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Ted Hurlbut

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The Borders Failure

March 16, 2012

Borders filed for bankruptcy protection today, surprising nobody. For months there has been speculation that the company was bleeding cash, and struggling to secure additional financing. But Borders’ problems went far beyond financing. As Michael Souers, an analyst for Standard & Poor’s, said “Instead of leading and being innovative, they were certainly a follower.”

To many observers, Borders had long been behind the curve, as its primary retail competitor, Barnes & Noble expanded its online presence, and then as both Amazon and B&N developed digital readers. But to me, Borders slow response to technological changes in the bookselling business overlooks an even more important part of the story.

As a consumer, I have long preferred Barnes & Noble stores to Borders stores, just as I preferred Best Buy to Circuit City and Bed, Bath & Beyond to Linens ‘n Things. B&N, Best Buy and Bed, Bath & Beyond were simply better stores. It’s clear that I wasn’t the only one that felt that way.

It’s not technology that has done in Borders, any more than it was technology that did in Circuit City or Linens ‘n Things (although nobody can deny that technology has been and was a contributing factor). What did in these retailers was a failure to update and refresh the compelling idea that gave their stores such resonance and relevance with consumers in the first place.

Retailing is hard, and consumers can be fickle. They’ll stand still only until the next thing comes along, which it always does, more quickly than expected. Successful retailers initially achieve critical mass because they’ve delivered Wow. They were best in class, whatever their class. But loathe be the day they are no longer best in class. All the price reductions in the world can’t rescue a failed customer experience, or bring back disaffected consumers.

Borders says it needs to immediately liquidate a third of its stores in order to create some financial breathing room. I have no reason to doubt that. But unless they give me, and a whole lot of other consumers, a compelling reason to prefer their stores to their competition, they might as well close up the rest of them now, while they’re at it.

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