James Daunt, the man who will soon try to revive Barnes & Noble, once spent weeks in a noisy, arm-waving debate about the ideal angle of tilt for bookstore shelving. His opponent was an Italian showroom designer who argued, in a series of otherwise congenial meals in some of London’s best restaurants, that the shelf should be tilted 4 degrees.
Wrong, countered Daunt. The right answer is 3 degrees. Yes, the cover of a book catches a bit more light, and attention, if tilted at 4 degrees, especially on shelves below eye level. But the spine of a book starts to bend, ever so slightly.
“He prioritized presentation. I prioritized the condition of the book,” Daunt said, grinning to acknowledge just how wonky this discussion was. “These are my stores, so I went with 3 degrees.”
Daunt is talking about Waterstones, Britain’s largest bookstore chain, which he began to run in 2011, when it was on the verge of bankruptcy. A soft-spoken 55-year-old with a puckish smile and iron resolve, Daunt steered Waterstones out of a death spiral by rethinking every cranny of the company, from small (those shelves) to large (the business model).
The changes have filled Waterstones’ 289 shops, mostly in Britain, with books that customers actually want to buy, as opposed to the ones that publishers are eager to sell. And store managers have been given plenty of leeway to transform their shops into places that feel personally curated and decidedly uncorporate.
“He’s essentially created a series of independent bookstores,” said Tom Weldon, the chief executive of Penguin Random House Books U.K., “with the buying power of a chain.”
Some Waterstones locations, like tiny Southwold Books in Suffolk, aren’t called Waterstones. Others, like the shop on Gower Street in London, have cafes with added electrical sockets and are swarmed day and night with laptop-toting college students, most of them consuming more electricity than coffee.
“We’re playing the long game,” Daunt said. “When those students are rich and famous, they’ll buy books from us and the cost of the electricity will be paid back in spades.”
Defying predictions that chain bookstores were doomed in an Amazon world, the privately held Waterstones returned to profitability in 2015, Daunt said, and earns a steady 10% margin on sales of roughly $500 million.
Now comes the question that will rivet U.S. book lovers as much as any page turner: Can he do it again?
Barnes & Noble has been sliding toward oblivion for years. Nearly 400 stores have closed since 1997 — there are 627 now operating — and $1 billion in market value has evaporated in the past five years. This past week, Elliott Advisors, the private equity firm that owns Waterstones, closed its deal to buy Barnes & Noble for $683 million. Daunt will move to New York City this month and serve as the new chief executive.
He has said little about his plans, but his playbook at Waterstones offers clues about what’s coming. His guiding assumption is that the only point of a bookstore is to provide a rich experience in contrast to a quick online transaction. And for now, the experience at Barnes & Noble isn’t good enough.
“Frankly, at the moment, you want to love Barnes & Noble, but when you leave the store you feel mildly betrayed,” Daunt said over lunch at a Japanese restaurant near his office in Piccadilly Circus. “Not massively, but mildly. It’s a bit ugly — there’s piles of crap around the place. It all feels a bit unloved, the booksellers look a bit miserable, it’s all a bit run down.
“And every year, fewer people come in, or people come in less often. That has to turn around. Otherwise …”
Bookstores on drugs
Daunt will still have a hand in running Waterstones, which means he will soon become one of the publishing industry’s most powerful figures, and a literary tastemaker whose sway is exceeded only by Oprah Winfrey’s. If that sounds like hype, consider what has happened in Britain. Although Waterstones doesn’t take money from publishers to push specific titles, its headquarters still chooses books to promote, and it anoints a book of the month and a book of the year. Those selections almost always become bestsellers.
“That is something Amazon doesn’t do, because its algorithm is passive,” said Andrew Franklin of Profile Books, the London publisher of Alan Bennett, Francis Fukuyama and others.
Amazon can tell you what you might like based on what you’ve already purchased, but it doesn’t spotlight unknown books that deserve a wide audience. It can’t make a literary star, something Waterstones now does with regularity.
