Borders envisions multichannel future without Amazon

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If instead of cobbling together a cross-channel operation from legacy direct and bricks-and-mortar systems that have been in place for years, wouldn't it be nice to start fresh and design an entirely new platform that meets all the needs of a retailer selling to consumers in stores and online?

Early next year when Borders Group Inc. launches its first proprietary e-commerce site in seven years, the struggling book retailer will come a lot closer to building a multichannel platform from scratch than most merchants with well-established brands will ever get the chance to do so.

"A big part of [it] is cross-channel - starting to bring the power and benefits of the different channels together," something Borders couldn't do before, said Kevin Ertell, vice president of e-business at Borders, Ann Arbor, MI.

What's been holding Borders back is a deal it signed with online superstore Amazon in 2001, back when the Internet's future as a sales tool was still in question and the concept of multichannel retail, with its ability to drive customer value and loyalty, was just starting to make the rounds. That deal expires in December.

Back then, there was some sense to be found in Borders' decision to shut down an e-commerce site that wasn't bringing in a lot of money and let Amazon provide inventory, fulfillment, Web site content and customer service.

However, as Internet sales have continued to grow industrywide every year since and the online channel evolved into a key component of any major brand's marketing strategy, the deal lost some of its luster.

"As consumers are becoming more multichannel in nature, retailers need to react to this to be able to support their customers," said Tamara Mendelsohn, senior analyst at Forrester Research Inc., Cambridge, MA.

Borders being in the position to launch a proprietary site for the first time in years "is a big deal because their customers are beginning to change and demand more consistency across channels," she said.

While Borders is late to the multichannel retail game, this has the benefit of letting the retailer learn from others.

"They're lucky in the sense that they're starting from scratch," Ms. Mendelsohn said.

She added that using technology to create a strong multichannel platform and putting a lot of thought into the reporting structure are the two areas Borders should focus on in order to build a strong foundation for future multichannel growth.

Borders is gearing up for next year with the relaunch in July of its marketing Web site at www.bordersstores.com.

The site was designed "to compensate for what we can't get out of Amazon.com" by providing a way for Borders to have a relationship with its customers online, Mr. Ertell said.

This site will evolve early next year into www.borders.com with e-commerce functionality.

One service currently available that will be relaunched in July with a more user-friendly interface and more prominent positioning is the ability to search a local store's inventory online, reserve a book and then pick it up at that store.

The new site will also offer customers the ability to review books for the first time and create a wish list of items. Customers can then retrieve their wish at any Borders' in-store-kiosk, which currently isn't e-commerce-enabled systemwide but will be next year.

To support the relaunch, Borders is stepping up its pay-per-click advertising with Google, MSN and Yahoo.

Borders' use of an interim site "is a good strategy and an appropriate strategy given their situation," Ms. Mendelsohn said.

Already, some of what Borders is offering, such as the online reserve, is quite innovative in terms of multichannel marketing, she said.

Once the e-commerce element comes online, Borders hopes to be able to integrate its customer loyalty program, customer service, fulfillment and analytics across channels. The only exception will be its in-store point-of-sale system.

"We see the Web site as much more than just a store," Mr. Ertell said. "It's a brand vehicle, a merchandise vehicle, a marketing vehicle, a customer relationship tool and a customer research tool, all brought together to provide a better experience for our customers and a better relationship with our customers."

It might even improve Borders' bottom line.

In 2006, Borders reported a 0.8 percent increase in consolidated sales for a total of $4.06 billion. The company recorded a net loss of $151.3 million for the year.

In March, Borders revealed a strategic plan for revitalizing the company that put the new online store at the top of the list of steps it plans to take to make Borders "a headquarters for knowledge and entertainment," according to a company statement.

The plan also includes revitalizing its Borders Rewards customer loyalty program - which will be extended to the Web with the launch of the new e-commerce site - and debuting a new concept store that will bring together technology and experiential elements in early 2008.

The company is exploring opening digital centers in Borders stores that will enable customers to interact with and purchase new digital products and services. The digital services are expected to be made available both in-store and online.

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