BY DR. TANAI CHARINSARN

JUNE 2, 2016

The business discussed here is the bookstore business, which has evolved significantly in recent times. In the past, bookstores were not very popular because they were often disorganized and had an overwhelming amount of books. However, with the rise of the Knowledge Economy, bookstores transformed to meet the changing demands of consumers. Borders is a new bookstore that recognized the business opportunity in this transformation. One of the strategies Borders used was to adopt the concept of a superstore, making it more attractive for consumers to enter and spend time in the store. They also organized books into categories, making it easier for book lovers to find the books they wanted to read, which increased the popularity of using their services.

Furthermore, Borders hired knowledgeable staff to guide customers and recommend new books, attracting more people to use their services. They also created a reading-friendly environment by incorporating cafes and providing free internet access, making it a more appealing place to read books. Borders implemented these strategies by leveraging the advantages of the traditional bookstore business model.

Why did this large-sized model fail?

The growth of the global online marketplace, such as Amazon.com, the world's largest online bookstore, provided customers with a much wider selection of books compared to traditional bookstores with limited physical space. This impacted the traditional bookstores' ability to offer all the books that customers desired. Amazon's success relied on selection, variety, and pricing strategies, which presented a challenge for physical bookstores.

One of the key issues facing traditional bookstores is their need for prime physical locations, which drives up their operating costs. The "Long Tail Strategy" by Chris Anderson highlights the problem; online businesses do not have the limitations of physical stores and can offer a broader range of products. However, this raises the question of how traditional bookstores could sustain themselves economically. As Chris Anderson's work suggests, in the digital age, many products and services are expected to be free, which means that businesses must find alternative ways to generate revenue.

Moreover, digital downloads made it easier for consumers to choose to download music and books over buying physical copies, whether through legal platforms like the iTunes Store or illegal means through file-sharing websites. The advent of big-box retailers like Walmart and Target entering the book market added further competition by offering books at discounted prices. Retailers such as 7-Eleven's Book Smile in Thailand, which provided convenient access to books, further drew customers away from traditional bookstores.

Where did Borders go wrong?

The signs of Borders' failure were not sudden, but the company's response to the changing landscape led to its downfall. Borders initially partnered with Amazon.com, allowing its customers to choose books through Amazon. This inadvertently increased Amazon's customer database as they became responsible for book deliveries, making customers realize Amazon had a broader selection of books.

To combat this, Borders tried to attract former customers back by offering a free membership program, with no fees. However, this strategy did not significantly incentivize customers to return and purchase more books. Additionally, the opening of new stores without evaluating the performance of existing ones increased costs and made it harder to maintain a profitable business. Finally, the growth of e-books, coupled with Borders' decision to become a showroom for e-reader manufacturers, where they didn't have their own brand of e-reader, further alienated their staff and confused customers.

In early 2011, Borders announced the closure of all 399 of its stores, laid off over ten thousand employees, and eventually filed for bankruptcy.