Borders Postmortem, A Failure of Loyalty


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It’s been said that a good book tells the truth about its hero and a bad book tells the truth about its author. But the liquidation of a 40 year-old bookstore chain ultimately tells the truth about the brand anad how it was managed.

Last Friday Borders bookstores began liquidation sales at their remaining 399 retail stores. Former Borders VP and Chief Merchandising Officer and current interim CEO, Mike Edwards, sent out an email to Borders Rewards customers, which was an interesting spin on events. But to paraphrase Oscar Wilde, a thing is not necessarily true because a brand dies for it, so here are some portions of his letter and some of our observations from a loyalty and engagement perspective.

“I want to personally thank you for your loyalty and support. . . ”

Observation: What loyalty? It’s been more than half a decade since Borders declared an actual profit, and has lost a billion + dollars since. That’s occasional shopping, not the loyalty that drives profitability.

“You might be asking yourself what happened?”

Observation: Not really. Borders was egregiously bad at identifying consumer product and lifestyle trends, introducing candles and stationary, CDs and DVDs at a time when consumers were moving in other directions. The chain was late to the e-book movement, but more about that later. We don’t know what they relied upon for insights, but we’re sure they weren’t real loyalty measures. Actual loyalty measures identify consumer behavior trends 12 to 18 months before they show – or in the case of Borders — do not show up at the register.

“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 e-Reader revolution, and a turbulent economy.”

Observation: This is like Krispy Kreme blaming the Atkins diet on their brand positioning blunders. It’s true that the book industry has changed and the economy has been wonky, but volumes of competitors—from Barnes & Noble to Wal-Mart—have managed to take away market share and customers from Borders in that same economic environment. Borders was late to the Web, and late bringing e-tailing into their marketing mix. In fact, despite their “very hard work,” Borders actually contracted out their e-commerce business to No. Really. We’re not kidding. They drove customers to an actual competitor. They only acknowledged the inertia of electronic books back in July 2010, a year after Barnes & Noble–nearly a year after that they changed their e-Reader apps to the Kobo. This move was, apparently, too little, too late to really engage customer.

“We put up a great fight, but regrettably, in the end we weren’t able to overcome these external forces.”

Observation: Not to mention the $1.293 billion dollars that they were in debt. After a good deal of financial negotiations, creditors rejected a bid from Direct Brands and Borders filed for an auction. But, alas, the bid deadline expired on July 17th without a single bidder coming forward. Meanwhile Apple, which has extraordinarily high levels of loyalty and engagement, saw their shares traded at nearly $375 and have delighted consumers willing to camp out in the street just to get products despite the “turbulent economy.”

“Going out of business sales begin in stores Friday July 22. I encourage you to take advantage of this one-time opportunity to find exceptional discounts on your favorite books and other great merchandise.”

Observation: Pleeeeeeease. Did we mention they’re $1.293 billion in debt? OK, that notwithstanding, when you can only get customers in the door based on price, you’ve ceased to be a brand and have turned into a commodity. And today, consumers are looking to be delighted, and only real brands that can engage customers can do that. Loyal customers follow ‘The Rule of Six:’ they’re six times more likely to rebuff competitive offers, and six times more likely to invest in your company. In 2008 Border’s stock was 35 a share. Last year it was still under a dollar. Did we mention Amazon’s shares were being traded at $215.00?

“For decades, Borders stores have been destinations within communities. . .”

Observation: Although, apparently, not recently. If you’re a retailer, loyal and engaged customers are also six times more likely to visit your locations.

“I feel privileged to have had the opportunity to lead Borders. . .”

Observation: One can only imagine Mr. Edwards was paraphrasing the Captain of the Titanic or reading from a 60% off copy of the Charge of the Light Brigade.

“My sincerest hope is that we remain in the hearts of readers for years to come.”

Observations: You mean like other companies who had brands that were bankrupt in funds and bankrupt in meaning? How many consumer hearts today beat wildly for the likes of Caldor, Spiegel, Bennigan’s or WashingtonMutual?

The bottom line? With real loyalty metrics, a brand doesn’t have to invent a happy ending. It can actually write one.

Robert Passikoff
Robert Passikoff, Founder and President of Brand Keys, Inc., pioneered research in loyalty and engagement, creating the Brand Keys Customer Loyalty Engagement Index® ,the Sports Fan Loyalty Index® , and the Women's Wear Daily Fashion Brand Engagement Index® . His first best-selling book, Predicting Market Success provides marketers a 21st century perspective on predictive loyalty metrics. His newest book is The Certainty Principle: How to Guarantee Brand Profits in the Consumer Engagement Marketplace.


  1. You state a lot of truths about Borders — there was bad management of many things. However, I would somewhat dispute one point — that customers weren’t loyal. There were many loyal customers (including myself) who continued to appreciate what a physical store offered compared to Amazon (ability to browse shelves, page through books, and ask impromptu questions of a real person in real time) — there were just not enough of us. Market and demographic trends were indeed rapidly changing and Borders either did not adequately respond or responded too late. Borders should have done their own e-commerce site long ago, decreased their CD offerings earlier, and possibly closed or downsized some stores earlier.

  2. Speaking on the Australian experience with Borders, there was a large store close to where I lived and I visited the store 2-3 times a week. Mainly to get coffee and read.

    However the fact that books in Borders where in all cases priced at 20% higher than prices in other stores within walking distance ment that I did not buy anything at Borders.

    Some of the books that I was interested in (more expensive and specialised) I could buy from Amazon and have delivered to my doorstep at rates of below 50% what Borders priced them at.

    I would check out Borders price first do my research at Borders and go elsewhere. Now Amazon gets all my business.

    I guess the moral is you just have to price right.

  3. I happen to enjoy the feel of a real book and being able to ask for reading recommendations at a brick and mortar store. I see a real benefit to a place where one can go find a good read–ebook or otherwise–and am willing to pay a bit more for the service.

    As it happened, the Borders in our town had no one with the expertise to assist (except sometimes in the children’s section). In addition, as someone already mentioned, Borders priced their books much HIGHER than the competition–including other bookstores. Despite being a frequent visitor, I rarely bought books there. It is somewhat entertaining that even with the 10-20% markdowns the prices are still higher than other stores. Lots of mismanagement and poor decision-making abounded.


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