C. Myblog

Farewell To Borders: No Business Is Immune

August 19, 2011

No business is immune to the pressures of external forces and changing consumer behaviors.  At the end of July, after being in business for over 40 years, Borders notified its 1.6M rewards customers that it would be closing its doors for good.

According to Borders’ 2010 annual report, the company had:

  • 642 stores
  • 16,400 employees
  • $2.3B in revenue but a net loss of $299M
  • For comparison, 2009 net loss of $109M and a 2008 net loss of $187M

Following is an excerpt from a letter issued by Borders CEO, Mike Edwards:

We had worked very hard toward a different outcome.  The fact is that Borders has been facing headwinds for quite some time, including a rapidly changing book industry, the eReader revolution, and a turbulent economy.  We put up a great fight, but regrettably, in the end, we weren’t able to overcome these external forces.

Some in the industry are simply preserving the status quo, expecting the environment to eventually subside to pre-Great Recession levels bringing higher loan-to-asset ratios.  A key factor to consider, however, is the blatant un-sustainability of that environment.  Consider the evolution of the personal saving rate at that time:  cycling from a meager 2.4% at year-end 2002 plummeting to negative levels by 2006.

To expect consumers to return to this debt-burdened state after the recent economic collapse is a fallacy.

The lesson here is not that you have to focus your strategy around technology, but that you have to strategically evaluate your business model and evolve as appropriate with the changing landscape. “Appropriate” will be unique to each institution.

1.    A Fond Farewell…Thank You For Shopping at Borders, Letter To Borders Rewards Members, 7/21/11
2.    Borders Group, Inc. 2010 Annual Report on Form 10-K

Showing 2 comments
  • Mark Arnold

    The Borders analogy is a great one. I would also point to Blockbuster. For years they were a leader in the entertainment industry. Rather than adapt to a changing landscape and changing competitors (Netflix, Redbox, Apple, etc.) they chose to continue using the same strategic model they had for years. By the time they adjusted it was too late. Part of strategic planning for credit unions is making QUICK adjustments (don’t move too slowly).

  • Alan

    Too bad . . . I’ll miss holding nice big books and turning pages. How do you put a coffeetable book on an ereader? Maybe I can plug the ereader into my bigscreen TV for more photo appeal.

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