Borders Group (or "the company") operates book, music and movie superstores, mall-based bookstores, as well as an online store. Borders Group offers eBooks through its online website, www.borders.com. Online retailing is a growing industry, and by leveraging its presence in the channel, Borders Group can retain its customer base as well as improve its revenues. However, the discretionary spending in the US is highly pressurized due to increased unemployment. As the cautious American consumers cut down on the discretionary spending, the demand for Borders Group’s products can further decrease.
Bankruptcy filing and subsequent liquidation
of brick and mortar stores
Presence in the online retail channel
Operating through franchise model in the
UAE and Malaysia
Consumer spending in the US pressurized
by high levels of unemployment
e-books and e-reader offer significant
Growing demand for religious books e-reader price wars denting profit margins Digital piracy
Presence in the online retail channel
Borders Group offers eBooks through its online website, www.borders.com.The company’s website was originally launched in 2008. Borders Group re-launched its digital bookstore in 2010 in partnership with Kobo, a global e-reading service and e-reader provider. The new website allows customers access to new state-of-the-art free e-reading applications and e-reading technology, more than 2.3 million books, newspapers, magazines, and a unique social reading experience. This partnership also allows Borders Group to have a share in the profits generated from the sale of all Kobo e-content on devices sold by retailers across the US.
In February 2011, Borders Group filed a petition for reorganization relief under Chapter 11 of the Bankruptcy Code. Following this, it entered into agreements with some liquidators to conduct an orderly wind down of 200 of its underperforming stores. Further in July 2011, Borders Group got an approval from the court to begin the liquidation process of its remaining stores. Thus, with most of the stores closing down, online channel will be the key route to market for Borders Group. Online Borders Group, Inc. Page 5
Borders Group, Inc.
retail is a growing industry, and by leveraging its presence in the channel, Borders Group can retain its customer base and improve its topline.
Operating through franchise model in the UAE and Malaysia
Owing to weak financial performance and declining profit margins, the company filed for bankruptcy in February 2011. To meet its debt obligations and commitments to vendors and agents, Borders Group started selling its stores beginning from February 2011. However, its international franchised operations were not included in the Chapter 11 Cases. Borders Group operates in the growth markets of UAE and Malaysia through franchise agreements. The company has a franchise agreement with Berjaya Corporation (Berjaya), a publicly-listed diversified corporation based in Malaysia. Berjaya operates stores in Malaysia under the Borders banner. Likewise in the UAE, the company has a franchise agreement with Al Maya Group (Al Maya), a diversified corporation. Al Maya or its affiliates operate Borders stores in the UAE as well as other Gulf Cooperation Council countries. In both these nations, the retail market has registered a strong growth. According to the Department of Statistics, Malaysia, the retail trade in the country grew by more than 11% in the first two quarters of 2010, and by 8.1% in the third quarter of 2010. Specialty retail registered a growth of 11.9% in the third quarter of 2010. Furthermore, the retail sector in Dubai is estimated to grow by 5.5% in 2011 by industry experts, owing to the growth in economy, rising household consumption and improving tourism.The franchise business model allows Borders Group to expand its presence in the growth markets...