A World Without Borders: How One Beloved Bookstore Chain Signed Its Own Death Certificate
Borders used to be the bookstore behemoth that both avid and casual readers loved until a series of poor strategic choices led to their filing for Chapter 11 bankruptcy protection. How could such a successful company completely misread the changing landscape within the book industry?
The flagship Borders store on Michigan Ave. in Chicago used to be a weekly staple for my family and me. Originally bemoaned as a behemoth corporation responsible for the demise of the small, neighborhood bookstore, Borders became a prime example of what happens when companies do not innovate fast enough. In 2011, Borders filed for Chapter 11 bankruptcy protection and began the liquidation process, ending the 40-year run of a beloved company.
Borders success was predicated on providing thousands of titles in one location, providing customers with options that were hard to replicate by competitors. At the time Borders also boasted an inventory management system that allowed them to predict customer’s buying patterns. While this was an early source of success for the company, Borders was slow to react to the overall changing landscape of the industry, making heavier bets on its music and DVD portion of the business just when people began the move to digital. Digital books provided customer’s with an unprecedented level of portability and flexibility, while Amazon made buying books even more convenient by eliminating the need to go to a brick and mortar store, while also having other pertinent information like reviews readily available. While Barnes & Noble created its own e-reader with Nook in order to carve out its own space in the digital book industry, Borders did not, instead opting to hand over control of their online book sales to Amazon. This decision proved to be the final nail in the coffin for Borders. At the time, Amazon was a direct competitor to Borders as more and more people were ordering books directly from Amazon and bypassing Borders altogether (or finding a book in Borders to then later order on Amazon). While they may have felt that Amazon was better equipped to run online sales because of its expertise and infrastructure, giving up control of such an important component of the business to a competitor was not a good strategic decision. Instead of reacting to the customer’s desire to purchase more books for consumption on e-readers and the increasing usage of the Internet to order books, Borders decided to cede control of their online sales and completely ignore the burgeoning e-reader market. It’s hard to fathom how management concluded that was a strategically defensible position to take, but it is clear Borders ended up paying the ultimate price.
Borders going out of business was by no means an inevitable outcome. The convergence of technological changes and a flawed response plan put them on the path to obsolescence. Borders has become a cautionary tale for any company in any industry that has been disrupted by emerging technology and consumer’s changing trends in response. Complacency is not a winning strategy. As technology continues to change the way we interact with products and services, companies must be malleable and quick to respond. Refusal to accept the changing landscape does not mean it will change any less slowly. While Borders is out of business, its competitor Barnes & Noble is still in existence. Their two different approaches highlight the two possible outcomes when your industry is disrupted. It is important for digital strategy to not be separate from the overall corporate strategy. They must work together to ensure companies maintain relevance in an ever-changing environment.
As someone who was initially resistant to buying and using an e-reader, and then jumped on the bandwagon, I can understand Borders management’s reasoning – e-readers will never take the place of the smell and feel of a brand new physical book, and since web sales were not in its wheelhouse, Borders thought it was safe with its traditional model. I alternate back and forth between my Kindle and physical books, and even though I love my Kindle, I find it’s sometimes much easier to find and read a physical book. Problem is, the last place most consumers want to obtain a physical book is at a brick-and-mortar due to the cost and the inconvenience.
You say that Barnes and Noble is still around, and I think there’s a reason why, apart from digital strategy. Barnes and Noble is the Whole Foods of book retailers, and Borders did not execute to the same degree that Barnes and Noble did. Buying physical books is much easier via Amazon, but part of Barnes and Nobles’ value proposition is the ambiance while browsing in the store. You can buy a coffee, sit down in a comfy chair and literally read an entire book if you want. It’s more about the experience than the books themselves. That being said, do people actually buy books? I know many people just stop in and browse, and similar to Borders, buy the book later (and for a better price!) on Amazon. Barnes and Noble is still around, but if they can’t sell books and e-readers, they are yesterday’s news, just like Borders.
Very interesting point that Border’s dismay is not inevitable! In hindsight, the decision for Borders to cede control over its internet sales to Amazon appears to be fatal. It reminds me of the class discussion on BMW handing over the software development of its Smart Cars to Google, and the potential downfall it may bring to the automaker. This serves as a fantastic (albeit unfortunate) lesson on companies should respond to new technologies (e.g., fight or flight) and how one decision could lead to a domino effect of consequences.
I used to go to school at Michigan and Borders is one of my favorite bookstores nearby. They have a good selection of books, a corner for staff picks for more unconventional selections, and an area reserved for a coffee shop. I enjoyed the bookstore experience but recalled ultimately getting books from my very first generation of kindle because eBooks are usually cheaper. I do believe they have created an unique experience (value creation) for booklovers like me, but sadly it seems that they are not very good at capturing the value into revenue.