By now, the actual bankruptcy filing and subsequent store closures announced by Borders will have been worked over pretty well, so I see no need to add any analysis there. The bare bones facts are that Borders is seeking Chapter 11 bankruptcy protection, so theoretically there will be a reorganization and a new, healthier Borders that comes out the other side. In the meantime, Borders is closing 200 stores, or about 30% of their store locations.

The real story, to me, is about digital’s impact on the store experience. Borders got caught between two massive trends that are still grinding their way through retail today. On the one side, more and more business is being transacted online and this is having a fundamental impact on the cost model of the store. Media has been leading the way, because it is now so easy to digitize it, but whether the good being purchased is physical or virtual ultimately isn’t going to matter. The store was designed to support a certain level of sales, and retailers built out a certain number of stores to support their overall sales, and now they have too many stores for the purely in-store transactions that occur there.

It’s possible that online makes up the difference, but online sales aren’t free — you can’t just add them into store sales and count yourself done, not unless you also add in some portion of the online costs that are incurred to support those sales. Retailers have had to add new channels, and new costs to support those channels, without driving a corresponding amount of incremental sales. And they’ve had no choice in the matter — consumers have demanded it.

In the case of Borders, we watched the retailer struggle through in-store erosion. They bought Paperchase. They sold it. They slimmed down the amount of space devoted to music and movies. They put in cafes, they expanded their toy selection. They tried events in some stores, and experimented with digital signage to broadcast events held in one location to other stores. I’ve been a big proponent of whatever you want to call it — retail theater, retailtainment, the store as event space. Apple has certainly figured out how to do it well. REI does it well, albeit on a smaller scale. The book stores — they just haven’t really figured it out, Borders in particular.

I think part of the challenge is that events in a retail space are harder than just selling books — and apparently that is hard enough already. You have to work at it. You probably have to treat it almost like a concert venue, with relentless recruitment and promotion, except the tickets are free. You just hope to make it up in concessions and merchandise.

So this is the rock in the rock and the hard place — stores aren’t what they used to be, and Borders has not figured out how to adapt to that reality. Closing stores will help. The new format and design is a good one, even though it too propagates an old retail is about selling products mentality. Borders, if the reorganization is accepted, has a chance there.

But then there is the hard place — and this is specialized to media right now, but I won’t take any bets on whether it remains unique to media in the long term. Borders got completely outflanked in the digital space. While Apple, Amazon, and even Barnes & Noble jumped in on digital media distribution — down to the device — Borders tried an open approach and lost. Because ultimately, the company that distributes the media is the company that is going to benefit the most. Borders could’ve joined forces with Amazon, selling Kindles in stores and selling eBooks through the Kindle store online. But what’s the point in that? Amazon has no incentive to treat Borders as anything more than an affiliate seller. Borders constantly risks Amazon stealing its customers. Same story with Google and Apple.

Borders really had no choice but to offer yet another eBook store, and by the time they really worked to support it, it was too late. Why should consumers invest in yet another eReader? Even if there’s a Borders app for that, if I have the Kindle reader, the Nook reader, and the iBook reader on my iPad, what the heck do I need Borders for? I’m pretty sure I can find a book I want in one of those 3 other places.

The book landscape jerked hard toward the digital space, and Borders got left behind. Whether they can figure out how to make their stores relevant in a more digital omni-channel world or not, they did not figure out how to create a relevant online experience for their customers at all.

Maybe, just maybe, you can survive if you mess up one of these things — one, how the store and online work together, and two, how online provides richness and relevancy to the consumer experience (note that I didn’t say shopping experience). But if you mess up both of those, I don’t think you can recover. Whether Borders emerges successfully from bankruptcy or not, I don’t think it will ever be the same again.