Inside the E-Commerce Strategy That Could Save Borders, Part 1

Borders recently ended its outsourced e-commerce relationship with Amazon.com and debuted its own website. But does the flashy Borders.com arrive too late? In this two-part series, Borders IT and business execs take CIO.com inside the project that is vital to the struggling retailer's future.

In May 2008, retailer Borders finally delivered on its vision of what executives thought a Borders e-commerce engine should look like: A website that meshes the in-store and sometimes serendipitous experience of browsing for books and music with the limitless, easily-searched and interconnected possibilities found in online shopping.

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Kevin Ertell, Borders' senior VP of e-business, says that the site's development process was chiefly about "bringing those two together in a way that leverages the strengths of each of the channels but brings them together in a way that's greater than the sum of its parts."

One example of this blended strategy is called the Magic Shelf. The attention-grabbing feature on the Borders.com home page uses Flash video technology to recreate a virtual bookshelf and the nirvana of finding a book or DVD that you've always been meaning to purchase.

That this online endeavor is, perhaps, a decade late is water under the bridge to Borders Group executives. In 2001, Borders had ceded its entire e-commerce operations to Amazon.com, which as of now is Borders.com's largest and most entrenched competitor. "We knew it was really important that we have our own website," Ertell says, "and that we get to control our brand, the experience for our customers and integrate that into the store experience in a way that wasn't possible under the Amazon partnership."

Kevin Ertell
Borders SVP of E-Business Kevin Ertell

The new Borders.com is the centerpiece of the retailer's strategy going forward. Borders' capital expenditures in 2008 are mainly focused on building out the site's functionalities and the systems that will wrap around it—replenishment, supply chain, CRM and in-store technology improvements, like kiosks that will allow customers to search in-store and online inventories.

The desired end result of all the front- and back-end integration and cross-channel marketing and sales opportunities is better fiscal health for Borders. It certainly could use it. Revenues dropped from $4.1 billion in 2006 to $3.8 billion in 2007, and profits have been on the decline during the past several years. In May 2007, its stock traded at over $20 per share; just over a year later, in July 2008, the share price hovered around $4 to $5.

The significance of Borders.com to the company's future is not lost on anyone inside its Ann Arbor, Mich., headquarters. "It's a marketplace we weren't really competing in, and we had to be there and we had to be successful with it," Ertell says. "Everyone understands that, and everybody rallies around it."

Borders' Need for Big Change

In retrospect, the "partnership" with Amazon.com seems like anything but. Amazon did everything for Borders—inventory management, content development, back-end fulfillment and customer service—and grew its business into the juggernaut it is today. The wealth of intellectual capital and hard-earned lessons that Amazon realized over the years from selling to Borders' online customers stayed inside Amazon's Seattle headquarters. All Borders got out of the deal was a percentage of sales.

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