Jimmy six-hundred: Mr Daunt goes to New York
In all of the adulation for James Daunt, current chief executive of Waterstones and incoming chief executive of Barnes & Noble, it is worth recalling that it was not always so. A year after he took over at the business I watched as a senior publisher, visibly upset at how Waterstones had handled the roll-out of one of its biggest titles, physically effaced a picture of Daunt in that week’s issue of The Bookseller.
The ill-feeling of this senior executive towards Daunt was not unusual either. Daunt’s first few years at Waterstones were troubled. He had pushed and largely succeeded in getting extra discounts from all of the big publishers in return for culling paid-for promotions, including the popular three-for-two deals on paperbacks; he had begun returning huge numbers of books after discovering £20m of worthless stock hidden in back-rooms and under tables across the chain; and had started selling Amazon Kindle devices at a time when publishers were still bruised by the Department of Justice investigation into their agency (fixed priced e-book) contracts.
Back then it was not obvious that Daunt would survive. He’d gone from running six shops (the nickname at the the time was “Jimmy six-shops”) to 300, many of them underperforming and a rump of them unprofitable. Earlier in the year, at the opening of the Russian bookshop within Waterstones’s flagship store at Piccadilly in 2012, and despite a rare sighting of the then owner Alexander Mamut, I’ve seldom seen a more depressed bunch of publishers. Daunt once described the decision to bet on e-book sales slowing down and print reviving as “one where you have to look into the mirror, get the bottle of whiskey out and decide what you well and truly believe”. Fine words, but hardly confidence-building.
Yet from that point, things could scarcely have gone much better — the sales decline slowed down, the e-book revolution did stall, the bookshops gradually began to look better and better, and the investment in (and empowering of) booksellers started to pay off. There was a small improvement in sales in 2015, and a bigger leap in 2016 when the business moved back into profit.
With its acquisition of Barnes & Noble, Daunt has gone from six, to 300, and with B&N’s 600, nine-hundred stores now effectively under his control. It is a huge gamble, not least for Elliott, whose sudden interest in the book business remains (largely) unexplained.
For Americans, the move also marks a fundamental shift in their bookselling firmament: the departure of B&N chairman Len Riggio, who founded the business with a single college bookstore in 1965 and has been a mainstay even during this recent period of disquiet. As former B&N employee and now founder of Welbeck Publishing Marcus Leaver put it: “[It] feels like the best book retailer of the last generation has handed over the baton to the best book retailer of this generation. Having both Waterstones and Barnes & Noble survive and then, hopefully, thrive is good news for all publishers.”
There is, of course, a sort of implausible logic about the deal. Sometime ago I asked Daunt if he’d consider running B&N. Elliott had just acquired Foyles, and the reasoning for going after B&N was not much different: and for Daunt, bookshops (notably book chains) are important and he wants to save as many of them as he can. Declaring an “element of self-interest“, he said: “It really matters to us that Barnes & Noble can continue to do what it does, and it really matters that publishers can continue to sell print books through these stores, as well as, obviously, through Amazon.”
At the time, Daunt said he’d leap at the opportunity to try and revitalise B&N. Still, even then it seemed far off, and in some ways unthinkable. Despite Daunt’s view that both businesses operate in similar ways, there are also massive differences between them, notwithstanding the contrast in the number of stores, the turnover and the cultural differences between the UK and US.
For starters, Barnes & Noble’s stores are huge: the chain operates roughly double the number of stores as Waterstones yet its turnover is six times the size. Geographically, too, the sheer breadth of the challenge for one person is staggering. Then there is B&N’s recent performance, where the decline in sales has been severe. At its height the group boasted sales of $5bn, but the hiving off of its campus stores and the waning of sales at its Nook e-book business have reduced the business both in size and stature to $3.5bn. The drop of 30% is steeper even than that suffered by Waterstones over a similar period. Perhaps more fundamentally, since 2010 it has made a profit just three times, its faltering performance further exposed by its public listing on the New York Stock Exchange.
On the positive side, BN’s web platform is much bigger and more successful than that of Waterstones’, while the Nook, despite the tough competition it faces from the Kindle, looks to be an opportunity, particularly if it can get a piece of the growing audiobook market. Like Waterstones, Barnes & Noble has a DNA that is formidable, with many booksellers having stuck it out, even through the lean times. Many have not, of course, particularly at its head office, which after a relatively positive period under former c.e.o. William Lynch, has been in turmoil.
For Daunt the main focus will inevitably be on the bookstores, where he will want to empower booksellers to run their shops in the manner of how Waterstones operates today: effectively as a series of independents, only with the buying power of a chain and the centralising brain of Daunt and his senior buyers. He will focus on merchandising, including non-book, but the drive will be on making the shops attractive to book buyers first, casual shoppers only secondarily. Daunt says he will resist closing stores, but some operate in areas, many out of town, where footfall is perhaps too diminished even for him to work his magic. Nevertheless, his commitment to having bookshops in unfashionable locations is resolute: Waterstones would be a much more profitable business today had he closed some of its underperforming shops. Instead, he has turned them around, or simply made a case that their cultural significance was more important then their contribution.
US publishers, who are said to be jubilant and “pinching themselves” with delight at the development, would be wise to be cautious. It is likely that things will get tougher before they get better. They should remember that Daunt was not an overnight success, he is thoughtful and considered, and while he will want, and should get, their support his aim will be on improving the financial performance of his business, not theirs. He, too, will have half-an-eye on the exit: not his from the US, but that of Elliott, who will likely look to float the combined group.
Publishers should also take time to understand Daunt’s singular vision. Gone will be the grand plans and corporate double-speak of the current regime, replaced instead by someone whose message will be simple, to the point, sometimes bruising, but effective.
