1.
Borders Group Inc.
Background
The beginning of Borders Bookstores can be traced back to 1971, when brothers Thomas and Louis
Borders opened their first bookstore in Ann Arbor, Michigan. Borders Group Inc. was a book and
music retail chain. In 1995, Borders Group, Inc. was the second largest bookstore in America,
boasting massive superstores that housed more titles of books, DVDs, and videos than any of its
competitors. As business flourished, Borders grew ready to expand. Borders unleashed its first large
“superstore” model bookstore in 1985 and subsequently opened five more throughout the Midwest.1
The superstores were unlike any other bookstores of the time – they featured coffee bars and lounge
areas to provide customers with unique in-store experiences that set Borders apart from its
competitors.
Borders caught the attention of Kmart Corporation (“Kmart”), which wanted to expand its presence in
the retail book industry. Kmart saw Borders as its opportunity and acquired the superstore bookstore
chain in 1992.
Mistakes
In the mid-nineties, while all of its competitors were “going digital,”2 Borders Group turned
to selling more pre-recorded music and DVDs.
Borders Group audaciously continued to ignore the transformation of the book industry. It
turned its cheek to the digital changes in the industry, and kept expanding its physical store
footprint into the new millennium. 3 These aggressive expansion efforts came to a screeching
halt in 2005, however, when Borders Group, after suffering significant losses, finally
acknowledged that the retail book industry was no longer viable and that consumers generally
preferred electronic formats of movies, books, and music over hard copies.
however; by the time Borders.com was re-launched, approximately a decade had passed since
e-commerce transformed the industry.4 Because it had outsourced its website to Amazon.com
for approximately seven years, Borders Group lacked the requisite expertise to operate a
successful website.
Findings
It was too late to e-books, Borders didn’t foresee the rise of e-books like Amazon and later
Barnes & Noble did. It didn’t develop its own e-reader
It opened too many stores.
It had too much debt, When the recession hit in 2008-09, Borders was already carrying a
huge debt load. It had restructured twice since 2008 in an attempt to pay down some $350
million owed. But Borders could never get out of the hole that its inefficient business practices
had put itself in.
By 2006, Borders no longer turned a profit. Five years later, Borders declared bankruptcy
and liquidated their assets.
Recommendation
It's not a good idea to "keep your friends close and your enemies closer" when it comes to a
critical component of your business plan. Borders made the error of cutting corners, which
ultimately led to the company's collapse.
Large-scale transformations like the cooperation between Amazon and Borders demand
careful preparation and risk analysis. A strategic change initiative must be created. Borders
might have anticipated this result if they had thought about the long-term repercussions of
this tactic.