Market Awareness

What Retailers Can Learn from the Downfall of Borders

Years ago Borders was the place to be. I bought countless presents there, spent afternoons reading at the café they had in store, and then one day *poof* stores starting closing left and right. As a consumer, this was jarring—a leader in the books, movies, and music space was gone, seemingly out of the blue. But learning about the inner workings of the company provides a cautionary tale for all retailers. There are a number of lessons retailers can learn from Borders to avoid their unfortunate fate.

At their height, Borders had hundreds of stores worldwide. But by February 2011, Fordham UniversityProfessor Albert Greco stated that in terms of the book market, Amazon owned 22.6 percent, Barnes and Noble had 17.3 percent, and Borders had just 8.1 percent. At that point, they had been in business for 40 years, so what led to their untimely death?

Overall, Borders was too slow to take strategic risks. It wasn’t just one problem that doomed them. Their ship sunk, one drop of water at a time, and by the time they realized it was sinking, it was too late to course correct. Let’s break down their major problem areas.

1. Giving Away Business to Amazon

Borders enlisted Amazon’s help to sell their products online. literally redirected to Amazon’s website. If that wasn’t an omen for what was coming, I don’t know what was. Through this online shopping experience, shoppers would form a loyalty to Amazon, with the ability to tap the Everything Store for anything else on their shopping list.

A related and recent example of this is Walmart, Target, and Best Buy selling Amazon’s Echo line of products on their own sites and in-store. While this might help retailers get in on some of the revenue, one of the main features of these popular products is making shopping on Amazon easier than ever. Sending business to your competitor is rarely a good idea, but the impact on these retailers still won’t be as extreme as what Borders experienced.

2. Ignoring the Rise of New Mobile Devices

Borders had an e-reader called Kobo, but it had a similar response that Amazon’s Fire phone met: it was so late to the game that market leaders had already cemented their positions as winners. Therefore, it faded away as competitors’ e-readers (which had been launched years earlier) soared in popularity. It was certainly a “too little, too late” scenario, but unlike Amazon, Borders didn’t have other products or services to absorb the shock of a failed product.

Since brick and mortar was such a big part of Borders’ revenue, it was a bit counterintuitive that they didn’t leverage in-store merchandising to support the e-reader. If they were going to be successful, there needed to be a cross-channel effort in place to support and promote it. On the other hand, if you walk into a Barnes and Noble store, you notice displays for the Nook after the first few steps in the door.

3. Over-Investing in Brick and Mortar

Borders operated massive stores across the world and continued expanding even though they weren’t seeing out of the ordinary success domestically. They simply had too many stores and often those stores were too large. This left them with costly leases that could span multiple decades, making bad investments worse.

Even though Borders went under just six years ago, the brick and mortar focus seems backward in today’s retail. With so many stores closing and some malls feeling like ghost towns, the idea of opening more stores is reserved for those who seem to know something the rest of the market doesn’t.

As usual, Amazon is among those bucking trends, this time by opening stores as other companies are shedding locations they’ve had open for years. That’s because they have the data to do it intelligently. While Borders likely did a fair amount of market research to learn which markets they might do well in, Amazon is a data powerhouse that can put it to use across channels. This is another area in which Borders struggled.

4. Not Implementing Technology Across New Channels 

In the early days, Borders had an enviable inventory system. NPR reported that Borders had “a superior inventory system that could optimize, and even predict, what consumers across the nation would buy.” Borders missed the boat on translating this technology to their online experience. Online shopping presents a unique and powerful opportunity to put assortment data to work and present shoppers with offers that actually appeal to them. But this goes back to sending all of their website traffic to Amazon. You can’t mine data that you don’t own, so Borders was definitely in a bind, with great technology, but no way to expand the use of it in a way that factored in a trendy channel.

Closing Thoughts

In retrospect, it’s easy to see all of these red flags, but retail technology changes constantly, so knowing what to latch on to can be a tough call. All of the elements discussed here that led to Borders’ downfall were strategic risks that the company managed poorly. A recent Deloitte study found that strategic risks made up 86 percent of notable market loses, yet companies are only spending 6 percent of risk management budgets on managing these specific risks. Retailers can be sure to avoid Borders’ footsteps by keeping one ear to the ground for developments in retail at large and their niche as well.

Successful retailers utilize multiple selling channels so that they aren’t putting too many eggs in one basket. Diversification, the ability to act on trends early, and consistent reevaluation could have saved Borders from ending their tenure in such an unfortunate way. Retailers who are able to take risks strategically and adjust tactics based on what they learn will be able to create a lasting business model.

Contributing Writer: Angelica Valentine

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