The 8 Reasons Borders Went Bye-Bye

by Staff Writer

All good stories must to come to an end, and Borders bookstore is no exception to this rule. The 40-year-old book seller announced earlier this week that it will be closing all remaining stores and laying off 10,700 employees after a failed attempt to sell the company at auction. Even though it’s a very un-fairy tale ending for the nation’s second-largest bookstore chain, we know it had a good, long run. These are the 8 reasons Borders went bye-bye:

  1. It hasn’t turned a profit in five years: Borders experienced its peak in 2003, when it operated more than 1,200 Borders and Waldenbooks stores, but the last time Borders actually turned a profit was 2006. Shortly after their success, Borders Group began scaling down its Waldenbooks outlets, in addition to ending the company’s businesses in the UK and Ireland, in order to focus on the U.S. stores. Borders was hit extremely hard during the financial crisis and the business continued to suffer, never regaining its lost sales.

  2. Management missteps: Borders demise was certainly caused by management errors that happened during the company’s weakest years. The company management made some risky moves when it changed the Borders Rewards loyalty program and closed the music and video department in each store. To make matters worse, the company continued to hire people who had little interest and knowledge about books and authors, including four CEOs who lacked book-selling experience.

  3. Debt: For the last few years, Borders has been swimming in debt and in need of a miracle to keep them afloat. After the 2008 announcement that Borders would be selling the chain because of financial issues, it increased its debt by borrowing $42.5 million from the company’s major stockholder, Pershing Square Capital Management. Borders used the money to remodel stores and upgrade technology to compete with rival Barnes & Noble, and surprisingly paid back the lender. Despite Borders debt restructuring attempts, it did not see an increase in book sales and the company continued to crumble. In February 2011, the company filed for Chapter 11 bankruptcy and claimed to be in debt of $1.29 billion and assets of $1.28 billion as of December 2010. Since then, the company has struggled to get publishers to accept delayed payments for shipped merchandise.

  4. Outsourcing their website to Amazon.com: In 2001, Borders made a daring and downright damaging business move when it partnered with Amazon.com and allowed the competitor to run its online sales business. From 2001 to 2008, Amazon.com was responsible for running Borders website, which kept the bookstore from truly competing in the electronic book market. Outsourcing their site to Amazon.com also hurt Border’s online presence, therefore, causing the bookstore to fall behind its competitors and the times.

  5. Behind on technology and e-commerce: Borders fell behind the times and its competitors when it failed to get involved in electronic books and e-commerce. Sure, Borders partnered with Amazon.com to run its online sales and finally launched its own e-commerce site in 2008 and the company even created its own Kobo e-book reader in 2010, but the fact still remains that Borders lagged behind. Not only did Borders abandon management of its website and online sales, but it also failed to catch on to and emphasize the importance of electronic books, which drastically hurt the company’s sales and overall presence.

  6. Invested in too many stores: Borders had a huge U.S. and international presence, thanks to the company’s expansion efforts. And instead of developing its own e-commerce site and jumping on the e-reader bandwagon early like its competitors, Borders decided to add superstores and focus on its international business during these crucial times in the book industry. Although Borders had hundreds of stores worldwide, too many of them were unprofitable. When Borders filed for bankruptcy, it stated that several of its stores cost the company $2 million a week to keep running. Borders will close the remaining 399 stores that employ about 11,000 people.

  7. Ignored declining music and DVD sales: Borders definitely missed the beat on changing its business strategy during the decline of music and DVD sales. While these sales were down, electronic books were gaining popularity, but Borders failed to emphasize the importance of this new technology. The result was a dramatic decline in Borders profits as other, more flexible competitors embraced technology.

  8. Category management initiative: When Borders implemented the retailing concept of category management in 2001, the company and its business operations were forever changed. The category management program controlled the number of titles that were sold for each genre. Borders created specialized categories for its books, gifts, children’s, multimedia, stationery, calendars, cafe and other products. Each category was assigned its own sales, marketing and merchandising team that strove to respond to customer needs and provide more data to stores; however, this practice was heavily criticized for putting large publishers before small presses, therefore giving customers fewer options when it came to choosing a market.

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