Despite being one of the largest bookstore chains in the United States, Borders for several years has relied on Amazon to operate its entire online business.

But that will soon change, as Borders is building its own e-commerce site from scratch and expects to go live early next year. It is an intensive process that began late last year and involves about 100 Borders employees and a variety of vendors.

“It’s a large undertaking,” says Tamara Mendelsohn, an analyst at Forrester Research. “There are a number of challenges. From a technology standpoint, there’s the commerce platform itself, the technology needs to be built out, customized to support Borders’ unique requirements. They are a large multi-channel retailer, it needs to integrate with other systems.”

Currently, the “Borders” Web site is a version of Amazon.com with a Borders logo at the top. Amazon itself actually supplies and ships the merchandise, and Borders receives a commission on sales, according to Kevin Ertell, vice president of e-business at Borders.

Such an arrangement is rare for a retailer of Borders’ size, Mendelsohn says. “The majority of large, multi-channel retailers are attacking this in-house,” she says.

Department store chain Target has an arrangement with Amazon to handle order fulfillment, checkout and other e-commerce needs, but the products the company sells on Target.com are its own.

Borders executives decided to drop the partnership with Amazon because operating their own online business is important to the company’s strategic plan and cross-channel capabilities, Ertell says.

“It’s an extremely large project, as we’re building a new business, really, for Borders from the ground up,” he says. Borders, which has more than 1,200 stores selling books, movies and music worldwide, has not operated its own Web site since 2001.

Once the Web site debuts, the 17 million customers who have Borders Rewards cards will be able to use them online, Ertell says.

Borders recently selected vendor Sterling Commerce to handle order management, which orchestrates the fulfillment of an order and gives visibility into the whole process, from the sale through delivery.

For Borders, this will include giving customers the ability to pick up items ordered online in a store. The actual behind-the-scenes process to make sure inventory ends up in the right place is fairly complicated, says Ken Ramoutar, director of applications product marketing at Sterling.