Borders, the Michigan based bookstore, has filed for bankruptcy. No buyers have been found.
Why did Borders go bust?
• because its business model was wrong
• its marketing strategies were out of kilter with its customers changing buying demands
• it failed to respond as more aggressive competitors turned to the new technologies
How to avoid these pitfalls
1. Don't miss the boat
Borders were late adopters of online sales and ebooks, prefering to continue to play big through bricks and mortar sales operations.
The shift from printed to ebooks is dominated by Amazon. By the time Borders tried to enter this market, they needed to invest more than they could afford to successfully compete. Ebooks, once thought of as a niche product, now outsell printed books (Amazon).
You only have to see companies clamouring to sign up for Google+1 business profiles (currently in beta to the chosen few), and before that Facebook business pages - to understand how changing customer behaviours can quickly cause pandemonium in the business world.
You can't ignore innovations from the likes of Google and Facebook, because they set the pace.
Technology has also reduced customers attraction for cold calling, Yell, and other traditional advertising, where customers have shifted their attention to online media.
Borders failed to adapt fast enough when its market changed. There’s no point commanding a niche that’s passed its sell by date.
Bottom line: You've heard it all before - set up a business blog, be active on your social media pages, use paid and organic search, and get on with a video - perhaps now's the time to start doing all of these!
2. Costs out of control
Poor cost control kills businesses. By focusing on online sales, Amazon significantly reduced its overheads while increasing its reach and sales.
Borders stuck to its traditional operations which cost them dearly which they couldn't reduce in scale fast enough when they finally tried to change.
Digital marketing offers much lower, more cost-effective marketing, with the added benefit of easy to use, low cost technologies, with instant feedback/analysis on results.
Bottom line: All companies seek to lower their cost per lead, and online marketing gives you an immediate advantage in doing this.
3. Lack of research
History tells us to always watch what others do, copying what is good and avoiding what isn’t.
Borders seem to have put their heads in the sand and were slow to appreciate just how much Amazon was changing the market.
Borders should have spotted much earlier where the future lay.
This process of constant innovation and change is called industry disruption. This entails understanding:
• how change/innovation is affecting your business
• what actions are competitors taking to cope
• where is this leading
Not reacting to change is apparent in many businesses. Being reticent about adopting blogs and social media, areas now critical to their online presence, are prime examples.
Bottom line: Look around. If so many other businesses are already doing this, there must be a pretty good reason - and a payback.
4. Being an also ran
When major changes to an industry occur, it's dangerous if your business is at the back of the field.
Conservative approaches to aggressive markets are doomed to fail for a company of any size, in a market driven by a fast evolving internet.
Change is unsettling, often painful, but tackling change early is often far cheaper than catching up later when the market is dominated by others. Plus there is often a competitive advantage to be had if you're at or near the front of that change.
Bottom line: If nothing else, ensure your marketing is in tune with your customers changing demands.
Takeaway
As technology changes; customer behaviour changes; and business reacts to the changes. Failing to keep up can have brutal consequences for any business - as Borders can testify.
Managing change is about correctly picking what will work best for your business - then planning and implementing it.
The process of change is relentless - your competitiveness depends on keeping up.
Sources Kipp Bodnar, Lessons from Borders Bankruptcy, Hubspot,Tue, Jul 19, 2011