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Friday, May 20, 2011

The Internet Says: Another One Bites the Dust...

I was in New York City the other day and had just finished up a handful of great meetings with prospects and social influencer's around social marketing.   It was interesting because most of the day was spent talking about the dramatic shift that has occurred in our short lifetime related to the Internet and specifically social media.  We talked about everything from social media to conversational marketing to earned media.

One of the topics we spent a lot of time talking about was the fact that consumer reviews and word of mouth marketing has changed how marketers, and especially retailers, operate in the market today.  A good example of this paradigm shift can be seen by looking at Amazon, even years ago when they were mostly focused on books.

One of the things that made Amazon such a successful business model was they could offer the true long-tail of books. I remember, even as much as 15-years ago, I told my dad that I was interested in books about toasts and toasting people at parties and dinners.   I had a difficult time finding any of these titles at the local book store and the library, but my dad went on and because they were able to offer such a rich catalog of books that covered every possible topic, he was able to find me a handful of books that were really useful and interesting. Because Amazon didn’t have the overhead of retail locations and the limitations of having only a limited set of local customers, they could really offer almost any and every book you would ever be interested in.

It was interesting as I was walking back from my meeting I looked across the street and saw one of the Border’s book stores going out of business. It struck me as really interesting and woke me up to the reality of the discussion we were just having hours before.  

It is clear the downfall of Borders can be directly tied to the growth of the internet and the increase in consumer adoption of e-commerce.  

Though there are many reasons Borders failed as a company, a few of the primary reasons were due to the fact that their business model was similar to Amazon, though they had to have local stores.  Borders model was to carry any and every book you would ever need.   Yes, they would carry the best sellers and the classics, but they also tried to carry as many other titles as possible.   This is the same story as Amazon, but if you think about the overhead that Borders had to carry with having to stock each of these books in all their local book stores.  Since demand for the long-tail of products is almost random, there is no way to scale a business like this unless you can charge a very large premium or you can reduce your carry and logistics costs.

It is clear Borders wasn’t able to pull off their business plan, and though they had other failures, such as being very music focused (another internet nail in the coffin), the internet could account for the majority of this companies failures.

I visited this store that was closing down in the next few days because they were offering really great discounts.   What became apparent to me was even with a discount as high as 90%, I didn’t see value in these books because I now read everything on my kindle or iPad.  It made me a little sad to see all these great books that would be fun to read, but realize I had no use for the paper versions.

I took some photos of the store that was about to go under.  They were selling everything, from the books to DVD’s to furniture to the cash registers.   Check out some of these photos, you can see a story that is playing out across the US at many Borders, and other book stores.

The one amusing thing I found was that, though most of the books were gone, the Palin and Beck books were overstocked and there were plenty of these books to go around.  Even at a 90% discount for the Palin or Beck books, people were much more likely to buy a book on dirt or economics versus buy one of these things.

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