Bad Times at Borders

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A writer and independent publishing analyst who blogs at fonerbooks.com, Rosenthal says the deal allowed Amazon to siphon off younger web-savvy customers and solidify its position as the number-one destination for books online. And it slowed Borders’s move into the digital age.

George Jones acknowledges the mistake. “We were taking our really good customers and turning them over to a competitor,” he says.

The online world took another bite out of Borders’s business as music downloading and MP3 players started supplanting CDs. According to Ed Wilhelm, Borders’s chief financial officer, music accounted for 20 percent of Borders superstore sales in 2000. Today the figure is just 7 percent.

Borrowing from the supermarket business, Josefowicz introduced “category management,” which allowed publishers to shape entire sections of the stores. The change irked employees who’d once had more autonomy—but there were fewer of those each year, as the company gradually replaced its full-time sales staff with less expensive part-timers.

Borders Rewards, another import from the food industry, offered customers who signed up big discounts and free merchandise for shopping. It proved hugely popular, and 25 million members now receive emails and other weekly specials.