Waterstones is thriving

Friday, July 22nd, 2016

Waterstones, the biggest bookstore chain in Britain, is thriving:

The company was £170 million (about $260 million) in debt and about to file for bankruptcy when, miraculously, it was rescued by the billionaire Alexander Mamut, a complicated, influential figure in Putin’s Russia who one British broadsheet dubbed “the most powerful oligarch you have never heard of.” Mamut had been talking to Daunt before the sale and immediately brought him aboard to right the ship. “He wanted to make a mark in the United Kingdom, where he had a house, educated his son, and this seemed a positive, beneficial thing worth saving,” Daunt said of Waterstones’ benefactor. “Other people buy football clubs, fund art galleries — this was his thing.”

Once at Waterstones, Daunt tore up the business plan. His first target was the so-called planogram, a kind of map that tells chain booksellers which new books go where, ensuring that each store assigns exactly the same prominence to exactly the same titles. The very best locations in the store are actually sold to publishers. This includes the so-called best-seller list, whose rankings are determined not by the popularity of a given book but by how much a publisher is willing to invest to promote it. (A similar policy of “bookstore baksheesh,” as one editor dubbed it, seems to exist at B&N.) In 2011, Waterstones earned around £30 million just for this kind of advertising, Daunt said. Considering that the company was hemorrhaging money when Daunt took it over, forfeiting this revenue stream seemed crazy, and it also offended many publishers. “By giving control back to the booksellers, we were telling the publishers, ‘We know what sells better than you.’ That’s never a pleasant message,” said Daunt. “There was extreme nervousness. But we had the advantage of being bankrupt. Crucially for us, Penguin said, ‘Sounds mad. But what are the options? So we’ll support you.’ ”

By freeing up the placement of books, Daunt was able to optimize the selection for each store based on the type of customers coming in. What sold in working-class Gateshead wasn’t the same thing that sold in affluent Kensington. In some stores, he would discount. In others, he wouldn’t. “This is sort of difficult for booksellers to get their heads around, but some of the customers actually don’t want a discount. There is a fair price for a book, I think,” he says, picking up a doorstop history by the likes of Ian Kershaw. “You’re investing a lot more than 25 quid in this. For most readers, that will probably take a good month of your life. Almost the least important thing is how much it costs.”

I remember Art DeVany making that same point years ago.

Next came the staff. Daunt shrunk Waterstones’ central office and fired half of the store managers. He gave those booksellers who remained almost complete autonomy over how to arrange their stores — from the windows to the signage to the display tables — but controlled the stock with a dictatorial zeal. Out went books you wouldn’t want to browse: reference, technical guides, legal textbooks. That — along with the real estate freed up by eliminating publisher-sponsored placements — allowed Daunt to grow the total number of titles in stores by about a quarter. With more books to browse, sales increased. The number of unsold books that were returned to publishers fell from about 20 percent before Daunt took over to just 4 percent today.

A leaner staff and more autonomy resulted in everyone working harder, but Daunt says the staff is curiously happier as a result. “You love being in a shop where people are busy,” he says. “It’s much better than being out the back, filling up boxes of returns and thinking your life is a drudgery of doing pointless administrative tasks for some nameless bureaucracy of a head office who you despise because they just dump innumerable amounts of crap books on you.” As is probably clear, Daunt still has an indie bookseller’s contempt for the big chains, even though he now runs one of them. Of Barnes & Noble, which appears more and more like a cross between an airport gift shop and a toy store, he said, “My faculties just shut down when I go in there.”

For a CEO, Daunt is refreshingly impolitic. He has called Amazon a “ruthless money-making devil” and has relished the recent resurgence of print and the plateauing of e-books. He stocked Kindles in his store up until earlier this year, when he pulled them, gleefully, citing “pitiful” sales. The revival of print, and of Waterstones, confirms in a way Daunt’s worldview. “Do not underestimate the pleasures of reading,” he said last year. “The satisfactions of the book, in the age of social media and proliferating cultural choices, are very singular.”

Comments

  1. Alrenous says:

    So bookstores think they’re obsolete, but really they’re merely mismanaged. He fixed it by using techniques at least as old as Napoleon. It’s not hard, you just have to actually want to do it.

  2. Rollory says:

    A man after my own heart.

    I haven’t set foot inside a B&N in years. I also do not own a Kindle nor any e-books.

  3. Kudzu Bob says:

    E-books have not plateaued. The Big Five publishers’ share of the e-book business continues to decine, but small presses and indie writers have seen their e-book sales continue to increase. The media have misreported this as the plateauing of e-books.

  4. Ken says:

    “The very best locations in the store are actually sold to publishers. This includes the so-called best-seller list, whose rankings are determined not by the popularity of a given book but by how much a publisher is willing to invest to promote it. (A similar policy of “bookstore baksheesh,” as one editor dubbed it, seems to exist at B&N.)”

    The term is “slotting fees,” and they’re common in grocery stores as well.

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