Borders: From success to failure

Borders opened its first store in Ann Arbor, Michigan. Along with competitor Barnes & Noble, Borders pioneered the book megastore business. Not being able to address the concerns on the change of the book industry over time and re-strategising their business model has caused the megastore to file for bankruptcy in late 2011.

Here are five explanations to why this had happened (Sanburn 2011):

1. It was too late to the Web

Borders outsourced its online book-selling to Amazon.com. Everytime you visited borders.com, you were redirected to amazon.com. It might have seemed to be a smart decision at the time, however, Borders did not expect that the outcome resulted to hurting Borders’ branding strategies and cut into its customer base by relinquishing control to another company.     Borders usually have a fixed price for their books and not being able to acknowledge the fact that once they outsourced to Amazon.com, this enabled buyers to compare prices with other sellers, which usually are more competitive prices.

Peter Wahlstrom, who tracks Barnes & Noble for the investment research firm Morningstar says,

In our view, that was more like handling the keys over to a direct competitor.

(Noguchi 2012)

2. It was too late to e-books

Borders also did not forsee the rise of e-books like how Amazon and Barnes & Noble did. It didn’t develop its own e-reader to compete with the Kindle or the Nook immediate enough, and only realised to open an online e-book store a year ago. Once they have actually adopted to selling e-books for devices like the Kobo and Cruz, their marketing strategy was not strong enough to attract buyers. In contrast to that was Barnes & Noble’s initiative to getting their product Nook out there to their target market, which had visually dominated their stores to attract attention and interests.

Amazon Kindle (Goldring 2009)

Barnes & Noble’s Nook now in its 1st Edition of Wi-Fi! (CouponAlbum.com, 2010)

3. It opened too many stores

Borders carelessly expanded too quickly in a short period of time. Many Borders stores were competing with a local Barnes & Noble’s, offering a glut of bookstores even as people were shifting to online shopping.

4. It had too much debt

Carrying a huge debt load while going through the 2008-09 recession only damaged the firm further and where in a desperate attempt to pay down some $350 million it owed by trying to restructure. Because of the inefficient business practices they had put itself in, there was no easy way out.

5. It over-invested in music sales

                  It started off as simple as a bookstore, then over the years, it has morphed into a multipurpose entertainment retailer. Another factor that had cost them was investing heavily in CD sales during the 90s just as when people had stopped buying CDs as they began to purchase iPods instead.

Many of the ‘avid’ readers saw this fate approaching Borders. Their main concerns where Borders had lost its niche market that they once had to their further promotion on ‘Best Sellers’ which were often written by celebrities who usually don’t have a proper background in writing or they may have hired other writers to write for them. True readers were turned off by this approach as Borders intentions where to appeal to a wider customer base to increase their profit. Their failure to listen to want their loyal niche market wanted instead tried to win the hearts of a wider market had cost them consumer trust.

Borders is a great example of what could happen to our firms should we choose to ignore what our lecturers, reading and videos had been informing us. The failure of borders significantly relates to both of Ilka Staudinger’s lecture. Creating scenarios of the extremes with drivers of change is vital when deciding to create an innovation as this will only help you be more open-minded to the possible outcomes that could have a great impact on the success or failure of your business. It is better to acknowledge these scenarios and provide solutions now to be more prepared when one of these scenarios does actually happen as you can only improve it for the better. It also relates to finding your firm’s persona/s. Firms are usually more successful providing accurate and efficient solutions to a niche market rather than trying to cater for general use – which is almost impossible as different people has different views, needs and personalities.

It also links the Brown reading ‘Design Thinking meets the Corporation or Teaching to Fish’ when he talks about re-thinking strategies and used Nokia as an example. As he argued that Nokia was a leading mobile phone for providing services such as texting and calling. Now that new technologies had emerged such as the iPhone and Androids which offered an endless variety of services on their phone systems perfect for our current way of living ( fast-paced and efficient) which had then made Nokia re-think its strategies and services to stay in the game.

We could learn from the mistakes of Borders and apply this when evaluating our firm.

Reference:

CouponAlbum.com 2011, Buy.com Deal: Shop NOOK First-Edition Wi-Fi at 43% OFF + Free Shipping, online shop, Coupon Album, accessed 3 July 2012, <http://blog.couponalbum.com/buy-com-deal-nook-first-edition-wi-fi/>

Goldring D. 2009, Review: The Amazon Kindle 2, weblog, Gear Diary, accessed 3 July 2012, < http://www.geardiary.com/2009/03/16/review-the-amazon-kindle-2/>

Hamilton C. 2011, Borders’ Potential Failure Maybe Good for Publishers, Authors, weblog, Florida Writers Conference Blog, accessed 3 July 2012, <http://floridawriters.wordpress.com/2011/02/02/borders-potential-failure-may-be-good-or-publishers-authors/>

Noguchi Y. 2011, Why Borders Failed While Barnes & Noble Survived, weblog, NPR, accessed 3 July 2012, <http://www.npr.org/2011/07/19/138514209/why-borders-failed-while-barnes-and-noble-survived>

Sanburn J. 2011, 5 Reasons Borders Went Out of Business (and What Will Take Its Place), weblog, Time Moneyland, accessed 3 July 2012, <http://moneyland.time.com/2011/07/19/5-reasons-borders-went-out-of-business-and-what-will-take-its-place/>

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