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Why James Daunt Feels Waterstones is “Desperately Vulnerable”

More Downton Abbey than EastEnders, Daunt maintains the proverbial British stiff upper lip.

By Roger Tagholm

LONDON: Perhaps it’s having a father who was a diplomat, or all those years at boarding school, which either damage you or give you a steely self-reliance — whatever the reason, James Daunt, the 48-year-old MD of Waterstones, doesn’t do ruffled. For someone running a company that so many commentators outside the business – and a few inside – think should be greatly reduced in size, he is remarkably calm. Naturally, he is under no illusions about the challenges he faces, but ask him if it can be done, if Waterstone’s can survive against Amazon, he laughs – yes, laughs – and says: “I wouldn’t be here, if I didn’t. I had a perfectly nice life where I was [for 20 years he ran the highly respected Daunt Books mini-chain that now numbers six stores in London], so unless I thought this was both important, and possible, I wouldn’t do it.”

It’s a little over six months since Daunt both surprised – and greatly relieved – the UK trade by taking the helm of the nation’s last remaining specialist chain of any size. He was brought in by Waterstones’ new owner, the Russian billionaire Alexander Mamut, whom Daunt agrees is as much an intellectual philanthropist as he is a yacht-owning oligarch. “He has a deep and passionate interest in Waterstones and in the value of books, and unlike many people, I don’t think he expects anything other than the trajectory we’re on. We’re in a tough world and we’ve got a lot of work to do. He certainly wasn’t expecting any miracles.”

Reinvention: Slow, But Simple

Daunt can make his task all sound rather simple. He talks about making the shops “nicer places in which to buy books,” about making sure that the books “you put in front of people are more closely allied to what people actually want to buy.” He says that this process has begun and that those shops that have grasped the opportunity to tailor themselves more specifically to their market are doing better than those that haven’t. “But we are still working with very clunky systems that we inherited from HMV [Waterstones’ former parent company] and that has hampered our progress. It’s a slow old grind. We’re in retail. Retail is about detail. It’s just grinding through them, improving this, improving that, and you just carry on until you have an accumulative affect.”

Some publishers say he knows about selling books in wealthy locations such as Chelsea, but wonder whether he can “do a Daunts” in Darlington or Warrington, in less fashionable, poorer parts of the country. He reacts slightly angrily to this. “I understand what a running good bookshop is and it’s the same business up and down the land. A good bookshop is a good bookshop. It’s essentially all the elements of customer service. You know within three or four minutes whether a shop is being run well or not. Is it tidy? Have they got the rights books there? Are the tables in the right places? Are the staff bothering to say hello to the customers or standing around? You know straightaway when it’s a good one and then you look at the numbers and they’re doing well.”

Will Waterstones Sell the Nook?

That’s fine – and for reasons of discoverability, the survival of the chain is obviously important for publishers. But what everyone wants to know about are the chain’s digital plans. There is widespread speculation that Waterstones will sell Barnes & Noble’s Nook, speculation increased by last year’s appointment of Miranda Curtis as Chairman, since Curtis works for digital broadband business Liberty Global Inc whose sister company Liberty Media Inc has a 16.6% stake in Barnes & Noble. Can he say anything? One knows the answer but asks the question anyway. “No. But it seems fairly obvious that we will be doing it with somebody. It’s also fairly obvious that we have a non-disclosure agreement with whoever we’re doing it with. And at the point at which we agree, we’ll announce it.

“It’s no secret that I think that we should be selling digital books to people because, quite clearly, that’s how they want to read. We need to sell an e-reader with an e-platform and deliver e-books to our customers, and we believe that buying those within the environment of a bookshop is a perfectly sensible and agreeable place in which to do so, and actually, perhaps the best place in which to do it.

“What I’ve said, which presumably explains the Barnes & Noble speculation, is that their model is pretty good. They sell them with authority and confidence and they do it in the heart of the shop, and they build it around their own physical book offer, and it really works. You’ve only got to go over there and look. The departments look good, the e-readers are great, they’ve got wi-fi and if you’ve got a Nook and you wander around a Barnes & Noble you can sample anything for free, you can read it, look at it, you can buy it in a second and they’ve got somebody there, dedicated people to help you. Something goes wrong with your machine, or you just don’t understand it, there’s somebody there to fix it – it’s all free, it’s all great: that is a model that works.

“They’re getting decent market share off Amazon, having come in late behind them. I think within the UK context we can do it in a slightly different way that we think will be a better way, and I think we can make it a really compelling alternative to Kindle.”

