Borders Group Inc. was a book and music retail chain founded by brothers Tom and Louis Borders in 1971. Acquired by Kmart in 1992, Borders was slow to react to the boom in eCommerce and it continued to open new stores with high overheads as Barnes & Noble developed an online presence and e-reader. It also sold books through the Amazon platform for seven years instead of developing its own site.
| Aspect | Description |
|---|---|
| Founding and Early Success | Borders Group, Inc., was founded in 1971 by brothers Tom and Louis Borders as a single used bookstore in Ann Arbor, Michigan. The company expanded rapidly and gained a reputation for its extensive selection of books and its focus on creating inviting retail spaces for readers. |
| Book Superstore Concept | Borders played a significant role in popularizing the book superstore concept, which offered a wide range of books, music, and later, DVDs and other multimedia products. It provided a welcoming environment for browsing and reading. |
| Expansion and Competition | Borders expanded both nationally and internationally, becoming one of the largest bookstore chains in the United States. It competed with other major booksellers, including Barnes & Noble and independent bookstores. |
| Introduction of Music and Multimedia | Borders diversified its offerings by introducing music CDs, DVDs, and other multimedia products in its stores. This move aimed to capitalize on the growing demand for entertainment beyond books. |
| Online Retail and Amazon’s Rise | As the internet gained prominence, Borders ventured into online retail. However, it faced fierce competition from Amazon, which rapidly grew to become a dominant force in online bookselling. Borders struggled to keep up with Amazon’s pricing and convenience. |
| Financial Challenges and Bankruptcy | Borders faced financial challenges due to declining sales, increased competition, and a debt load resulting from its expansion efforts. In 2011, Borders filed for Chapter 11 bankruptcy, leading to the closure of numerous stores and the liquidation of assets. |
| Liquidation and Closure | Borders ultimately announced the liquidation of its remaining stores in 2011. The closures marked the end of a major era in the retail book industry. Borders’ failure to adapt to the changing landscape of bookselling and digital media contributed to its downfall. |
| Legacy and Impact on Retail | Borders’ legacy includes its role in popularizing the concept of the book superstore and its contribution to creating a welcoming environment for book lovers. Its decline and closure served as a cautionary tale for retailers facing the challenges of e-commerce and digital media disruption. |
Background
Borders Group Inc. was a book and music retail chain founded by brothers Tom and Louis Borders in 1971.
From a single store in Ann Arbor, Michigan, Borders operated 1,249 stores at its peak in 2003 with a presence in the United Kingdom, Singapore, and Australia.
No more than eight years later, Borders filed for Chapter 11 bankruptcy protection and was unable to find a buyer. The last stores closed in September 2011 with rival Barnes & Noble acquiring Borders’ trademarks and customer list.
Borders was an early innovator in inventory management with passionate store managers who believed in book-selling. Its stores also had extensive selections with adequate browsing space, cafés, and community outreach programs.
So what went wrong? Many will assume Borders was just another victim of the Amazon juggernaut. But the story of Borders’ downfall starts much earlier and is more complex.
Kmart acquisition
Borders was acquired by Kmart in 1992 for $125 million, with the Borders brothers leaving the book business for good.
This is when the trouble started for the company. Kmart had purchased the mall-based book chain Waldenbooks eight years previous but was struggling to make it profitable. Essentially, Kmart hoped that Borders senior leadership could somehow turn Waldenbooks around.
Waldenbooks and Borders were not a good fit culturally or commercially, and many senior Borders staff resigned as a result. This further exposed Kmart, ill-equipped to deal with a division experiencing competitive pressure from Barnes & Noble and Crown Books.
Borders was eventually spun out in 1995 and renamed Borders Group.
Store merchandising
As the eCommerce movement gathered momentum, Borders Group continued to open new brick-and-mortar stores. The company also added CDs and DVDs to its stores just as iTunes and file-sharing networks became popular.
At the same time, Barnes & Noble began focusing on its online presence and developed an early e-reader called the Nook. The failure to develop an e-reader would prove to be a significant missed opportunity for Borders.
Amazon affiliation
Borders eventually started selling online by outsourcing its operations to Amazon. Essentially, visitors to the Borders website would be directed to the Amazon store.
As a seller of books itself, partnering with Amazon did not make sense financially. When customers were interviewed outside a West Virginia store, one reader admitted she browsed books in Borders stores and then ordered them straight from Amazon.
Too many stores and too much debt
Borders operated hundreds of stores at its peak but they were big and had high overhead costs. This left the company financially exposed at a time when consumers were moving online. Furthermore, an estimated 70% of all Borders stores were in direct competition with a Barnes & Noble outlet.
Debt was also a problem for Borders, with the company restructuring twice after the GFC to manage the $350 million it owed.
Bankruptcy
In its February 2011 bankruptcy filing, the company cited its expansion strategy as one of the key reasons for its demise.
Borders noted that many stores were simply unprofitable and that it had signed too many 15 to 20-year leases which made them difficult to sell.
Key takeaways:
- Borders was an American book and music store chain founded in 1971 by brothers Tom and Louis Borders. After almost 40 years in business, Borders filed for bankruptcy in 2011.
- Borders was acquired by Kmart in 1992 and joined Waldenbooks under the Kmart Umbrella. Borders executives were then instructed to resurrect Waldenbooks, but the two subsidiaries were not a good cultural or commercial fit.
- Borders was slow to react to the boom in eCommerce. It continued to open new stores with high overheads as Barnes & Noble developed an online presence and e-reader. It also sold books through the Amazon platform for seven years instead of developing its own site.
Quick Timeline
- Borders Group Inc. was a book and music retail chain founded in 1971 by Tom and Louis Borders.
- It was acquired by Kmart in 1992, leading to cultural and commercial clashes with its subsidiary Waldenbooks.
- Borders continued to open new brick-and-mortar stores and added CDs and DVDs as digital music and video distribution gained popularity.
- The company failed to develop an e-reader, missing out on the growing e-reader market that Barnes & Noble tapped into with the Nook.
- Borders partnered with Amazon to sell books online, which led to customers browsing in stores but purchasing from Amazon instead.
- The company had too many large stores with high overhead costs, and around 70% of its stores were in direct competition with Barnes & Noble outlets.
- Debt also became a problem for Borders, leading to two restructuring attempts after the Global Financial Crisis.
- In 2011, Borders filed for Chapter 11 bankruptcy protection, citing its expansion strategy and unprofitable stores as key reasons for its downfall.
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