That'll teach 'em: Borders slashes rewards program

Nothing Borders Group Inc. (NYSE: BGP) does has made any sense to me lately. Last week, I wrote about the company's decision to close half of its Waldenbooks stores and focus its energy on starting its own website to compete with Amazon.com Inc. (NASDAQ: AMZN). I believe that Borders is at a huge comparative disadvantage in that market, as Amazon has spent years becoming the number 1 online book retailer. I believe that the company will either sink or swim as a brick and mortar bookstore and nothing but. Now the company has decided to replace its old customer rewards program [subscription required] with a stingier one, straight out of Scrooge's playbook. Let's compare the programs:

• Under the old program, customers could spend $50 in a month to receive a 10% discount on all purchases on a certain day in the next month. Customers also got a 5% "Holiday Reward" on store purchases made through Nov. 14.
• Under the new plan, customers receive a $5 discount in the next month for every $150 they spend. This 3.3% discount expires at the end of of that month. Wow. What a deal.

While Borders is doing this, Barnes & Noble Inc. (NYSE: BKS) is increasing its discounts for club members and Amazon.com is giving customers unlimited 2-day shipping for only $79 per year. Anyone looking for a rebound in Borders is not going to find it as a result of this new savings program which is, to be honest, pathetic. The margins may improve but gross sales will suffer. Borders is a company in turmoil, and it is choosing a path that will irritate its customers. This is not a good idea, and I will be shocked if this ends well.