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Borders - The W1nners' Club

 

Borders Group, Inc. was an international book and music retailer that was based in Ann Arbor, Michigan.

 

In its final year of trading the company employed nearly 20,000 people throughout the U.S.

In February 2011 the company applied for Chapter 11 bankruptcy protection and began liquidating 226 of its stores in the United States.

The question that first springs to mind is how did a former giant of the book retail world end up becoming a victim of its own success?

Borders opened its first bookstore nearly 50 years ago and along with its main rival Barnes & Noble, pioneered the book megastore business. The company however made some critical miscalculations over the years that ended up costing it dearly.

At one time Borders’ sheer size was its main advantage. It had a reputation for offering a huge variety of books — sometimes tens of thousands of titles were available in a single store at a time when most bookstores could barely afford to stock a fraction of that amount.

Borders had also developed an early technical advantage: a superior inventory system that enabled them to optimize and even predict the products that consumers would buy.

By the mid-1990s however, Borders was beginning to lose its edge. The company had placed a large bet on its future by investing heavily in CD and DVD products at roughly the same time that the industry was starting to go digital in a big way. During that same period, arch rival Barnes & Noble was pulling back, choosing instead to place their chips on the future success of online sales and also developing its own e-reader, the Nook. Borders however expanded their warehouses, refurbished their huge stores and outsourced their online sales operation to Amazon instead.

“In our view, that was more like handing the keys over to a direct competitor,” said research analyst Peter Wahlstrom from the investment research firm Morningstar.

Shoppers at the time were beginning to purchase books in a completely different way by going in to Borders to find a book and then going to Amazon to actually purchase it. With so many people migrating online to buy books, Borders ultimately lost out and the last time the company ever turned a profit was way back in 2006.

Borders didn’t foresee the rise of e-books like Amazon and Barnes & Noble did. It didn’t develop its own e-reader to compete with the Kindle or the Nook and they only opened an online e-book store in 2010. The company simply got too big — so big in fact that many of its stores (an estimated 70 percent) were competing with a local Barnes & Noble, offering a glut of bookstores as people were beginning to shift to online shopping. To compound matters further, when the recession hit in 2008-09, Borders was already carrying an enormous amount of debt. It had restructured twice in an attempt to pay off the $350 million it owed, but ultimately it could never get out of the hole that its inefficient business model had placed it in.

On February 16th 2011, the company announced that it had filed for Chapter 11 bankruptcy protection, listing $1.275 billion in assets and $1.293 billion in debts in its filing.

If only Borders was still around today. With The W1nners’ Club – Part One currently in print circulation, the company may have stood a chance if they had a few copies in stock!

 

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