Indies and Gardners adopt real-time tech to boost trade
Independent bookshops and wholesalers Gardners are adopting a real-time data technology to help book-buyers discover which physical copies are located in bookshops near them.
Real-Time Local Inventory (RTLI) from London-based tech company NearSt shows where products are stocked in high street shops in real-time, giving nearby bricks-and-mortar shops a point of advantage in the competition with online retailing.
London indie bookshop Pages of Hackney signed up to the tech last year and plans to roll it out in its new shop. “We’ve noticed people coming into the shop saying they had googled the book and had been directed to our shop as a result. It’s difficult to know how much the financial boost is but you can see the difference,” said owner Eleanor Lowenthal. “It’s the only time we have branched out on normal advertising. It’s worth the investment, just to get the new people in based on Google and them being directed to us. Once they come in once, we hope they will return.”
Explaining how RTLI works, NearSt c.e.o. and co-founder Nick Brackenbury, said: “Once an hour we get an update on what they have in stock, and at what price. We then pull other information and pull that into a feed on Google so if a customer is looking on Google, that shop will be top of their search and will tell them that for example, that book is available 2.1miles away at this shop.”
Gardners has partnered with NearSt and is using the tech from its Gardlink Stock control & Epos system to “give a boost to the high street book trade.” Nigel Wyman, head of business development (UK) at Gardners, said: “The Real-Time Local Inventory data from our Gardlink Stock control & Epos system, enables each of our customers to show their available stock in real time online without any technical know-how. It greatly encourages people who search/shop online to walk into a physical bookshop and take the book off the shelf and put money in the till. As Gardners are a Premium partner with NearSt any bookseller using our Gardlink system that signs up will also get additional benefits.”
Bookshops are “leading the charge” in the fightback against online retailers and are using technology to boost footfall, according to Brackenbury. NearSt is integrated with every major POS system in the book industry, including Bertrams, and estimate 15% of all eligible independent bookshops are now using the RTLI data.
“We believe that the high street has a huge amount of value. Currently you can stand outside and go to order a book online and Amazon will tell you it can be delivered tomorrow, but you could be standing right outside a bookshop that has that book in stock. There’s all this negativity around the high street and focus on people buying online as if there is no alternative but it’s not an either/or situation. It can start online and end in a store and it can be a really powerful thing,” he said. “If we can keep their stock visible online then they can focus on making the most of their stores. Five years ago bookshops were taking a battering but bookshops right now are making the most of this and adding event spaces, coffee shops and making themselves amazing destinations. Bookshops are leading the charge and it’s really exciting and I think it can be transformative for the high street.”
A new report by NearSt and The Future Laboratory examining how traditional retailers can use tech to compete with online companies found trends based on micro-retail and a focus on community will define the future of the high street with retail space “rethought in more dynamic ways as there becomes a reduced need to carry stock that isn’t in demand”. Anecdotal evidence from NearSt’s current network of shops indicates that RTLI could drive up to £9 billion of sales back into the UK’s 200,000 high street shops, the equivalent of an average Briton making just seven additional high street purchases a year.
Whilst online sales are growing at a fast rate, the ONS says bricks and mortar sales still account for nearly 82% of sales in the UK. A TimeTrade survey found if an item is available both online and in a nearby store, 75% of consumers would prefer to shop instore.
Booksellers Association m.d. Meryl Halls welcomed the report and the use of RTLI. She said: “It’s exciting to see hi tech put to the ends of common sense and community focussed solutions, so we were really interested to read the High Street Futures report and hear what our friends at Near St are planning in the Real Time Local Inventory (RTLI) space. The high street is in desperate need of some creative thinking, and the solution that reaches consumers online and then delivers them an in-store experience has great potential. Near St have been commitment to booksellers right since they started, so they know how the indie bookselling sector works, and they have also built innovative solutions around inventory and online search. Bookselling has been an innovative industry for decades, and it’s good to know that there are tech companies who are identifying the consumer yearning for a real-world experience and building an online solution to that.”
The report comes as Amazon revealed plans to open pop-up shops on the UK high street to give online businesses a bricks-and-mortar presence.
ReaderLink ‘preparing rival bid for Barnes & Noble’
US book distributor ReaderLink LLC is preparing a bid for Barnes & Noble that could beat the price agreed by Waterstones owner Elliott Advisors Ltd, it has been reported.
On Friday 7th June, Elliott announced it had agreed to acquire the US book chain for $683m (£537m), including the assumption of debt. The hedge fund confirmed James Daunt, c.e.o, of Waterstones would also become chief executive of Barnes & Noble, splitting his time between London and New York, once the takeover is complete.
However, according to a report in the Wall Street Journal, ReaderLink LLC is working towards making a rival bid.
The merger agreement reached by Elliott contains a “keep-shop” provision, stating Elliott would be entitled to a $4million payment if B&N strikes a deal with a third party before 11.59pm ET on 13th June, the paper reported. There would be a $17.5million break-up fee after that.
A source told the WSJ ReaderLink, the largest distributor of hardback, trade and paperback books to non-trade channel booksellers in the US, was attempting to get financing before the cut-off date and could join with another investor.
Barnes & Noble is North America’s largest bookseller with 627 bookstores and sales of $3.662bn for the fiscal year 2018.
On agreeing the Elliott deal last week, its founder and chairman Leonard Riggio, who owns around 19% of the firm’s stock, said he had “admired” Waterstones for many years.
He said: “In view of the success they have had in the bookselling marketplace, I believe they are uniquely suited to improve and grow our company for many years ahead. I am also confident that James Daunt has the leadership ability and experience necessary to lead this great organisation. I will do everything I can to help him make the transition smooth.”
Barnes & Noble declined to comment on the latest development. The Bookseller has contacted Waterstones and ReaderLink for a comment.