Waterstones turns new page as independent book sales custodian

At the start of the pandemic, James Daunt instructed managers at the US chain Barnes & Noble to take every book off their shelves, “clean up the trash”, make each section flow out, and set up stores theirs together.

Overhaul is a strategy that the chief executive officer of Waterstones, the owner of the chain, has deployed several times over the past decade. It’s one of those things he could come back to again at Blackwell, the 143-year-old bookseller buying by UK retailer last month, with the backing of hedge fund owner Elliott Advisors.

The takeover adds the UK’s largest independent chain to a portfolio that includes Barnes & Noble, Foyles and Hatchards. It also strengthens Waterstones’ position as custodian of struggling book chains, with Daunt serving as head of both the British retailer and Barnes & Noble.

As with previous takeovers, Waterstones intends to keep Blackwell’s name intact. “I can’t think anyone interested in a bookstore would want these [Blackwell’s stores] to close,” said Daunt, sitting in the cafe of the flagship Waterstones branch in Piccadilly, London.

But for independent chains, it is difficult to support large stores like Blackwell’s Oxford branch without deep pockets, Daunt added. Blackwell’s has been consistently losing money in recent years.

Toby Blackwell, the chain’s last remaining family owner, made several cash injections to provide working capital and fund the digital expansion. During the pandemic, the group looked into transferring employee ownership, a long-standing ambition of Blackwell, but it couldn’t find a bank to fund the restructuring, the former executive said. executive David Prescott told the Financial Times.

Waterstones, which bought 18 Blackwell stores for low millions, will refinance the company, investing in the company’s stock to “allow it to do well,” Daunt said. Prescott and sales and marketing director Phil Henderson left the business in early April.

This acquisition marks another turning point in the slow transition of UK book sales led by Daunt.

James Daunt in the Daunt Books
James Daunt opened his eponymous bookstore chain in 1990. Daunt Books remains independent © Alex Lentati / ANL / Shutterstock

After the successful launch in 1990 of Daunt Books, a London-based chain that remained independent under his ownership, the 58-year-old former banker was appointed to rejuvenate Waterstones in 2011. After After several years of cost-cutting and strategic rework, including empowering booksellers to make each store unique, the company turned profitable in 2016.

“One of the advantages of bankruptcy is that all complacency, the God-given right to exist, is eventually broken,” he said. “You never want to go back there again.”

The existence and revival of Waterstones took place under the ownership of Russian billionaire Alexander Mamut, who sold the business to Elliott in 2018. But it would be “catastrophic” today if the business remained owned. of Russia, Daunt said.

He rejected suggestions that Waterstones, sponsored by Elliott, was exclusively selling books on the streets in England. “Amazon is clearly the dominant bookseller, not Waterstones,” he said.

Daunt says Elliott’s portfolio of British book brands isn’t enough to stop the online giants. “If the United States does not have a major, efficient physical bookseller, given the size of the market, regardless of the arrangement by which the major publishers [in New York] Partnering with Amazon is definitely a must here,” he said, explaining how Waterstones benefited from Elliott’s acquisition of Barnes & Noble and its 627 stores for $683 million in 2019.

However, the expansion of the United States is not without challenges. Daunt has halved the number of employees at Barnes & Noble’s headquarters and laid off 5,000 employees.

In the UK, Waterstones has been criticized for underpaying staff, although Daunt defends its policy of hiring what he calls “disproportionate” entry salaries, saying the company quick promotion.

Waterstones can take some reassurance from Amazon’s failures in physical retail after the company said last month it would close 68 book, toy and homeware stores in the US and UK to focus on groceries.

But online booksellers are taking a bigger share of the market than ever before. Retailers, dominated by Amazon, sold 37% of printed books in 2019, according to Nielsen Books and Consumers survey data, compared with 24, according to Nielsen Books and Consumers survey data. % of bookstore chains like Waterstones.

“That number for retailers has grown to 49 percent in 2020,” said Philip Stone, communications director at Nielsen BookData. , slow and steady and that is accelerated during a pandemic”. “All indications are that it will return to steady-state gains again.”

There’s no complacency in the fight to save bookstores, but data from the Booksellers Association provides some encouragement. The group counted 1,027 independent bookstores among its members at the end of last year, the highest level since 2013. It was the fifth consecutive year of growth after more than two decades of decline.

Sales at Barnes & Noble have begun to pick up, while Daunt said Waterstones has recovered from a slump during the pandemic. Sales fell from £376 million in the year to April 2020 to £230.9 million in 2021.

Daunt expects Elliott to exit his investment in a couple of years, his ultimate goal being to take the Waterstones public. The underlying motivation remains the same as when he launched Daunt Books: “Our work as booksellers is very important.”

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