July 22 this year marks the 7th anniversary of the fall of Borders. Barnes and Noble on the other hand seem to be making it. Retailing is hard. Really hard, that’s for sure. So, what went wrong with Borders?
Borders’ press releases state they were the victims of the times. They cited the maturity of the book industry, the development of the e-reader and the shaky economy during the 2000’s. The rise of e-books and digital music created an environment that didn’t have a place for a bricks-and-mortar book franchise, Borders’ insisted.
One of the clear differences between Borders and say Barnes and Noble was the on-line strategy. Borders approach was “our online investment will be channelled to support our in-store platform, while Borders.com will continue to be utilized as a convenience retail channel”. Investing in the in-store platform was simply a cost reduction strategy; automating processes; reducing the need for in-store sales people. Reflect on that for a minute; physically go into a store to then simply go onto an amazing in-store on-line platform to find a book. Yes!
Borders passed the on-line sales channel to Amazon. Amazon managed the platform, customers, books and music. Borders’ clients did receive books, but Amazon held key customer information and customers got more – low transaction costs, quick turnaround time and money back guarantees. Amazon. Winning.
Barnes and Noble took the approach “[if we] pay a visit to our customers at their home through Barnes & Noble.com, they will return the favour at our stores”.
Borders invested in music and DVDs and for a while seemed to be gaining some market share. But by the time it invested enough to expand its range, on-line music providers and Netflix crashed the party.
Borders were also late with the e-reader. Missed completely. First Amazon with its Kindle (2007), next Barnes and Noble’s with the Nook (2009) and the iPad. Borders came out with its e-reader – the Kobo (2010/2011). How many customers were lost to the Kindle when Borders’ passed the on-line business to Amazon?
These were big moves and I haven’t even discussed nor mentioned Border’s large and rapid physical expansion! More investment in stock and higher fixed costs. No wonder cash was at a premium.
It’s great being in business, it has its rewards and challenges. When you are so close to your business and constantly working the day to day its hard lifting your head to see what is developing around. There’s just not enough time to Focus on performance improvement and mitigate or take advantage of digital disruption, so it gets pushed out.
As always, touch base to discuss.
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