Borders enters the Digital Age

President and Chief Executive Officer of Borders Group, Inc., George Jones, is on a mission to prove his company isn’t just a bookseller. With a medley of cutting-edge technology and an innovative new store design, Jones speaks to Business Management about providing leadership in an industry struggling to find its niche in the digital age.

Walk into a new Borders store and you’ll encounter plasma TVs, digital kiosks and brightly lit architecture steering customers to special destinations with an assortment of digital interactive activities. It’s a far cry from the Borders of the past – one that was better known for luring in an older, more sedate crowd satisfied with a good book and a latte. And it’s a very deliberate shift: Chief Executive Officer George Jones wants everyone to know that Borders isn’t your average bookseller, but rather a headquarters for knowledge and entertainment.

Since Jones took over the reigns just two years ago, the company has been on a turnaround fast track. At the center of his aggressive turnaround strategy is a new proprietary e-commerce site, and the innovatively designed concept stores featuring revamped architecture and a smorgasbord of unique in-store digital technology.

Jones’ vision for the company is more of a rebirth than a turnaround. And it just so happens to come during one of the roughest US retail environments in recent history. Borders faces the double-edged sword of being a retailer and a bookseller – not only feeling the pinch of curbed consumer spending, but also dealing with the tough book business that’s facing stiff online competition. By no means has Borders been immune to the poor retail environment – as part of its $1 20 million cost-cutting plan, the company has already cut 156 positions at its headquarters in Ann Arbor, Michigan, in June, and earlier this Spring announced it would consider selling parts or all of the business.

Despite the retail woes necessitating a focus on debt reduction, however, the second-largest US bookseller is confidently moving forward with its transformation plans and its mission to set Borders apart from any other retail shopping experience. Jones has already begun to see the key parts of his ambitious turnaround strategy come to fruition, namely in the form of its e-commerce site Borders.com, which went live in May, marking the end of its seven-year-long relationship with Amazon.com. In addition, the company is on track for 14 concept stores to be launched in the US by the end of the year.

The changes underway all stem from the r ealization of the limitations of a business model that wasn’t incorporating the digital world and the internet. “I looked at the way Borders had been positioning itself as a seller of books, CDs and DVDs,” Jones says. “You really want to look at Borders more broadly, as a provider of knowledge and entertainment. I saw the need to develop a concept that took some giant steps forward in terms of the intermingling of the bricks-and-mortar traditional retail store with the digital world and the Internet.”

And so began the rebirth of a new technologically advanced, digit al-savvy Borders, and its proclamation to the market that it’s anything but just a bookseller with a café.

The new concept stores
After more than 18 months of development and testing, the first concept store was launched at the company headquarters in Ann Arbor in February, and since that time 10 more stores have been launched across the country. Not only have the stores met with resounding customer approval and garnered superb customer reviews, but they’ve exceeded sales expectations as well – which Jones is keen to stress were by no means conservative.

In the new stores customers will find a refreshing medley of technology for downloading books and music, creating custom CDs, making photo books, and more. The unique digital services are housed in the Digital Center, the centerpiece of Jones’ initiative, which contains a number of computer kiosks and stations to encourage customer interaction – whether it’s downloading music or creating custom CDs through Borders Digital Music, tracing family history through Borders Genealogy Services, creating personal photo books through Borders Custom Photo Books, or even self-publishing customer-written books through Borders Personal Publishing.

Since Borders’ core demographic falls in the 35-55-year-old range, the variety of digital services found in the Digital Center are geared to accommodate customers who may have never even owned or operated an MP3 player. “The Digital Center was designed with the idea of really hitting the technophobe,” Jones admits. “Our feeling was that there were a lot of customers, particularly in our core demographic, that weren’t as comfortable or knowledgeable as far as the digital services that may be available.”

Jones emphasizes the importance of the well-trained Digital Center staff, who not only have an in-depth knowledge of the technological services, but are also customer-friendly to make the learning process as enjoyable as possible. Helping customers discover new technology is a key part of the formula for Borders to be recognized as a center for knowledge and entertainment.

