Why Did the Borders Bookstores Collapse?

July 26, 2011 in Daily Bulletin

Borders recently announced that it would be shutting down as no potential buyers were willing to take over the company and keep the bookselling chain afloat. So what caused one of the largest booksellers to close? An article on Slate gave a good summary of the major causes. It cited four major problems:

1. It did not adapt well to the internet or properly adopt it into its business strategy.

2. Borders did not cash in on e-books, which have become increasingly popular.

3. Borders lacked diversification – sales of books declined as DVD and CD sales declined, which also made up a large portion of Borders sales. Barnes & Noble diversified by bringing Starbucks to its stores, while Borders eventually brought in Seattle’s Best.

4. Borders opened too many stores, many of which were unprofitable. Many of these stores were too large leading to high overhead costs and they also locked themselves into many long-term leases making it impossible for them to shut-down specific, unprofitable locations.

Will Barnes & Noble be next, or will they be able to compete against Amazon in the future? Only time will tell.

Source: Slate