What Happened to Borders?

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#14: BORDERS

Borders was once an international book and music retailer. At their height, Borders operated over 1,000 stores in the world, with thousands of employees. While the majority of their business was conducted in the United States, their international presence was exemplified by their stores in the likes of the United Kingdom, Australia and New Zealand. For numerous reasons however, Borders were unable to maintain their success, eventually leading to its demise. In this article, we take a look at what went wrong.

 

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Borders used to have stores all around the world

Borders was founded in 1971. At first, Borders was purely a standalone store based in Ann Arbor, Michigan. The store was set up by brothers Tom and Louis Borders, who were students at the University of Michigan. At first, the store comprised of just two rooms, with used books being sold. Despite their humble beginnings, the business secured strong sales, and by 1975 they had bought out a rival bookstore. Borders slowly expanded around the state of Michigan, and eventually nationwide.

 

Following two decades of control by the Borders brothers, the success of the company led to an acquisition from Kmart in 1991. Kmart was a significantly bigger business, yet had struggled in the past with selling books. Kmart merged Borders with Waldenbooks – another book chain they had purchased. But this caused problems, with several senior managers leaving Borders. Faced with competitors gaining market share, Kmart eventually spun off Borders into a solo business – named ‘Borders Group’.

 

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The rest of the 1990s would see Borders continue to expand. They were able to make a first foray abroad in 1997 – as a branch in Singapore was opened in 1997. Over the following years, Borders expanded to Australia, New Zealand, the United Kingdom and Ireland. By 2003, there were over 1,200 stores worldwide. A franchising system was installed, with franchises opening in both Malaysia and the United Arab Emirates. The introduction of a loyalty program and cafés in some book stores proved popular.

 

But in 2006, Borders would turn a profit for the final time. Borders had enjoyed a long-standing agreement with Amazon to be able to use their platform to sell books. But Borders made the ill-fated move to try and compete with Amazon instead, opting to launch their own online store. Yet the online store struggled to compete with Amazon. The decision to go it alone, as opposed to harnessing Amazon’s platform, proved disastrous for Borders. The move allowed Amazon to cement their place as the most popular online retailer for books.

 

In 2008, Borders announced their intention to sell their business due to financial difficulties. The business had to secure a loan due to debt problems, though the revelation of an abnormally-high interest rate led to the shares in the company dropping significantly. An effort was made to sell the company to Barnes & Noble – their biggest competitor in terms of bricks & mortar stores. Yet no deal could be reached initially, and their share value continued to drop throughout the year.

 

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Borders used to sell music products too. Photo by Poranimm Athithawatthee on Pexels.com

 

Yet in 2009 there appeared to be signs of a turnaround. A new management team was brought in to try and arrest the alarming decline of the business. The infamous loan was restructured to provide a lower interest rate, and a new publishing arm of the business was created, which allowed authors to self-publish books. But despite the initial optimism, poor sales in the crucial holiday season of 2009 failed to lift investor confidence, with major cuts being made across the business.

 

The Australian, New Zealand and Singapore arms of the company were sold off. The British stores of Borders were all closed following liquidation proceedings. By 2010, Borders only had their domestic stores remaining. In mid-2010, Borders had managed to pay off their loan. But sales losses continued, leading to their share price plummeting further. By the end of the calendar year, Borders had to intentionally delay payments to ensure the business didn’t have to require bankruptcy protection.

 

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Borders struggled to cope with the rapid rise of Amazon

 

In early 2011, Borders were forced to file for bankruptcy protection. Hundreds more stores were closed. After a restructuring programme couldn’t be implemented, Borders were forced into liquidation. By the end of 2011, all stores and their online store had been closed down. Barnes & Noble eventually acquired the remaining assets of the business, in the process leaving Borders defunct.

 

As you can see, a range of problems affected Borders. Many book stores closed in the same period – owing to the move to online purchases. But Borders did initially excel online, but their fateful decision to terminate their arrangement with Amazon was hugely costly. Amazon went from strength-to-strength, while Borders were unable to match their success. Finally, when the company was struggling financially, the repayment arrangements on their loan appeared to end any chance of survival.

 


FROM BRILLIANCE TO BANKRUPTCY:
TOP 20 BUSINESSES THAT WENT FROM HUGE SUCCESS TO COLLAPSE


 

Borders are far from the only company that haven’t been able to cope with the rise of Amazon. But unlike the majority, many of the problems that led to the demise of Borders were ill-advised, self-inflicted problems. While the founders managed to sell the business early on, their successors didn’t have as much success. Ultimately for Borders, a combination of technology advancements and poor decision-making proved costly.

 

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