Small book retailers were buying in bulk from major online booksellers because they could really save some money. One was buying up to 70 copies of a particular title -- it was $5 less a pop from the big guys than it would have been from the publisher. Finally, however, the big retailers have become wise to the trend and taken action, according to the Wall Street Journal (subscription required).

Wal-Mart (NYSE: WMT), Amazon (NASDAQ: AMZN), and Target (NYSE: TGT) have decided to cap the number of books customers can buy online, a measure intended to prevent smaller competitors from treating them as partners. Walmart is limiting customers to two copies of a particular book, with Amazon placing the border at three and Target at five.

Twilight and Harry Potter sales notwithstanding, there's a growing reality in our fair nation -- people just don't read like they used to. And with the slowdown in reading comes a definite decline in book sales.

The Book Industry Study Group reported that publishers sold fewer books in 2008, down 1.5% from 2007 to 3.08 billion. Of course, all was not lost -- total revenue edged 1% higher thanks to increased prices.

Borders Group, Inc. (NYSE: BGP), the arch-rival of bookseller Barnes & Noble, Inc. (NYSE: BKS), is struggling mightily. It may not go away, but it seems that there's a good chance that it will continue its business imperatives under new owners. According to a press release issued by the company, as well as this AP article, the company appears to want to sell itself at this point because, to be blunt, management appears to have failed at its job of preserving and growing shareholder value; it also has failed against online entities such as Amazon.com, Inc. (Nasdaq: AMZN) and other retailers such as Wal-Mart Stores, Inc. (NYSE: WMT). Why, as I write this, the stock is down 39%, and it is below $5 per stub. Yikes! I've been feeling pain with some of my financial stocks lately, but I feel bad for Borders shareholders, that's one torturous drop in value.

The retailer just isn't doing well; in fact, it decided to drop its dividend payout because it no longer can afford it. I'm sure shareholders were expecting such a move, but when it happens, it's always such a slap in the face. Borders is having cash issues, management doesn't seem to be confident in its current business structure, it missed earnings estimates, revenues are down, etc. Funny thing is, I actually prefer the shopping atmosphere of my local Borders store over my local Barnes & Noble outlet. Can't always go by personal experience, I guess.

Well, if one wants to speculate, one could buy some lottery tickets -- I mean, shares -- in Borders Group. I won't. Yes, catalysts could come down the line for the company, but for now, the market seems to be telling investors that this is one to stay away from.

Disclosure: I don't own any of the companies mentioned here; positions can change at any time.

Bookseller Borders Group Inc. (NYSE: BGP) continues to bleed money even with the release of the latest Harry Potter volume. If anything, the losses, already substantial, are getting bigger. Despite the fact that consolidated sales as reported in 2Q 2007 results were up 10% to $945 million, the company still posted a net loss of $25 million, or $0.43 per share, a 25% bigger loss than Wall Street had anticipated. Things have gotten so bad that CEO George Jones remarked he was encouraged by flat sales at Waldenbooks. For the last 7 quarters, Waldenbooks' same-store sales have fallen.

Borders stores posted a total sales increase of 9.7%. Excluding Harry Potter, organic sales growth -- a misleading term in this instance -- was less than half of 1%. This is an expensive business model that is not working. In an effort to lure customers into stores, Harry Potter was sold at a large discount to match prices at discount chains. Administrative expenses increased a bit, but debt increased by almost $200 million, to $663 million. No wonder Borders is now negotiating to amend its credit agreement with its banks and considering the possibility of selling its Borders International segment, which still somehow posted a $10 million operating loss even while total sales increased 31% to $170 million.

Waldenbooks is in an even worse situation. Total sales declined 7.7% and operating losses were the same as one year ago, meaning the chain has made made no improvements to its bottom line situation. BGP shares began the year trading at $22.46, reached a high of $23.41 in late May and have been tanking ever since, closing at $14.66 on Thursday, down $0.28.