One bookseller goes bust. The other booms

The Borders bookstore chain was in the news yesterday for all the wrong reasons. The group may close all its remaining stores if no bidder is found in the next few weeks. The chain had said it would close 200 of its c.600 stores when it filed for Chapter 11 bankruptcy on Feb. 16. But now the picture is even bleaker.

Borders sorry tale is another example of a company who has died as its core business has declined.

In contrast, another bit of news from a bookseller shows how to re-invent a core business. Amazon recently announced that it now sells more kindle ebooks than it does paperbacks in the US. Pretty amazing eh? After having transformed the book market once, driving online sales, it has now done it again with ebooks.

A few learnings from Amazon's success:

1. Better to have the cannibals inside the family

Amazon was smart enough to see that the book market was going to move from paper to ebooks. This meant a decline in its sales of books. It could have tried to defend its core from attack. Instead, it decided wisely that it was better off getting its fair share of the new market.

2. Lead the change

What I find most impressive about Amazon is the way they have led the market transformation in books. Perhaps it helped having led the online retailing revolution to do it again. They launched the first Kindle ebook reader back in 2007, a full 3 years before Apple launched the iPad.

3. Upgrade the new core

Amazon have not sat still on the product side. Rather, they have continued to launch upgrades. Importantly, a key improvement has been making the Kindle reader smaller and more portable. This is a key edge over tablets like the iPad. Check out how big and clunky the first Kindle looked like back in 2007:

 

4. Driving down price to drive penetration

Amazon have not been greedy and looked to maximise profit in the short term as growing sales have created economies of scales. Instead, the company have continued to cut prices of the Kindle reader to drive more and more penetration, knowing that the company will benefit from higher sales of Kindle ebooks.

In summary, you have two ways to respond to market transformation. You can "do a Borders" and try to defend a declining core. Or, better, you can be braver and bolder and "do an Amazon", embracing and leading the change, even if it means having eating your own core business in the short term.

 

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Instead, the company have continued to cut prices of the Kindle reader to drive more and more penetration