All of which is a ringing endorsement of Barnes & Noble and tantamount to the announcement we’re all waiting for. But if Waterstones is to take its own version of the Nook, how would the revenue be split? If someone buys a Kobo reader from WHSmith, they don’t then buy their e-books from Smiths – they buy them from Kobo. They are in Kobo’s eco-system. Daunt agrees and adds: “I think for a book retailer of our confidence and stature that would be a strange arrangement to have. We want to sell to our customers the e-books that we supply.”

So, if Waterstones does take the Nook, who gets the revenue from each book sale? Whose eco system is the book in? Daunt uses a car analogy to explain. “If you go and buy one of those big, fat ugly Minis, it may have Mini written on it, but it’s made for BMW by Steyr in Austria. BMW pay Steyr to build that Mini, Steyr make a profit from building that Mini for them and BMW make their profit from selling the Mini.”

We might deduce from this that Waterstones will pay Barnes & Noble to “make” an adapted Nook for it – except that the Nook is made by Foxconn, of course, which also make the iPad – with Waterstones retaining the revenue from each book sale. We shall see.

More Downton Abbey than EastEnders

Born in Islington in north London in 1963, Daunt is classic, upper middle class English – quietly spoken, slightly reserved, more Downton Abbey than EastEnders. He had the traditional childhood of the diplomat’s son, moving with his parents every three years. “I think we lived in something like 12 houses. Paris twice, New York, Brussels, Cyprus. Other diplomatic children go to far-flung places, but my father was doing the UN, OECD, NATO.”

He boarded at Sherborne in Hardy country, served as a purser on cruise ships outs of Miami during his gap year and then read History at Cambridge where he met his wife, Katy. Four years with JP Morgan in New York followed until a desire to do something for himself, something that involved his interests – reading and travel – became so strong that he resigned and set up Daunt Books for Travellers in Marylebone in 1991.

So began almost 20 years of quiet, highly respected independent bookselling, during which time the handful of Daunt Books were long regarded as models of what a bookshop should be. That remains true to this day.

With his appointment by Mamut, he has gone from relative anonymity to a position that has some bearing on the cultural life of the UK. In a very short space of time, he has become easily the most interviewed of Waterstones’ many MDs. This may have something to do with the Daunt stores, which he still owns, being in affluent parts of the capital frequented by the media. But he is a self-effacing man and has said in the past that he does not like “the cult of the MD”, always preferring to describe himself as a “shopfloor bookseller.” Then, suddenly, he is receiving requests from the media every week and his every pronouncement is being pounced upon. How he has coped with all the attention?

“I will never tell a lie.”

“I’m oblivious to it. I’ve always endeavoured – at Daunt Books and now – to do the minimum possible. But if somebody asks me politely to do something, I’ll do it. I don’t prepare for it, I don’t look back at it – I just do it. I always give extremely straightforward answers, I never have to prepare because I’m never going to tell a lie, I’m never going to try and spin anything, so it’s extremely easy. But I don’t look at them and I don’t think much of them – I’m trying to get through my day and march on. I endeavour to only talk about Waterstones. Certainly, all the requests that I do something on the interior of my house, or those sort of personality profiles I turn down.”

He says he still finds time to see his children, Molly, 14 and Eliza who is eight, and to walk the dogs Rufus and Charlie on Hampstead Heath, close to where they live. “You love asking about my dogs. Next you’ll want to know about my chickens…” Gleaning such personal details from this private man is very difficult – almost as hard as trying to arrange an interview with anyone from Apple. But now we know he has five chickens as well as the 295-odd Waterstone stores.

On Amazon

Was he surprised by the way his comments about Amazon were picked up?  According to the Independent, he described the retailer as a “ruthless, money-making devil.”

“There have been a number of things I’ve said about Amazon, some of which I have said and some of which I might not have used those words because they’re not a form of language that I recognize. It helps if people use these machines [he points to the recorder] rather than scribble things down and use their own language. I am clearly not shy in saying that I think that Amazon is a major competitor and I think some of its business practices, particularly around its use of the tax anomaly which are available to it through the Luxemburg operation, are unfair.”

He is referring to Amazon.co.uk’s status as a “service company” – as opposed to a retailer – providing fulfilment, marketing and support services to its Luxembourg-based parent Amazon Eu Sarl. Although Amazon.co.uk delivers books from UK bases, it collects the money in Luxembourg, which has a lower corporation tax rate than the UK. He points out that Waterstones is taxed heavily on the high street in a way that the internet is not.

