The Coming Trend in Retailing?

I find the following story fascinating, in that it possibly foreshadows some new trends in retailing. The Borders Group, the company that owns Borders Bookstores and WaldenBooks, is closing a large number of its stores and setting up its own Web site. Here is why this is interesting: Several years ago, Borders made a conscious decision to focus its energies on its world-wide retail stores. It still understood the need for a Web presence, but it turned over its Internet operations to Amazon.

Apparently, their strategy, however well executed, has not worked. The company reported a dismal fourth quarter that ended with a loss of $73.6 million, in contrast to a profit of $119.1 million in the period the year before. As a result, Borders will close nearly half of its Waldenbook stores in the United States...and close or sell off almost all of its 73 superstores outside of the US. The company already closed 124 Waldenbook stores in 2006.

In addition, the company will eventually sever its relationship with Amazon and open up its own Web site early in 2008. The reorganization will still put much of the company's focus on its remaining 500 domestic superstores, but will also add a new technology-heavy concept that has been in development since late 2006. Borders will also introduce "digital centers" in its stores that will allow customers to buy audio books, MP3 players and electronic books.

A couple of years ago, I remember reading a story about Barnes and Noble that said they were finding many of their customers browsing in their bookstores, but actually going home to order the books on-line as they were cheaper. I confess I am one of those folks who does that. I also do the same thing for other products. As a small-town resident, I am used to ordering on-line and I don't mind waiting a few days to get what I want at a lesser price. Could this attitude be spreading to the folks that shop at Borders?

As I said, I find this most interesting because here is a company that worked hard to focus all its energies at their retail outlets and, in the long run, it is not working. Are they setting a trend? Will other mega-retailers switch to a more Web-oriented business? We have seen that already with CompUSA stores. Even electronic superstore Fry's has gone big time with their own Web site. Circuit City and other retailers offer the ability to buy on their Web site, then pick it up in their stores.

Obviously, stores like Home Depot and Lowes need to have retail stores because the majority of their items are too big to ship effectively to the consumer. But they still maintain a huge Web presence. We shall have to see if more vendors of small, easier shipping items will be following Borders' example.