After being in business for nearly half a century, Borders announced plans to close and liquidate its remaining stores by the end of September.  This announcement came after the company filed for bankruptcy in February and after the last hope for a revival disappeared when a private investment deal fell through.  

Though all of this has come to light in recent months, Borders reportedly has operated at a loss for years.  What caused Borders’ downward spiral?   

According to one source, Borders did not identify and embrace emerging trends when it should have.  At the turn of the century, Boarders failed to anticipate the value of selling books on the Internet.  Instead of providing customers a way to make purchases through its own internet site, the company outsourced its internet sales to Amazon, opting to take a small percentage of the revenue.  Borders’ own website merely allowed customers to browse inventory located in the actual stores.  Not until 2008 did Boarders regain control over marketing its products online.  By that time, however, Amazon had already become a market leader in internet book sales.

Also, Borders did not anticipate the popularity of e-readers, small portable devices that store digital books.  Amazon released the first e-reader, the Kindle, in late 2007.  Shortly thereafter, Barnes & Noble released the Nook and Apple released the iPad.  By the time Borders came out with with its own e-reader, the Kobo, in July 2010, the competition had already established a stronghold on the market. People who purchased a Kindle or Nook were not willing to buy another e-reader.

Finally, although Borders enjoyed high CD and DVD sales during the mid 2000s, the company did not seem to notice when demand for these products began to fall.  Due to competitors like iTunes and Netflix, people were just not buying as many CDs and DVDs.  Ignoring this, Borders expanded these departments when it should have scaled back.

Now, our marketplace is more challenging than ever.  The moral of the Borders story is that corporate giants with a long history can no longer fall asleep at the wheel.  Today’s consumer not only demands the latest products and services, but also expects retailers to anticipate commercial trends.

Filed under: Corporate Law by Yau Jo-Anne Wednesday, September 14th, 2011