“It’s in nobody’s interests that this is going on and our lawyers have made representations to the EU. I’m a free marketer. It’s the world I live in and I accept it. Where I get fed up is when they’re using things like the tax regime in Luxembourg to gain unfair advantage, or when they receive a subsidy, as they did in Scotland, to open up a distribution centre, creating a small number of jobs, whereas we employ many hundreds of people across Scotland. I’m not advocating that I be given a subsidy – I’m just advocating they aren’t and that they aren’t given preferential tax treatment.”

“Libraries Matter More than Waterstones”

Politically, one might imagine he is a Conservative – he has come from that stock, that milieu – but he is a great defender of non-profit-making, some might say Socialist, institutions like the UK’s libraries, currently suffering from coalition Government cuts. “Libraries are more important than Waterstones. Waterstones also matters, but I wouldn’t equate the two. Libraries definitely matter an awful lot more than Waterstones because they’re open, they’re free, whereas if you want a book from us, you’ve got to pay us. That makes libraries most definitely command the higher ground to us.”

One could argue that the prime aim of Waterstones is – or should be – educational and cultural, just as much as making money. That being so, and given that it has become vulnerable because of Amazon – “desperately vulnerable”, Daunt interjects – does he feel some sort of government intervention is necessary? The UK’s Booksellers Association has called on the Government to act for the protection of all bookshops by urging councils to lower rates, for example. Many countries in Europe have some form of retail price maintenance on books and the US has the Robinson Patman Act.

“That’s not the way our society works. If we were in France, it would, but we’re not, we’re in the United Kingdom, and there will be no political and financial backing for a bookshop chain.”

Does he think that is good or bad? “Should our society operate in the way it does? France has a very large car industry because the state propped up Renault and Peugeot and Citroen at the moments when they needed and we have no indigenous car industry because our government didn’t. On the other hand, we have large Honda and Nissan plants and we actually make a lot of cars, but foreigners do it. We are in an Anglo Saxon capitalist world. We will get no favours in that world, that’s the way it runs. Amazon is not going to be turfing out all the French booksellers, but it could very well turf us out. That’s absolutely fine by me, because I think we have it within our power to resist them. Where I get fed up about it is when they’re using things like the tax regime in Luxembourg to gain unfair advantage. I’m quite happy to compete with somebody on a fair and level playing field.”

“I’m a Shopfloor Bookseller”

He is interested in bookshops – a fan, you could say – and is enjoying visiting his stores, gradually working his way through the chain, travelling to parts of the UK he has never visited. “It’s my world. I’m a shopfloor bookseller. I understand what it’s like to tramp a shopfloor. One of the joys of working in the world of books generally, but certainly in the world of bookselling, is that we have extremely nice people working in our shops. All those clichés about passion and interest and all the rest, are absolutely true.”

He notes changes in the wider world of bookselling, and praises (again) Barnes & Noble’s boutiques, such as the one in Union Square in New York. “In Europe I think there’s some quite interesting stuff going on that’s changing the nature of the bookshop, of what they are. The Fetrinelli shops are interesting – where you actively and overtly go out and to try and make the bookshop a social environment and hub. I think that’s interesting, so I think we’ve got a lot of lessons to learn from people.”

And with that, our hour in the 5th View Cocktail bar at the top of Waterstones Piccadilly flagship is up. He gathers a packed shoulder bag in which it’s possible to see a folded Financial Times and an iPad. Does he read on it? “It’s a useless thing to read on. It’s not an e-reader – the glare you get off it makes reading tiring and unpleasant. And it’s too heavy. The Kindle’s not too bad – I mean, it’s a perfectly acceptable reading experience…”

There – he’s just said something positive about Amazon. “No, about an e-reader,” he corrects, before heading off.

DISCUSS: Is James Daunt Inspiring Confidence in Waterstones?

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  1. Posted February 15, 2012 at 3:32 pm | Permalink

    I don’t understand why the prime aim of Waterstones could be described as ‘educational and cultural’. I don’t need to be told what to read by a shop. It will need to sell what people want to buy (just as, say, Boots does with its own stuff) rather than point them in the direction of where its directors think they should go. My local Waterstones no longer sells the more popular books; there is nothing with a pink cover – which many customers might want to buy – because presumably that’s just TOO down-market even though they’ve cheerfully sold zillions of them over the years. (And yes, that includes the ones I’ve written). As a result it’s looking a bit empty and will probably close. So farewell then, Waterstones. You were brilliant and I’ll miss you. But hey there’s still Amazon.

