Borders Group next year will unveil a new proprietary website billed as the centerpiece of the retailer’s turnaround strategy and an effort to break out of Amazon.com’s e-commerce shadow.

The current Borders.com is run entirely by Amazon.com. It features Amazon's inventory, site content, fulfillment and customer service capabilities. The sales even belong to Amazon, with a percentage going to Borders. The new Borders site, which is expected to launch early in 2008, marks a major juncture in Borders' business and e-commerce strategy and the end of what will be a seven-year relationship with Amazon.com at a time when the Ann Arbor, Mich.-based bookseller is in the midst of a turnaround.

The new online store is a major piece of Borders’ attempt to triple earnings by 2009, to 5 or 6 percent from 1.9 percent in 2006, when the company recorded revenues of $4 billion. Other pieces of Borders' strategy include expanding franchisees overseas and cutting the number of Waldenbooks outlets.

An E-Commerce Marriage of Convenience with Amazon.com
In 2001, when the retailing rivals inked this deal to develop a co-branded web site, it was mutually beneficial. Amazon.com, which had gone public in 1997, was under pressure to turn its first profit. Extending the e-commerce infrastructure into which it had invested millions of dollars to third parties such as Borders injected much needed cash into Amazon.com's business. And Borders, which like many traditional brick and mortar stores at the time was struggling to make the e-commerce game work for them, got a tried and tested, user-friendly e-commerce site powered by a company that consumers trusted. Never mind the fact that Amazon was a competitor.

"The relationship with Amazon.com allowed us at the time to focus on our brick and mortar stores while still having an online channel that was branded Borders," says Anne Roman, a spokeswoman for Borders. She notes that the company had its own e-commerce site before it partnered with Amazon but that the costs associated with operating and marketing it outweighed the revenue it generated at the time.

Turnaround Time for Borders
Over time, as Borders' business headed south, the partnership with Amazon.com became less advantageous to Borders. During its fiscal year 2005, Borders' consolidated earnings per share began its decline. The following fiscal year, the company posted a loss of $2.44 per share, a net loss of $151.3 million and a 2.2 percent decrease in same store sales for the year. Consequently, Borders unveiled a strategy for revitalizing its business in March 2007—a cornerstone of which is the launch of a new, proprietary e-commerce site and the use of technology to drive sales and create deeper customer relationships. The company also announced the hire of a new CIO, Susan Harwood, to oversee all of the company's systems, including the new e-commerce site.