Top Reasons why Borders Failed

Borders was a great book and music retailer that was founded in 1971. After decades of work, the company decided to liquidate in 2011 and closed 399 stores. It was shocking for many people to see the store closing like that, especially considering that 10,700 people lost their jobs. Borders was one of the most visited bookstores out there, along with its competitor Barnes & Noble.

One of the bookstore’s unique qualities was its specific inventory system — Borders was able to optimize what consumers throughout the entire country would end up buying. It was also good at predicting customer behaviors. Many people appreciated that it was such a big store with a wide variety of books that provided more chances to find the items they were looking for. Still, the business couldn’t live forever.

So, why did Borders fail in business?

The Internet Became More Advantageous

The Internet started to become more common and more people had access to it. Once the demand for online orders increased, Borders was at a disadvantage. The company didn’t invest in its online store. In fact, whenever you would access borders.com and try to buy books, you were redirected to Amazon.com.

Now, we all know how big Amazon is, and using it may have seemed like an advantage at the time. This decision did not turn out well for Borders though. Partnering with Amazon for online orders meant that Borders was giving a lot of its control to a different company. As a result, the branding strategies of the bookstore suffered.

Borders continued to be stubborn and neglected to create its own online initiative, unlike its competitor, Barnes & Noble. As a result, Borders lost a lot of customers who chose to resort to Barnes & Noble since it offered the opportunity to buy online. Even in 2007, Borders didn’t consider creating an online store. This decision had severe consequences for the bookstore.

The E-Reader Revolution

With the evolution of technology, many people also moved toward using e-books rather than buying physical books.

When talking about why Borders failed, Mike Edwards, the president of the company, gave some reasons. “We were all working hard toward a different outcome,” he said. “But 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.”

But that’s not the full truth. Other bookstores invested in catching up with new demands and thus adapted to the e-reader revolution. There was a lot to benefit from since so many people were looking to buy e-books. For example, Barnes & Noble and Amazon were able to see the growth in e-book interest early on and opened their own respective e-book stores. In contrast, Borders chose not to make its own e-reader to compete with the Nook or the Kindle. Why would anyone go to a physical store and buy books the traditional way when they could buy an e-book from Barnes & Noble? It was more convenient to settle for the e-reader format, especially since so many bookstores started adapting to it.

Borders did eventually open an e-book store, but by then it was too late. It wasn’t obvious to customers that the store sold e-books, especially since they were for lesser-known devices such as Cruz and Kobo. So, not only was Borders late in investing in their e-book store, they also didn’t make it obvious that it existed. This was high in contrast to their major competitor Barnes & Noble, who made the Nook section in their stores impossible to miss.

Investing in Music Sales

Over the years, Borders tried broadening its selection from books to other merchandise to grow the business. The goal was to become a multipurpose entertainment retailer, which is why they started investing in CD sales in the 1990s. This turned out to be a huge mistake, though.

As time went on, people were not buying CDs anymore. Instead, they were focusing on downloads for their iPods. In response to this, Borders ended up reducing its music inventories. Unfortunately, this left the company with more expensive retail space than necessary. Again, Borders was in a bad spot. One in five dollars of sales used to come from music and video.

Other record and video stores also suffered from the impact of the same forces. When Netflix, iTunes, and other networks that shared files became popular, people switched to them instead. This also affected Borders’ sales.

Too Many Stores Opened

Another big reason for Borders’ demise is the numerous stores that it opened. It became way too big, and it was too expensive to maintain the company. Some of these stores were overseas as well, which made it even more expensive to maintain the business.

Although the company still owned a lot of stores that made a profit, it was also paying to keep numerous unprofitable stores. Borders stated in the bankruptcy filing that it “…still [has] a sizable core of profitable stores…However, in analyzing their cost structure, the Debtors have found that they also have several stores which are simply unprofitable and are substantially impacting the Debtor’s overall performance and ability to pay their debts.”

In 2011, the company had to file for bankruptcy. It was too much for them to compete with the Internet — a place where it was much easier and quicker to connect with customers. Borders could no longer convince people to come to physical stores to find their books.

What can we Learn From These Mistakes?

One of the things we can learn is that companies need to adapt to changes in the market and the clients’ demands. As the Internet became popular, Borders should have developed an online store and opened an e-book store. They failed to do so and it cost them a lot of money.

Another lesson we could learn is that quantity is not better than quality. Borders tried to compensate for its lack of an online platform by having multiple stores spread across the world. Not only did this not work out, but it was too costly as well. The business ended up having a lot of debt, which forced it to file for bankruptcy.

If we own a business, we should look at what people want and not invest in things that are not popular anymore. Borders made this mistake by investing in music sales at a time when CDs were dying down and most individuals were moving toward iPods.

Final Thoughts

Borders would have existed for much longer if it had successfully invested in the right areas — developing an online store and opening an e-book store. The chain had too many stores that cost a lot, and it was overcome by the Internet and the convenience it brought to people’s lives.

In the end, most people moved to online buying and Borders was not making as much profit anymore. It couldn’t compete with the other booksellers who had managed to adapt to the changing market. Now, the once-beloved store doesn’t exist anymore.