Post of the Day
February 8, 1999
Borders Group Folder
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Subject: Re: idea for borders
"With every Borders in-store purchase you get a discount on your online purchase -"
So other than narrowing an already short margin, what does this do for Borders? How does it gain them customers? Most Borders customers already use Borders.com when they want to purchase on-line, so how does driving in-store customers to the web site where they will buy for deeper discounts help the company?
Borders is losing market share, plain and simple. They are at a critical point in their business plan where that issue has to be addressed. Borders has enjoyed wonderful growth due to the success of the super store model. Just like Home Depot, Wal-Mart, CVS, and others. The super store comes to town and the small book stores, hardware stores, drugists, or whatever go out of business. This is how they've historically grown market share in the past, and quite successfully. As you pick off market after market, that becomes harder to do. With a keen competitor like B&N with its own superstores, instead of an undercapitalized mom & pop store, it becomes harder to do. With the advent of on-line shopping, that becomes harder to do.
|"Bookselling, in and of itself, is not a growth business. Growth can only come from increasing market share. You can only increase market share by taking business from your competitors."|
Bookselling, in and of itself, is not a growth business. Growth can only come from increasing market share. You can only increase market share by taking business from your competitors. Borders has three areas available for growth. Expansion into areas where there is weak competition. Fighting the turf war in key markets with B&N. Increasing web sales at the expense of Amazon and B&N. They continue to execute the first strategyy very well. They are holding their own on the second. They are failing miserably on the third.
Given a very low growth industry, bookselling, it's a given that real world store sales are going to suffer at the hands of web sales. Will web sales eliminate or dominate traditional retailing? Never! Too many people like to "shop". The web will take its share, just like catalog shopping did. The web will have more of an impact on catalog shopping as that is the same customer base. Those who like the convience, don't mind the shipping charges and return hassles, those people who don't like to "shop". There can be no argument though that web sales won't have an impact on store sales, they already have.
So, if future store sales are going to be lower overall as a result of the web what does this mean for Borders. It means they are behind the eight ball. Right now they are in third place in the battle for mindshare. It's critical that they do a much better job of building the brand. They absolutely cannot maintain their historical growth by simply building new stores. It's critical that they maintain their market share at the existing stores and crucial that they not continue to fall behind in the battle for web share. Thus far they have not shown themselves to be very good marketeers. They haven't had to be, it was too easy to achieve growth strictly through expansion. They are living in a different world now and thus far have not done a good job at adapting.
|"Borders is in for the fight of its life not to be an also ran. This is a month to month, quarter to quarter proposition."|
Can they? Well, never say never, but I'm not optimistic. Two years ago at least, they needed to read the chapter about building brand awareness, a la Nike. They needed to hire top drawer spinmeisters to handle their PR, people who knew how to tell a story, spin a yarn, hype the worst looking numbers. They ignored the web as a fad, that was a critical error. Now they are faced with playing catch-up for mindshare, that won't be easy. They haven't shown any ability to market their product. Maybe the new CEO can breathe new life into this area, remains to be seen. I haven't seen any announcements about new marketing execs, or ad agencies, or marketing campaigns. That's what I'm looking for, not some nebulus statements about how "we're going to do better".
Don't be mislead by looking at historical growth numbers with this company. That came easy. Don't be mislead by projected growth numbers either, that's not going to come easy. Borders is in for the fight of its life not to be an also ran. This is a month to month, quarter to quarter, proposition. Watch the marketing effort for aggressiveness. Watch the same store sales growth as it compares to B&N. Watch the web sales growth, it must increase at a higher percentage than Amazon or B&N.
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