ThoughtBuzz

Borders Bookstore, a 40-year-old retail chain, has filed for bankruptcy protection in the United States after a bitter financial struggle that began in late 2010.  The company, which operates over 650 stores, is now in the process of shutting down over 200 of its stores in the US.

Borders began in 1971 as a used bookstore in Michigan.  When the 1990s hit, the company quickly expanded into a chain superstore, out-competing smaller independent bookstores, which were shutting down en masse.

But the advent and surge in popularity of the internet and e-readers soon saw Borders and other major players in the industry, getting a taste of their own medicine…

It was during this time that the now- struggling book industry should have started preparing themselves for what was to inevitably happen — technology takeover.

Borders’ closest competitor, Barnes & Noble, joined cyberspace with its e-reader, the Nook. Barnes & Noble now accounts for 25 percent of the U.S. ebook market and the company is selling twice as many ebooks as printed books in its online store.

Borders took notice of Barnes & Noble’s success and began carrying devices like the Kobo, the Sony Pocket Edition and the Velocity Micro Cruz tablet.  However, when compared to the Nook and Amazon’s Kindle e-reader, none of Borders’ devices saw significant success.

With profits nose-diving and a mounting accumulation of missed payments to Publishers, Borders finally filed for bankruptcy at the United States Bankruptcy Court in Manhattan.  Borders listed $1.27 billion in assets and $1.29 billion in debt.  The company currently owes $272 million to its largest unsecured creditors, and it has had to retrench over 15,000 of its employees.

But could this situation have been avoided? 

Industry players have been of the opinion that Borders has simply been ‘behind-the-times’ and too slow to catch on to changing trends – especially with regard to customer experience and expectation.

Instead of competing with the internet, Borders should have used it as a tool to understand how to better engage their current and potential customers. If you type in “what is wrong with borders.com” Google returns over 20 million results…

Many believe that Borders could even have simply better utilized its Facebook page as a sounding board, paying attention to its members’ feedback rather than just using the page as a big advertorial for the franchise.

Borders also had plenty of time to invest in some social media monitoring tools and learn from the market how the company is seen from the outside: Too expensive, lack of selection, poor service, etc.

The main criticism though is Borders’ failure to adequately address the internet sales channel and the subsequent ebook market – specifically, the decision to outsource Borders.com to Amazon.com. Borders.com was costing the company millions of dollars in losses each year, and therefore the outsourcing solution was originally justified as a case of letting the most efficient ‘etailing’ organization (Amazon.com) handle the job and turn a big negative into a profitable business. 

In the short-term, this saved a lot of money. In the long run, however, the internet is too important to outsource in this manner and Borders’ branding and customer base suffered immeasurably. 

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