The encyclopedia · Strategy & Leadership · Strategic decision · 2001–2011
Borders outsourced its online store to Amazon — then Amazon ate its lunch
Borders handed its e-commerce to Amazon in 2001. By 2011 it was bankrupt with 399 stores closed and $1.275B in debt. Amazon kept the customers.
Borders · Amazon · Barnes & Noble · 2011-02
What happened
Borders was America's second-largest bookstore chain, operating 399 superstores. In 2001, it made a fateful decision: outsource its entire online operation to Amazon. Borders.com redirected to Amazon.com, and Borders handed its customer data, e-commerce infrastructure, and digital future to its most dangerous competitor.
While Amazon built its e-commerce empire, Borders doubled down on physical retail — expanding stores, adding cafés, and investing in CD and DVD inventory just as digital downloads were taking off. Barnes & Noble, by contrast, built its own online platform and launched the Nook e-reader in 2009. Borders did not launch an e-reader until 2010, the Kobo, and it was too late.
Borders filed for Chapter 11 bankruptcy on 16 February 2011, listing $1.275 billion in debt. All 399 stores were liquidated by September 2011, eliminating 19,500 jobs. Barnes & Noble survived. Amazon became the world's largest bookseller. Borders' customers, data, and online traffic had been Amazon's since 2001.
Why it happened
- Outsourcing e-commerce to Amazon in 2001 meant Borders never built its own digital capability — it had no online infrastructure when it needed it most.
- Borders over-invested in physical media (CDs, DVDs) at the exact moment digital distribution was making them obsolete.
- The Kobo e-reader launched in 2010, three years after the Kindle and one year after the Nook — the window for a viable e-reader had closed.
- The $1.275B debt load left no room for the investment needed to pivot, even if management had recognized the need earlier.
The lesson
Never outsource your future to your competitor. Borders gave Amazon its customers and data, then built physical stores while Amazon built the business that would destroy them.
Aftermath
Borders ceased to exist in 2011. Barnes & Noble survived but was permanently diminished. Amazon became the dominant force in book retailing. The case is taught in business schools as the definitive example of outsourcing your competitive advantage.
Sources
- Borders Group, Inc. — Form 8-K, 17 February 2011 (voluntary Chapter 11 petitions filed 16 February 2011 in the US Bankruptcy Court for the Southern District of New York, Case No. 11-10614(MG); debtor-in-possession financing from GE Capital)
- Borders Group — Wikipedia (Chapter 11 filed 16 February 2011; $1.275B debt; 399 stores liquidated; 19,500 jobs lost; e-commerce outsourced to Amazon 2001; Kobo e-reader 2010)
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