110 million in December.

"We had a good relationship with Sterling, one that worked well for both companies," says Jenie Carlen, public relations manager with Borders Group Inc., Ann Arbor, Mich. "However, there is a fundamental business conflict. Barnes & Noble is a competitor. Its decision to acquire Sterling would have us supporting a competitor financially."

Carlen says Borders is quickly phasing out its relationship with Sterling. They're not alone. Consumer retailer Costco has also stopped buying Sterling's titles.

Costco supports a small book section, with about 300 titles. "We consider [Sterling] a competitor," says Jim Sinegal, president of Costco, in Issaquah, Wash. "Why else would we end our relationship with Sterling? Barnes and Noble will obviously get the best deals."

Analysts say these defections might not be the last. "They feel supporting Sterling supports a competitor," says John Kremer, editor of the Book Marketing Update newsletter, in Fairfield, Iowa. "Sterling will sell more books to Barnes & Noble, but they're not going to sell [as much] to independents. Ultimately, I see Sterling [as] a division of Barnes & Noble, with very little sales outside of [B&N]."

The decision by major retailers to end their relationship with Sterling opens opportunities for other publishers, Kremer says. Small publishers had a tough time competing with Sterling's relatively low-cost titles.

"The merger is an advantage for the independent publisher, but independent bookstores lose out, because they have fewer books to sell," Kremer says.