E-Commerce Times Talkback
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The Borders near me closed the other month. Wasn't surprising. Ditto for Circuit City. Gone. A few years prior to that it was Hollywood Video that rolled its end credits. The problem is, none of them had to go. They each died of self-inflicted wounds. Sure, a lot of their CEOs came out and blamed Iraq, the economy, e-commerce, etc., for their failures. But while these external forces may have played a part, they weren't the death knell. It's like the guy dying from heart disease blaming the doughnut shop.
Q: What went wrong at Borders?
A: A lot of things. Borders began in 1971 as an independent store near the University of Michigan. Its transformation began when its original owners, brothers Tom and Louis Borders, used computers to help stores adjust inventories to readers' tastes.
Things started to go sour, though, after 1991 when the brothers sold their company for $125 million to Kmart, which also owned Waldenbooks.
"The timing couldn't have been worse," says John Mutter, editor of Shelf Awareness, a digital newsletter about publishing. At a time when Barnes & Noble, Crown Books and other chains were expanding, "Borders was distracted by the ultimately unsuccessful effort to merge with Walden."
Kmart threw in the towel in 1995: It spun off Borders, which soon began to expand in shopping malls in the U.S. and overseas. But Borders couldn't keep pace with Barnes & Noble and discount chains led by Wal-Mart— and was poorly positioned to deal with the growing competitive threat from Amazon.com.
Q: How did Borders handle the digital revolution?
A: Borders tried to turn Amazon into an ally in 2001. The online retailer agreed to fulfill book orders made by visitors to Borders.com and pay Borders a percentage of the revenue. But that backfired.
"It was utterly stupid for Borders to borrow its future from a company that didn't want it to even have a future," says Michael Norris, an analyst at Simba Information.
In 2008 Borders ended the alliance with Amazon and began to handle its own online sales.
Q: And what about e-books?
A: Borders wasn't prepared for the newest publishing innovation: e-books for digital readers led by Amazon's Kindle and followed by Barnes & Noble's Nook. Borders began selling e-books online in July 2010, well after Amazon, Barnes & Noble and Sony had secured footholds in the market. According to Fordham University marketing professor Albert Greco, who studies bookselling, the two largest chains had similar shares of the market in 2000: Barnes & Noble (15.5%) and Borders (14%); by last year, Barnes & Noble was at 17.3%, and Borders had fallen to 8.1%.
Q: But didn't Borders try to buy Barnes & Noble?
A: Investor William Ackman of Pershing Square Management offered to help Borders finance a bid to buy Barnes & Noble, but the plan fizzled. His company has a 15% stake in Borders.
What happened to Circuit City?
So what happened? Was it competition from Best Buy? Was it a change in consumer behavior? Was it a poor business model? Was it the layoffs?
whatever it is
they are outta the picture
Hollywood Video’s parent company has been unable to handle competition from Redbox, Netflix and Blockbuster, and has now been forced to close all of retail stores in the United States.Movie Gallery, which saw its Hollywood Video chain fall into obscurity, believes liquidating all Hollywood Video stores is the only option. Since 2007, this marks the second time Movie Gallery has filed for Chapter 11 bankruptcy protection, which first happened after merging with Hollywood Video.Prior to the merger, the companies were the No. 2 and No. 3 rental movie store chains trailing behind Blockbuster.
Steve Harmon has written a really engaging article and clearly knows retail in it's true form; the meeting of customer needs irrespective if your store is made of light or stone.
One possible improvement..Steve takes for granted that, had the dead and dying created a ginchy buying experience and lowered price [each a margin killer],they could have actually survived. Walmart has been killing competitors with price and selection since b4 Amazon listed it's first book. There may just be room for x retail business per human being and as Amazon et al come in, somebody must exit.
Does Steve have any good examples of traditional stores who ARE surviving by "doing it right"? I personally think that, long-term, they are all doomed except for fresh bread, used clothes and the odd 7-11.