Do you also miss the old stores that went out of business? JCPenny, Blockbuster, Toys R Us or here- Borders Bookstore. In this article, we will discuss the 3 reasons that led to the bankruptcy of Borders, the book company.
What was a Borders Bookstore like?
In case you don’t know, Borders Group was an American book and music retailer founded in 1971 with headquarters in Ann Arbor, Michigan.
Borders was in fact, the second of the three largest bookstore chains in the United States.
Borders Group was popular in the US as they offered a wide range of books and music. Its distinctive stores with comfortable cafes and large selections made it a popular destination for book lovers.
In 1995, the annual revenue of the Borders Group was $1.6 billion. Voila!
Let’s move to the most asked question about Borders,
What caused the failure of Borders?
1. Impractical Business decisions
Sometimes business leaders make decisions that instead of helping them grow, lead to the company’s downfall. Something similar happened to Borders too.
One of the reasons for Borders’ demise was that the business outsourced its online book-selling to Amazon.com from 2001 to 2008. Therefore, viewers were redirected each time they went to borders.com.
While joining the Amazon bandwagon may have seemed a wise move at that time, handing over authority to another business damaged Borders’ branding strategies and reduced its customer base.
2. Borders Bookstore vs Barnes and Noble
Another big reason behind the disruption of many companies is not watching out for their competitors.
Borders remained stubborn and failed to launch its online venture, unlike its competitor, Barnes & Noble.
As a result, Borders lost a lot of customers who switched to Barnes & Noble because it provided the option to purchase online.
Borders had no intention of opening an online store even in 2007. This decision had significant consequences for the bookstore.
According to Border’s 2000 annual report,
“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. We have targeted loss reduction as a major goal in this area.”
3. Brick-and-mortar Business Model
People’s preferences keep changing every day. The demand for digital books and e-commerce was on the rise.
Consumers began to prefer the convenience and portability of digital books, which could be purchased and downloaded instantly.
The Amazon Kindle was released in November 2007. Barnes & Noble introduced the Nook in November 2009, and it is currently sold at Walmart and Best Buy.
The iPad was unveiled by Apple in April 2010. Borders finally launched the Kobo three years later, in 2010.
Although the Barnes & Noble Nook was less popular than the Kindle, it competed well in the e-reader market and supported strong e-book sales.
Borders, on the other hand, was unable to compete in the market due to its late adoption of the e-book. This resulted in losing a greater consumer base and sales for Borders Group.
But The rise of e-books and digital reading technology disrupted the traditional book retail market.
4. A disrupted customer base
Additionally, the diversification of borders was poor. It started as a bookstore, but over time, it transformed into a multipurpose entertainment retailer.
It made significant investments in CD sales during the 1990s. Around that time, individuals started purchasing iPods rather than CDs.
Furthermore, when Borders reduced its music inventories, it discovered that it had more expensive retail space than it required, which placed additional pressure on its business model.
5. A poor marketing strategy
Borders also mishandled its big-box marketing plan.
Despite poor sales, it expanded far too many locations, including a few abroad. In terms of expenses, the stores tended to be both too large and costly.
In its bankruptcy filing in February 2011, the business identified its expansion strategy as an area of concern. It noted that the excessive number of 15- to 20-year leases the company had signed made it more difficult to close down unprofitable locations.
While talking about why Borders failed, Mike Edwards, President of Borders, said:
“We were all working hard towards a different outcome. [B]ut the headwinds we have been facing for quite some time, including the rapidly changing book industry, e-reader revolution and turbulent economy, have brought us to where we are now.”
Finally, Borders bookstore closed down
Borders did have potential. Their reluctance to change with the changing market, not innovating like their competitors, not paying attention to customers’ preferences, and having an ineffective Business model led to their disruption.
Borders Group filed for bankruptcy in 2011, as it failed to make the transition to the digital age and was unable to compete with its competitors.
In 2011, the company closed 399 stores and laid off 10,700 employees.
That was all about why did borders go out of business. If you’re interested in more such company failure stories, subscribe to our blog by filling out this small form below.
Recommended read: Reasons that Led to Sears’ Bankruptcy