  2. Elaine
    Posted February 15, 2012 at 5:25 pm | Permalink

    With respect Judy I think you may have jumped the gun a bit on his meaning. What he’s doing is taking away the central diktak that means all stores HAVE to stock specific titles. Cultural does does not necessarily mean high brow. It means the culture of that high street, surely? My local Waterstones stocks plenty of “pink” books (looks like more rthan before to me but I can’t be sure). They also have Tolstoy and Proust. I spoke to a manager last week who said they were now free to stock whatever their local market wants. In fact COMPLETELY the opposite to your experience your local. The chart in my local is real mixed bag. They have more chairs now. All I can say is that as a customer it all seems to be improving. As a writer, well I’m not successful enough to make the chart yet but I think I stand a much better chance now those mountains of 3 for 2s are out of the way.

  3. Posted February 16, 2012 at 3:31 am | Permalink

    Chairs? You have CHAIRS? Now that I’d like.

  4. Posted February 16, 2012 at 4:57 am | Permalink

    I visit during the course of a year, some forty or fifty Waterstones stores to sign my books. Most of these stores certainly have chairs, comfortable armchairs and in fact I do see customers devouring books rather than sampling them and paying for them but you will always find a few who take advantage. I know many of the managers quite well and the improvement in job satisfaction and consequently customer relations is tangible since the Mr Daunt arrived.
    There is just one teeny concern, a winter one, in his policy. Open doors are good but not in freezing cold weather and I have seen customers walk out of stores when they do not consider them warm enough to linger.
    In addition, I just wish I could understand their buying policy vis-a-vis small publishers. The current method looks to me like making presents of chunks of trade discount to various wholesalers when they could be buying direct and retaining the discounts themselves.

  5. Posted February 16, 2012 at 5:30 am | Permalink

    Over the last few months, I have visited 15 Waterstone’s bookshops to do book signings for my debut thriller novel, Rough Cut. As a fairly introverted film writer & director with few social skills, I expected to hate the experience of having to talk to people as they walked through the door and try to interest them in my book but actually the experience has been wonderful and, as a result, I am doing another tour of 20 of Waterstone’s branches in April, May & June.
    A large part of the reason I have enjoyed the experience so much is that the staff of Waterstone’s are really friendly and welcoming and I don’t just mean one or two of them, I mean ALL of them.
    Another key reason for enjoying them is that I have the opportunity to talk to a lot of people who are interested in reading books and I have had a huge number of really enjoyable conversations with them.
    That I have also sold a lot of books at these events helps but it is only part of the reason I have enjoyed doing book signings so much. So, well done to Waterstone’s – please keep up the good work.

  6. Posted February 16, 2012 at 7:46 am | Permalink

    There are a number of comforting comments on a optimistically biased article, which is good news. Yes, Waterstones shops need individuality so hosting local authors is good, and yes, staff are generally welcoming and it’s good to talk to the book-buying customers as well as sell one’s own books. On the buying policy – if the Company would follow the old Border’s example and buy books direct from self-published authors, there would be savings in carriage, returns wouldn’t be an issue, and there would be better profit margins all round. The concept of encouraging local authors favours the high-street book shop too, against the monolithic mail-order giant, for it’s akin to ‘organic’ food shops where quality and service count for more than cheap deals.

  7. Bill Godber
    Posted February 16, 2012 at 8:12 am | Permalink

    James Daunt’s straightforward manner in this interview is refreshing and very different from what has been heard from others in the past. Clearly not everyone is going to be happy with the look and content of their local branch of Waterstones but what is important is that at last someone realises that every store in the country doesn’t need to be the same. For many years Waterstones seemed to be the only major retailer that thought this perhaps homogenous approach a sound policy – well apart from some rather down-market chains that seldomly had stores in major high-street locations. So this is a very positive improvement. But Lionel Ross’s comments re the smaller, independent publishers are pertinent. Supplying wholesalers can be efficient, of course, but margin apart it deprives publishers of important marketing data which puts them at something of a disadvantage over those supplying direct. No one knows where these books are going, which stores have taken them and where publicity efforts might be directed. And, importantly, this means that authors are kept in the dark as to where their books are being sold.
    Many independent houses, as well as authors and readers, are delighted by what is seen as a serious re-vamp of the Waterstones chain and optimistic that they will get to compete on a leveller playing field than in the past. Whilst this hasn’t happened yet to the degree that they would like, it is understood that this is a complex process and can’t be achieved over night – but it’s a process that many working in the smaller publisher sector hope can now be speeded up apace. It gives on-line retailers a serious advantage over the high street and that too is unfair.

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