The new strategy for Borders, the struggling book, CD and DVD chain, can best be summed up as this: slash and burn.
Earlier this week, Borders announced another shake up in its corporate management. Among the high-level positions eliminated this time were SVP and CIO (held by Susan Harwood since 2007) and SVP of E-Business (held by Kevin Ertell, a long-time employee).
In 2008, I had profiled the efforts of both Harwood and Ertell for several stories on CIO.com: “Inside the E-Commerce Strategy That Could Save Borders, Part 1,” and “Part 2,” and lastly “Borders’ Revamped E-Commerce Strategy Falls Flat During Holiday Season.”
It appears that all of the company’s technological diligence and hard work to create a multichannel, cross-platform sales strategy was for naught.
The company’s major investment in a flashy, state-of-the-art Borders.com sales engine is apparently being scaled back, as Borders still suffers from a 2008 holiday season hangover and now is consolidating management of its online operations. (It’s hard to figure out if Harwood’s and Ertell’s dismissals were simply executive salary cuts or the result of the failed and expensive e-commerce strategy. In the announcement, new CEO Ron Marshall said that “streamlining our leadership and eliminating management layers will help us be more agile and at the same time advance us toward our expense reduction goals.”)
Retail industry watcher Evan Schuman reported that Borders.com “won’t be gutted per se, but it also won’t be seeing additional investments.”
An anonymous Borders manager told Schuman that CEO Marshall “is basically going to let it alone,” referring to the website.
According to what I’ve seen and heard from retail analysts, Borders’ now has a year—maybe less—to right itself and (to put it mildly) make amends for a terrible and short-sighted decision former executives made nearly a decade ago: When, in 2001, they decided to “partner” with Amazon.com and outsource all of their e-commerce operations to their number-one online competitor.
In retrospect, Borders’ 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.
This is, of course, not an indictment of e-commerce. Just look at Amazon.com’s 2008 results and Walmart.com’s holiday results—even in this economic environment. Nor do Borders failings indicate that cross-channel retail strategies are foolish.
Quite the contrary. Brian Kilcourse, a managing partner at Retail Systems Research and former retail CIO, recently spoke with me for a story on just what IT could do to help retailers survive 2009 and thrive in 2010. One of his pieces of advice: Retailers should integrate their selling channels.
“Winning retailers are eliminating duplication of effort in the forecast and planning, procurement and fulfillment activities between their channels, in essence moving towards a ‘services’ orientation for the supporting processes to serve all channels,” Kilcourse says. “IT knows more than anyone, first, what a ‘services orientation’ is, and secondly, what needs to be done to enterprise systems to eliminate duplication of data—for retailers, product, inventory and customer data—and business rules that serve the same logical function, but in different channels.”
Even with the cuts to payroll, Borders’ immediate tasks won’t get any easier—balance short-term cost-cutting initiatives with long-term strategic investments (in stores? in IT? in e-commerce operations?) in an economic climate when some retailers are ceasing all operations rather than having to slog through life under Chapter 11 bankruptcy protection.
The point of any “slash and burn” strategy is to clear away what you don’t want, in order to create an environment where you can cultivate something better. I’m not sure Borders is going to like what they find after all the burning has been done.