It helps that books are back in fashion, it helps that the retailer sells toys and stationary these days too, but Waterstones, once a classic example of a company on the verge of being disrupted out of sight, is back in rude health – and entrepreneurial thinking seems to have saved it.
“We didn’t see [it] coming”, says James Daunt, chief executive of Waterstones.
2007 was quite the year for technology of course – the year of the iPhone, Android, Facebook went global and in November of that year, the Kindle was launched.
2008 was quite the year for finance, something big happened that year, what was it now, oh yes the global economy went into meltdown. 2008 was tough for just about everyone, but it was especially tough if were a bookseller at a time when the Kindle was making its mark on the world.
This was when the bad times began for the bookshop. By 2011, HMV, its owner at that time, who itself had worries with the core part of its business, sold the business to Alexander Mamut, the Russian billionaire for £53 million. That was when James Daunt, the man who founded Daunt Books – an upmarket bookstore chain – was brought in.
But it was an impossible challenge, surely. This was at the time when analysts coined a new word to describe a particularly annoying habit, from the point of view of retailers. The word was Waterstoning – it describes the practice of seeing a product for sale in a shop, and then buying it on your smartphone, probably from Amazon.
“When I took over, Waterstones was bust, it was losing horrendous amounts of money and the Kindle was eating away at sales,” said Mr Daunt. “It did look very bleak.”
In the year to April 2017 Water stones made a pre-tax profit of £18 million, following a £9.9 million profit the year before, which followed years of loss making. Or so it was revealed this year.
The store’s owner is looking to sell the business, but presumably, because he feels the job is done, the retailer has been saved.
So what happened? How did a book shop, in an age when digital technology was doing away with our need to own a book, manage to first survive and then flourish?
Well, it helped that the Kindle did not crush the book business after-all. According to Nielsen, in 2016, book sales by volume rose by two per cent, and by six per cent, when measured in pounds, shilling and pence. But paper books – remember them, the things that are made from trees – they saw sales (by value) rise by seven per cent, while e-book sales dropped by four per cent.
But that was part of trend, in 2015 digital content sales fell too, from £563 million in 2014 to £554 million in 2015.
This may have helped, but that didn’t mean the battle was won by Waterstones – it still had to persuade customers to buy books from its stores, as opposed to online, to buy from Waterstones instead of waterstoning over to Amazon.
To many people, books are like furniture – and there is a pleasure from reading an old-fashioned book as opposed to a digital one. But that does not mean digital is on it way out for good – paper books do present something of a storage problem, especially in the age when space seems to be at a premium.
Children’s fiction has been leading the way for paper books – at first this may seem surprising, aren’t kids so-called digital natives? But then look at the way some kids book are presented, with their bold images and that leap out from the page, and may br it will come as no surprise.
But according to Mr Daunt, a key moment for Waterstones was when the company gave each store manager more autonomy – to run the store they managed as if it were his or her own shop.
“My philosophy is just to let the managers get on with it. You just need to be alert to when things go wrong if sales fall,’ said Mr Daunt.
In short, by treating store managers like entrepreneurs, the company was turned around.
That is surely the lesson of resisting the threat of disruptive technology, or at least one lesson, creating entrepreneurial thinking among staff.