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August 16, 2011
Borders: A Brand Lesson Before Dying?
 
As someone who likes bookstores, I’m sad to see Borders bite the dust. As someone who works with brands, I’m intrigued with what went so horribly wrong with a brand that, at one time, seemed unstoppable.
 
In a nutshell: The company was founded in 1971 in Ann Arbor, Michigan. The Borders brothers sold it to Kmart in 1992. In 1995 the company was introduced on the New York Stock Exchange. The superstore expansion began in earnest. The company’s stock peaked at $44.88 in 1997. Its last profitable year was 2006, when it had 1,329 stores and almost 36,000 employees. It has been shedding stores and employees ever since. It filed for bankruptcy protection in February of this year. In July, the company was put up for auction but had no takers. On July 18, the company announced it would liquidate.
 
Shortly thereafter, Borders President Mike Edwards blamed his company’s decline on “the rapidly changing book industry, eReader revolution, and turbulent economy.” Note that nowhere does he say “declining book sales.” That’s because according to surveys, like the one from The Association of American Publishers, book sales have been rising. It’s just how people buy books that has changed. 
 
Edwards continues, “We put in a valiant fight, but regrettably, in the end we weren't able to overcome these external forces."  A headline in Newser.com begged to differ: “Borders Done In by Its Own Stupidity, Not Internet.” If you look at what’s been happening in the company since the mid 1990’s it’s hard to disagree.
 
With the morbid zeal of a nine-year-old poking a dead bird with a stick, I have jabbed at the Borders carcass to see what you and I might learn from this. I’ll share a few of my observations and hope you’ll do the same.
 
First, never underestimate the power of the Internet to totally alter your business reality. And when it does, adapt. Borders didn’t. In fact, looking back it seems that as late as 2008 management still saw the Internet as a fad that would soon pass so we all could get back to buying books in stores. Borders launched a website in 1998, a year after barnesandnoble.com. In Borders’ 2000 annual report they claimed that, "Our online investment will be channeled to support our in-store platform.” By 2001 their website was still losing money. Instead of fixing it they threw in the towel and gave their online business to Amazon, a competitor, as if online sales would never amount to much anyhow. 
 
Second, have a clear idea of what business you are in and to whom you ought to be selling. In a 2001 interview Anne Roman, corporate affairs counsel at Borders, seems to dismiss the Internet. “We want to continue to provide our customers with the online shopping option,” adding that the Amazon deal "allows us to focus on our core business, which is our chain of over 350 retail stores worldwide." I would have thought Borders’ core business was selling books, not running stores. But seven years later when the magnitude of the Amazon misstep must have been obvious, management still didn’t get it. Online book sales were booming and the Kindle had just been launched to great fanfare, yet Borders was still looking backwards. When asked about their newly relaunched site in a 2008 interview, vice president of e-business Kevin Ertell said, "The desire was really to make people who shop in bookstores comfortable with the site." Long after most of us had moved our book-buying online, Mr. Ertell created a website that catered to people who preferred not to buy online.
 
Third, strive to anticipate market trends, not react to them well after the fact. Ironically, Borders got their start because of technical innovation that was far ahead of its time. In 1971, while attending the University of Michigan, Louis Borders developed a software system that allowed him and his brother to manage inventory and project sales in their bookstore. This provided a huge competitive advantage that fueled the company’s growth for over 20 years. Among other things, it helped them build a reputation in the ‘80s and early ‘90s as having the largest assortment in town. This long-tail advantage evaporated overnight with the rise of “The World’s Largest Bookstore,™” Amazon, in the latter half of the 1990s. Undeterred, Borders continued leasing colossal stores. And ten years later as iTunes, Netflix, and file-sharing changed the way we consumed movies and music, Borders continued to aggressively push CDs and DVDs though its retail stores. In 2004 Borders signed a deal with Seattle’s Best Coffee to operate cafes in its bookstores, nine years after rival Barnes & Noble signed with Starbucks. I probably don’t need to mention that Kobo, their answer to the Kindle and Nook, arrived just last year to lackluster reviews.
 
Now, of course, hindsight is always 20-20. But it still perplexes me how Borders’ management failed to see — much less prepare for — online buying, e-books, e-readers, the demise of CD/DVD sales, and every other change in book retailing since the Clinton administration. It’s as if they were hoping it would all just go away. 
 
The Internet and the digital revolution are changing all sorts of things we thought were immutable fixtures in our lives, like newspapers, record shops. and bookstores. If you manage a brand or run a company, be vigilant. As Jeff Bezos once reminded me in a seminar: We are just at the start of the digital revolution and these are just the opening volleys. Expect more change in areas you least expect as iconic brands that fail to adapt are snuffed out and all sorts of new brands emerge. One thing to be sure of: closing your eyes and ignoring it will not make it go away.

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Sean Duffy is a founder of Duffy Agency, the digital marketing agency for aspiring international brands. Sean has over 25 years of experience working with strategic marketing in Boston, San Francisco, Stockholm, and Copenhagen. In addition to his involvement with Duffy Agency, Sean is a frequent speaker on strategic international marketing and online brand management. He serves also as Lecturer and Practitioner in Residence at the Lund University School of Economics & Management and as Mentor in their Masters Program in Entrepreneurship. Sean is an active member of  TAAN Worldwide where he has served two terms as the European Governor. He is also a speaker, bloggerTwittererand is on LinkedInWith offices in Malmö and Boston, Sean splits his time between Sweden and the States.

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