Another part of the formula, more so on the entertainment side, is the newly launched Borders TV. Borders has started creating original and exclusive video programming, and today more than 100 stores feature plasma screens that broadcast Borders-produced television episodes. The concept stems from the frequent author and musician appearances in stores – and the need for a vehicle to make those events more visible and available to larger audiences. As a result, the company hired a professional film production crew to film interviews and other special events. Today, in-store and online customers can view an assortment of great and original content via Borders TV. “On Borders TV in stores now you might see a segment of an interview with anyone from John Grisham to Bill Clinton or a musical performance by Joss Stone,” Jones says. “We also have a program called Borders Kitchen, in which we’ve done things with great chefs like Nigella Lawson and Mario Batali.”

All of the new features and services within the concept stores aim at encouraging customer interaction and engaging customers on a different level than most retail shopping experiences. “I thought there was a need to differentiate Borders from other retailers, and also to provide a shopping experience that might even be more compelling when compared to shopping on the Internet,” Jones explains. “Interactivity is a very key part of that.”

At the forefront of technology
Borders’ foray into the digital world has helped to assert its stance as a technology leader and its position at the forefront of innovation. And nothing attests to its newfound technological advantage more than its new proprietary e-commerce site, Borders.com. Launched in May, Borders.com is one of the most critical components of Borders’ cross-channel retail strategy, officially marking Borders’ independence from Amazon.com and enabling Borders to build on its healthy 27 million-member Borders Rewards customer loyalty program.

Full integration of the Borders Rewards program with the e-commerce site will enable Borders to form a true cross-channel relationship with customers. The e-commerce site itself will provide a unique online shopping experience for customers seamlessly tied to their in-store shopping experience, with a number of advanced capabilities for searching, filtering and browsing different categories and titles. At the centerpiece of the ecommerce site is a highly unique feature, The Magic Shelf, an intuitive three-dimensional bookshelf lined with books, CDs and DVDs customers can browse through to select titles of interest – and over time the Magic Shelf will be tailored to each unique customer’s preferences.

Beyond the e-commerce site, Borders is also embracing the digital tide by employing a digital audiobook service and through its offerings via the Sony Reader, as the market for electronic books continues to gain traction. “We’re going to be a leader wherever digital goes and whatever pace it goes,” Jones affirms. “We have an audio book service, and we also have a partnership with Sony, which we do for e-books and for the Sony Reader. That technology will continue to evolve and we want to be a partner at the forefront of it.”

While Jones doesn’t question people’s long-term devotion towards the traditional book, embracing the e-reader is a testament to his leadership to follow both technology and customer demand. “We want to deliver knowledge and entertainment in whatever format it may come in, and we want to be a leader in whatever our customers determine we should be.”

A tough climate
In turn, Jones is also keeping in mind what’s best for shareholders. Borders recently sold its Australia, New Zealand and Singapore businesses and is exploring strategic alternatives for parts or all of the remaining business. Jones has been quoted as being comfortable with liquidity, and the flexibility to evaluate bids is part of demonstrating the overall value of the company. Reg ardless of whether the company changes hands, however, Borders is still moving full speed ahead with the strategy in place. “From where we are right now – and we are in a very difficult overall economic and retail climate – we think our strategy still makes sense,” Jones says. “We think the strategy is exactly right.”

Indeed, despite the strained economic climate and the weight of pressure on ret ailers, Borders has demonstrated a good deal of resilience, and others can take away some key lessons in terms of the value of innovation and perseverance. Even in tough times, the need to innovate is imperative. “If you’re trying to just maintain the status quo and you do that for too long without any innovation, you’re going to become stale,” Jones explains. “The really good retailers out there are staying fresh; they innovate. They always have the antennae up and are always trying new things. That’s what we have to do so there’s constant innovation.”

While other retailers have been cowering behind deep discount pricing and waiting for the rocky economic times to blow over, there’s something to be said for braving the retail slump and pushing forward like Borders has. In fact, Jones likens the current retail situation to the analogy of being in a boat in a sudden storm. “If your boat is a really strong boat, you have a great crew, but all of a sudden you hit a very severe storm, which is what virtually all retailers are dealing with right now, you need to adjust as you go through that. It doesn’t mean that it’s a bad boat or that you’re on the wrong route, it just means that you make the necessary adjustments to go through the storm and emerge and be back on your way again.”

A life in retail

George Jones has been President, CEO and a Director of Borders Group, Inc. since July 2006. Prior to joining the Company, Jones had extensive retail experience, including serving as President and CEO of the Saks Department Store Group from March 2001 through September 2005. Prior to joining Saks, Jones was President, Worldwide Licensing and Retail, for Warner Bros., where in addition to his core responsibilities, he oversaw Warner Bros. Worldwide Publishing, Kids WB Music, Warner Bros. Interactive Entertainment, WB Sports and Warner Bros. Studio Stores.

