It’s was a beautiful Monday morning and life at the Borders bookstore in midtown Manhattan went as usual. No one would think that it would be the last day they would visit this store. That same afternoon Borders filed for bankruptcy.
Five blocks away at the nearby Barnes & Noble store everything looked fairly similar to the Borders store except for one clear difference; an immense “Nook”- the e-book kiosk display at the front of the store. That kiosk marks the difference between Barnes & Noble staying in business and Borders vanishing into thin air. Borders did not invest in the online medium. Barnes & Noble did.
Forty years ago Borders opened its first store in Ann Arbor, Michigan. Forty years ago the financial environment was different - people read books they did not scan internet pages, people heard about computers, did not own two or more, people used pay phones, not smart phones. The book industry was completely different. In many ways Borders stayed there, they did not evolve. Borders continued to serve their audience as they wanted, not as their audience needed. They certainly failed to adapt.
On February 2011 it all came to an end as Border began to close a third of its 659 stores.
1. They missed the Web opportunity.
Perhaps, Border assumed it will save money if they outsourced online book-selling to Amazon.com; as a result any visit to borders.com was directed to amazon. While it may have saved money, Border handed over control to another company. That cut into Border’s customer base and strengthened the competition.
2. No e-books.
The same management mistake as with the Internet – Borders didn’t predict the rise of the digital book as Amazon did and furthermore failed to react; as later Barnes & Noble did. They did not develop any gadget to compete with the Kindle or the Nook.
3. Hold too many stores.
Borders opened too many stores competing with Barnes & Noble’s while consumers continued downloading e-books.
4. Too much debt
Border restructured twice since 2008 in an attempt to reduce the $350 million they owed. They did not succeed. 2008-09 recessions made it even harder.
5. It over-invested in music sales
Borders tried to morph into a multipurpose entertainment retailer selling CD’S while consumers were starting to download music instead of buying it. When they realized that the CDs were not selling they reduced their inventory and ended up with a lot of unused expensive retail space. Their income per square feet tremendously decreased.
The winner: Barnes & Noble & Amazon. It may be that due to Border’s liquidation sales they both may see some drop in sales but it is estimated that Barnes & Noble will take 50% of Border consumers.
The losers: Employees and landlords.
In February, the e-books industry grew 202% compared to the same month last year. E-books outsold paperbacks for the first time ever. The Nook, Barnes & Noble’s e-book has successfully grabbed twenty five percent of the digital book market from Amazon and it’s the reason why they’re still alive.
Border where were you?