At no time in its history has the opportunity and danger been greater for Books-A-Million. Since Borders announced it was liquidating, BAM has moved aggressively to take over some of the failed chain's locations, betting that despite the erosion of print book sales through physical stores, there is still enough demand to keep traditional bookstores a viable business.

After failing to acquire 30 Borders leases in late July, BAM has opened or plans to open five stores in former Borders outlets, while also opening a store in Fredericksburg, Va., on the site of a former Joseph-Beth Booksellers. The company could markedly expand its national footprint if the bankruptcy court this week approves its bid to acquire leases for 14 Borders stores, a deal that will give BAM its first stores in New England as well as in South Dakota, Wisconsin, Iowa, and Michigan. But as BAM expands its physical footprint, its core book business is struggling, with soft sales of print books cited as the main reason why BAM has posted sales declines and losses in both quarters so far this year. For the first six months of 2011 sales were down 11.2%, to $210.4 million, and the chain had a net loss of $6.4 million compared to earnings of $3.9 million in the first six months of 2010. Equally ominous, comp store sales were down 13.1% in the six-month period.

BAM acknowledged that part of the slump in sales has been the migration from print books to e-books, as it has, at best, a modest e-book operation. BAM has had little to say on how e-books have performed since it began selling digital titles last year. Commenting on second-quarter results in a conference call last week, chief merchandising officer Terry Finley said BAM has seen "solid results from our entrance into the electronics and electronic accessories categories," and that BAM expects to expand those offerings. (In addition to e-books, BAM sells the Nook family of devices and accessories). BAM executives declined to comment for this article, but according to Bowker's PubTrack Consumer service, BAM did not sell enough e-books in the first quarter for that format to be a noticeable part of its business.

According to PubTrack, the single largest source of revenue for BAM, like most other bookstores, was hardcovers, followed by trade paperbacks. But BAM has some key differences from the chain it is looking to replace and the one it will compete with. With its largest market the southeast, BAM's product mix is much more heavily geared toward religious books than Borders was, with PubTrack finding that 17% of BAM's sales in the first quarter came from religious books compared to about 7% for Borders and 10% at Barnes & Noble. While children's and nonfiction sales at BAM are close to Borders and B&N, the 30% share of fiction sales is well below the 36% at Borders. (Within fiction, according to PubTrack, adult fiction is the most popular category at BAM, followed by general fiction, romance, and espionage/thrillers).

The typical BAM customer is also different from consumers who shop at Borders and B&N. BAM's customers are generally less affluent than those who shop at its competitors and have less education. PubTrack places the average household income for BAM customers at just under $60,000, while household income for B&N and Borders customers was more than $71,000. In terms of education, 36% of household heads who shop at BAM are college graduates compared to 46% at B&N and 47% at Borders. It will be interesting to see if BAM changes its merchandising and marketing approach in the new locations it is moving into or sticks to what has worked for it so far.

Among its departments, BAM stores usually include Faithpoint, a section that features a large selection of Bibles, Christian Living, and Christian fiction books. Stores also have a Kids-A-Million department that not only includes books but a wide array of items including toys and games. Indeed, BAM's Finley reiterated in the conference call that the company will continue to diversify its in-store mix to find products that have the greatest appeal. At the end of the first quarter, books were 76% of sales compared to 80% a year ago; the biggest gains came in the "other" segment that includes music, DVDs, and e-books.

Although the market for print books has been declining, Borders's demise leaves a significant gap that BAM is looking to fill. According to PubTrack, BAM's share of the total market remained at 2% in the first quarter of 2011 compared to 11% for Borders and 17% for B&N. Its share of sales for new releases was slightly higher, at 4%, but still trailed B&N (30%), Borders (23%) and independents (7%).

Up until now, BAM's conservative approach to business has kept it profitable and in a position to benefit from Borders's collapse. The key going forward will very likely be whether the chain can develop an e-book business to complement its physical stores. After all, as Borders proved, a bookstore chain can't rely on the sale of print books alone to survive.