A virtual walk through Borders’ new stores
More than 18 months of development and testing went into Borders’ new concept stores to offer customers a shopping experience unlike any other. The concept stores, designed to help differentiate Borders from other retailers by integr ating unique digital services, are a key part of Borders’ long-term strategy.

• Modern design: A bolder exterior includes a modern fascia with expansive windows, an illuminated red Borders logo and a louvered construction evoking images of the pages of a book. Inside, customers will find inviting, brightly lit spaces – with curved feature tables, rotundas with skylights, illuminated drums hanging from the ceiling and dazzling graphics all encouraging exploration.

• Digital Center: The Digit al Center is marked by a three-dimensional, 15-foot illuminated fixture and sign package, and within the center customers will find multiple computer kiosks and stations for music and book downloading, personal publishing, creating photo books, tracing genealogy and more.

• Destinations: Speci al new destinations have been created to represent popular and growing categories within the store focused on special topics such as travel, cooking, wellness, graphic novels or the children’s section. Within travel, customers may come across maps, GPS navigation systems or portable DVD players to take with on their travels, and within the children’s section, customers may come across toys, games, puzzles and more.

End of the traditional book?
While the electronic book market today is still just a miniscule portion of the overall book publishing industry, e-book readers are growing in popularity and creating a buzz across the industry. The demand for online novels is on the rise and some argue it’s the onset of the decline of the traditional book. E-readers leverage electronic paper display (EPD) technology, which some argue is easier on the eyes than standard ink on paper – and others are convinced by the e-reader’s portability as much as its readability. While the e-book market is still not expected to take off for some time, we took a look at the top market players.

Sony Reader Digital Book: Nearly two years old, the Sony Reader was one of the first commercially available electronic book readers.
• The latest version, PRS-505 holds 64MB of memory with the option to expand memory via Sony’s memory card format – Memory Stick – or an SD card
• Features a six-inch screen using E Ink
• Promises 7500 page turns from one charge
• Runs for $ 299.99

Amazon.com Inc.’s Kindle: Only eight months old, the sleek Kindle has grabbed significant market attention.
• 10.3-ounce wireless portable electronic reader
• Displays 167 pixels per inch on its screen
• Boasts six adjustable font sizes
• Runs for $359
• $1 per month user access to over 150 Internet blogs

Digital facts
• According to Amazon, over 90,000 books are available for purchase via the Kindle
• Publishing house Simon & Schuster recently announced plans to digitize 5000 more titles to be available as electronic books via Kindle by year-end
• HarperCollins is making over 90 percent of new publications available digitally
• Penguin Group announced plans to digitize its back catalog of 16,000 titles within two years

Borders bridges books with the world of technology
As a defining part of its turnaround strategy, Borders has fully plunged into the digital realm – offering customers a technology buffet of unique services within its new stores to help introduce customers to the wide array of digital capabilities available today. Below are some of the novel capabilities Borders is offering in its concept stores and the unique partnerships behind the technologies:

• Borders Digital Music: Customers can download music and create custom CDs with approximately three million song titles to choose from.

• Borders Genealogy Services: Provided by Ancestry.com, this technology enables customers to trace genealogy and conduct family research to find out more about their heritage.

• Borders Personal Publishing: Powered by Lulu.com, customers who are authors can publish their own work with the potential to even sell customer-written books in Borders stores, and select authors also have the potential to host in-store signings.

• Borders Custom Photo Books: Thanks to Shutterfly for photo management, customers can create their own special photo projects featuring family and friends, and leverage Borders Digital Photo Printing to print photos.

• LongPen: Borders was the first retail location in the nation to feature the revolutionary technology LongPen, which enables Borders to host book discussions, author signings and music events via video conferencing for authors and performers to connect with customers in real-time. It also uniquely allows remote authors and performers to personalize or autograph books, CDs, DVDs with an authentic signature for in-store customers via an electronic signing implement.

• Borders Digital Audiobook service: This represents the first download service of its kind launched in a physical retail environment in US. More than 15,000 audiobook titles are available for downloading within the Digital Center. The underlying technology and inventory are provided by OverDrive, the leading eBook and digital audiobook distributor in the US.