Why James Daunt Feels Waterstones is “Desperately Vulnerable”

In English Language, Resources by Roger Tagholm

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?

About the Author

Roger Tagholm


Roger Tagholm is based in London and has been writing about the book industry for more than 20 years. He is the former Deputy Editor of Publishing News and the author of Walking Literary London (New Holland) and Poems NOT on the Underground (Windrush Press).