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| James Daunt | |
"At the end of the day, bookshops needn't fear Amazon," James Daunt, managing director of Waterstones, said during a keynote speech last week at the Australian Booksellers Association's annual conference in Melbourne. (More on the conference in tomorrow's issue.) "If the bookshops are good enough, if the relationship with your customers is truly there, if your booksellers are enjoying themselves and you've trained them and you've respected them and you've allowed them to develop their skills... then our customers truly will remain loyal to us."
In his wide-ranging discussion, Daunt outlined the challenges he faced in 2011, when he, the owner of Daunt Books, a handful of independent bookshops in London, took on the job of heading the U.K.'s last remaining bookstore chain; how he has transformed Waterstones and saved it from bankruptcy; Amazon's effect on bookselling in the U.K.; and general guidelines for how to operate a thriving bookshop and compete with Amazon.
Starting when Amazon opened operations in the U.K. in 2000, the behemoth "slowly ate away at the High Street [downtown] market," he said, and now has about 60% of the market, including 95% of the e-book market. The casualties have been extensive: most chains, including Borders, Ottakar's, Dillons, Hammicks and James Thin, have disappeared. Indie bookstores declined from about 1,550 in 2005 to about 600 last year. Indies now account for about 5% of the market, and Waterstones about 16%. "Amazon virtually destroyed us," Daunt said.
But "all is not doom and gloom," he said. Amazon is known for doing a few things very well, particularly offering customers low prices on books and shipping quickly. As Daunt put it, Amazon is "alluring for one reason only: they're cheaper."
As a result, there is much that bricks-and-mortar stores do that Amazon can't, from putting on events even "in the smallest of shops" to more generally "giving people a sense of excitement about books," making books relevant, and keeping books "in the forefront." He added, "We as booksellers have a duty to create excitement about books. If we do so, we'll continue to have customers come through the doors."
Waterstones had to be reinvented, Daunt said, and the key changes included making the shops "more inviting and more interesting"; cutting costs "a lot"; and emphasizing how important it was for booksellers to be enthusiastic about books and to sell to customers.
In one of the most striking changes at Waterstones, the company reduced its return rate to 3% from 20%. In part this came about from better buying but also from forgoing substantial promotion co-op from publishers, to the tune of £27 million (around $35 million at current exchange rates). The "wholly destructive cycle" involved publishers "paying us to take particular books." Besides abrogating buying decisions to publishers, the program also made Waterstones stores less distinctive from one another as well as from their competitors. The change, he added, was painful, like "coming off heroin," but it had "massive benefits." Besides improving returns, it "stopped us filling up our shops with books customers didn't want to buy" and improved working capital by tying up less money. Eventually stock came down 20% and title count rose 20%. The company has also gone from two to five stock turns. He noted that with stock turns below five, "a lot of books are sitting there getting dusty, getting unattractive."
Cost cutting included reducing head office costs by 60%, cutting costs in the centralized warehouse by 16%, and cutting store payroll by 16%.
In revamping the staff, Waterstones put an emphasis on selling and tried to do away with as many of the duties that prevented selling, such as dealing with returns and stickering. "We had to make booksellers "self-reliant and self-motivated," he said. But even with staff down by a third, productivity--measured by the value of books sold by full-time staff--is up "roughly a third."
The emphasis on selling and being on the sales floor, also "brought energy into the shop. If you're literally running around and don't stop, customers feel that energy."
Even though Waterstones staff has been cut, Daunt said he's increased pay for the remaining employees. At Daunt Books, booksellers are paid a salary rather than by the hour. Waterstones pays by the hour but is starting to pay salaries. "We need to pay booksellers more and make it so people see this as a career," he commented.
"It's absolutely all about the booksellers," he continued. Having the right stock and "making the place look right" doesn't matter as much as "the energy and skill of booksellers."
Waterstones has formalized at least some of its bookselling promotions in company-wide efforts. When it named The Essex Serpent by Sarah Perry its Book of the Year for 2016, the title, which before then had sold under 1,000 copies, became a bestseller. Waterstones' "books of the month" promotions have also increased sales "dramatically" for each title.
He noted that Amazon doesn't have any impact on these titles, and called it an "urban myth" that people come into stores saying they can get titles at 50% off on Amazon. To the contrary, there is a sense, he said, that "a book bought from a bookshop is a better book.... When a book comes through a letter box or when a book is bought in a supermarket, it's not vested with the authority and the excitement that comes from buying it in a bookshop."
The company has tried to "brighten up" its shops, aiming to make "each and every shop individual" and to make them "fun." This is particularly important in the children's sections, which Daunt said should be "palaces where parents want to bring children and children want to be." Ideally, he continued, on Saturdays, when Waterstones opens, "I want to see kids break away from their parents and run to the fun children's sections."
Waterstones does some "significant discounting" of the top 200 titles, while Daunt Books does no discounting. "Price is irrelevant if the customer likes the shop," he commented. "The book is never an expensive item," particularly for the many customers who "we know are quite happy to go into a café and spend dramatically more on a cup of coffee."
Waterstones has turned around and profits are "pretty much at historic levels." At Daunt Books, sales are up every single year, and "a lot in some years."
The Waterstones website "doesn't produce any sales for us," accounting for less than 3% of the company's revenue, Daunt said. But targeted e-mails lead to increased sales in shops, and social media is "an opportunity" for local bookshops to communicate with customers.
Waterstones loyalty program offers customers 3% back "on everything." Daunt Books, by contrast, "has never given a penny back to customers."
Waterstones sells "a lot more things that aren't books," with children's the most successful area, and has done so in "careful and measured ways," so as not to "compromise ourselves as a bookshop." He stated that bookshops shouldn't go beyond having 20% non-book items if they want to remain "unequivocally a bookshop." Still, he touted non-book times as having the ability to make the bookshop more attractive as well as for making money and having excellent margins.
Concerning government subsidies and allowing Amazon to game the tax system, Daunt said, "All I want is a level playing field." He called on governments to "stop favoring Amazon, stop tolerating the way they abuse the tax system, and stop giving them subsidies to open warehouses." He called on booksellers and other to "continue to lobby our politicians" about Amazon.
One benefit of Amazon's push into the book world in the U.K. is that relations between publishers and traditional booksellers have improved, Daunt said. While respect has had to be earned, publishers have provided "fantastic support in the last few years."
Daunt has also been active in trying to save British public libraries, which has been closing and threatened for several years. "I want them saved because they produce readers," he explained. --John Mutter