Will the Long List of Bankrupt Retailers Soon Include Borders?

The Borders Story: Is This the Final Chapter? (Newsweek)

Retailer Faces Tough TimeWith the U.S. economy clearly on the path to recovery, we can now look back on the wreckage the recession left behind.  What we see is that many companies failed to make it through the tough times and needed to reorganize by filing for bankruptcy, while others simply went out of business. Besides the obvious failures in the automotive and financial industries, the business landscape is littered with many well-known firms that ran out of steam during the recession.  Among those on the list of companies that failed since the downturn started in 2008 are Frontier Airlines, Lenox, Nortel Networks, Reader’s Digest, Tribune Company and Ziff-Davis.

While financial problems afflicted companies across a wide range of industries, arguably the retail industry suffered the most.  Among those holding a spot on the long list of bankrupt retailers are:

  • Bennigan?s
  • Blockbuster
  • Circuit City
  • CompUSA
  • Filene?s Basement
  • KB Toys
  • Lillian Vernon
  • Linen ?n Things
  • Mervyns
  • Sharper Image
  • Value City

But, this list is likely to grow longer.  A number of other retailers are teetering on the edge including book retailer Borders, the 3rd largest bookseller in the U.S.  As laid out in this story, Borders was at one time in a strong financial position until it was acquired by Kmart.  When that happened, most of Borders? top executives left and things began to go downhill from there.

Along with Amazon.com?s entry into this space and a string of poor decisions, it is pretty clear why Borders is struggling.  While many companies that file for bankruptcy eventually recover (e.g., General Motors), this type of rebound seems to happen much less in the retail industry.  Thus, if Borders does file it could be the end of a once strong retailer.

Around the same time Amazon began to ignite a frenzy, emerging as an online seller of cheap books. But instead of going head-to-head with the rookie, Borders chose to focus its attention overseas, opening stores in the late 90s in the U.K., Singapore, Ireland, Australia and New Zealand, among others.

What is likely to have been the key strategic mistake made by Borders?

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