Monday, August 15, 2011

Business Impact: Shifting Consumer Preferences

Last weekend I went to Borders' Going Out of Business Sale and bought several books, which I started reading over the weekend. This, along with a couple of articles I've read in the Wall Street Journal, left me waxing whimsical about Borders. First I have to say: Borders, I'm sorry to see you go. You were my favorite! I love Amazon but I went to Borders for immediate gratification...and to talk to the knowledgable sales people who were often literary / cerebral types. Sometimes I need a mental boost and Borders delivered in more than one way.

What happened to Borders? I'm no book industry expert but I am a huge consumer of books so I'll take a stab at it. It's relatively simple: Borders' business model didn't keep up with changing consumer tastes. It wasn't that people stopped reading. It's that people shifted to reading more books electronically. It's the same thing that happened to newspapers (and that industry I know much better, since I owned a trade newspaper), just at a later date. What made the transition to electronic book reading slower was that people don't mind reading news bites or the occasional full newstory online, but they generally don't want to read an entire book online. Then Amazon came out with the Kindle, Barnes and Noble with the Nook and...then Apple came out with the iPad...and that was all she wrote.

Whereas Barnes and Noble created a large online presence for its customers to buy its books online or pick up a book at a store, Borders partnered with Amazon for online services. Whoa Nelly! The idea may have seemed good at the time but YOU should cannabalize your own sales, NOT someone else. In other words, Borders should have cannabilized its own in-store sales with a concerted online efforts, not allowed Amazon to do so. (Okay, admittedly Amazon still would have cannabilized Borders' sales, just not as much.) B&N also created its own ebook reader. Borders didn't.

I'm not knocking Borders. These things happen. Look at Blockbuster. A similar thing happened. A change in consumer tastes. Consumers still watch movies, they just have their movies delivered differently - in little RedBox vending machines outside the supermarket or drugstore (or Walmart...), in little Netflix mailing packages, or streamed over the Internet by Netflix or someone else. Borders either didn't see or ignored the shift in consumer delivery preferences until their competitors were way ahead and neither did Blockbuster.

So the point here is to pay attention to what is happening in your market and industry. Too many business owners like to narrowly define their competition. Do so at your own risk!

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