Borders Group Inc., the nation’s troubled second-largest bookseller, is in the midst of a turnaround that will hinge on marrying the past and the future of retail in a dozen concept stores and its new Web site.
The 12 Borders concept stores will offer digital products and services and allow customers to download digital purchases. For example, customers will be able to mix and burn CDs in the store.
“What I am trying to do is build the first truly cross-channel retailer so they feed one another and both benefit,” Borders CEO George Jones said in an interview, referring to different “channels” through which customers shop, from stores and catalogs to the Internet.
“You will see the meshing of the Internet coming into the physical store,” said Jones, a veteran retail executive brought to Borders last year to lead a revival. He previously held executive positions at Saks Department Stores, Warner Bros. and Target Corp.
Jones said the bookseller would create more partnerships like the one announced two weeks ago with Sony Electronics Inc., which expanded their agreement to sell digital book reader devices and initiated a co-branded version of Sony’s online store for e-book downloads this month. The e-book store will be part of Borders’ new Web site.
Promoting Partnerships
Borders has lost market share in recent years to Barnes & Noble, Amazon.com and big box retailers like Target and Costco, which are yanking best-seller business away.
Despite years of cost cutting, promotions and store remodels, Borders fell flat in 2006, losing $151.3 million on just over $4 billion in sales. Its stock price has fallen more than a third since January 2006.
Some shareholders have upped their stakes in recent months, more on speculation of a merger with Barnes & Noble than on faith in the turnaround plan, according to a J.P. Morgan analyst report.
Jones said “people can speculate” about potential mergers, but his focus is on turning around Borders’ fortunes.
His plan is drawing some early praise.
Jettisoning Amazon
“They have a chance to leapfrog other retailers in creating a compelling multi-channel experience,” said Nikki Baird, managing partner of RSR Research of Miami, a retail technology consulting firm.
Baird said it’s significant that Borders is breaking off its relationship with Amazon.com for book orders and shipping. The move allows Borders to control its destiny and gain critical information about what its customers are buying online. Borders hooked up with Amazon.com for online orders in 2001.
But Britt Beemer, chairman of America’s Research Group, said Borders has got to get the concept stores right from the beginning.
“They have to do it soon before the consumer says ‘I’m going to write you off my list,’ ” Beemer said.
He said Borders has been in the shadow of Barnes & Noble for some time: “At one time, Borders was known as a bohemian bookstore with books in great piles. It was like a treasure hunt, but that feeling went away.”
Borders is now testing a version of its e-commerce site at beta.BordersStores.com. The site is expected to formally launch in early 2008. Barnes & Noble launched its redesigned site this month.
Borders hopes its new site will allow it to take better advantage of its 21 million Borders Rewards loyalty program members. The site also is supposed to help Borders embark on partnerships with entertainment companies and become an electronic gathering place for customers to chat about books, music and their creators.