“James really liked ‘The Essex Serpent,’” Franklin recalled, referring to the 2016 novel by Sarah Perry, “and he made it book of the year. It sold 100,000 copies.”
There are other ways that Daunt distinguishes Waterstones from what he calls “our friends in Seattle.” In January, during a speech before a group of booksellers in Venice, he likened Amazon to the boy-devouring lion in “Jim,” a poem by Hilaire Belloc.
“Nothing happens quickly, but it happens remorselessly,” he told the audience, in the methodical tone of a man telling a ghost story. “It never stops. It gets worse and it gets worse, and if you’re not careful, you end up being entirely eaten.”
He paused, allowed a small grin and added, “But we haven’t been entirely eaten.”
Waterstones has held its ground, stubbornly retaining a 25% market share, compared with Amazon’s 40% in Britain, Daunt said. Barnes & Noble has been losing its fight and now has about 8% of the U.S. market versus 50% for Amazon, according to Mike Shatzkin, author of “The Book Business: What Everyone Needs to Know.”
Barnes & Noble flailed, in part, because it contested Amazon’s turf, investing heavily in e-commerce and losing more than $1 billion on the Nook, a competitor to the Kindle. Waterstones has spruced up its website “on a shoestring,” Daunt said, and it now accounts for 5% of sales.
But the company has largely persisted by selling the pleasure of bookstores first and books second. Because if a store is charming and addictive enough, goes Daunt’s theory, buying a book there isn’t just more pleasant. The book itself is better than the same book bought online.
“It just is,” he said. “You’ll enjoy it more. You’ll read it quicker. You chose it with your own eyes, your hands, your ears. Now it’s all about anticipation. If you buy a book from Amazon, there’s a little anticipation as you rip the tag off the envelope. But it’s generally slightly flat and disappointing.”
When Daunt took over at Waterstones, there was plenty of skepticism about him among publishers. His only previous bookselling experience was running what was then a chain of six stores that he had founded, Daunt Books. He had managed about 50 people. Waterstones employed 3,000.
Maybe he was in over his head.
Plus, he seemed a bit too erudite for a mass-market retailer; his style was more sommelier than salesman. And he had some radical ideas. He wanted Waterstones to forswear $38 million a year in “co-op fees” paid by publishers. The fees gave publishers the power to dictate which books would be stocked and where they would be displayed, in every single Waterstones.
Although bestsellers in Truro, near the southern coast of England, are different from bestsellers in, say, Belfast, the capital of Northern Ireland, these Waterstones were essentially interchangeable.
To Daunt, this was manifestly insane. He likened co-op fees to crack, an easy high that comes with an intolerable price.
“You can’t think straight on crack,” he said. “We were filling our stores with books that customers didn’t want.”
Publishers liked the co-op system because it let them increase the profile of any book they backed with a payout. They were just as smitten with then-ubiquitous “buy two get one free” promotions, a sales gimmick that Daunt despised. Customers, he argued, had a hard time finding a third book they really wanted.
Through months of tough negotiations, Daunt urged publishers to junk the co-op system and instead offer Waterstones a uniform discount on all books. Publishers would have to relinquish control over Waterstones’ inventory, but Daunt pointed out an upside.
At the time, more than 20% of Waterstones’ inventory was eventually mailed back to publishers, which cost them tens of millions of dollars in freight charges and labor every year. Let Waterstones choose which books to stock, Daunt said, and he would slash that expense.
“If you’ve got a better idea,” he told them at the time, “let’s have it.”
Today, just 4% of books are returned to publishers, and the figure is heading lower. Barnes & Noble, which is hooked on co-op fees, returns between 20% and 25% of books to publishers, a spokeswoman for the company said.
Without a co-op system to maintain, Daunt slimmed down his staff, both at headquarters and in stores. Productivity at Waterstones went up, too. Employees are selling books, not boxing them up to mail back.
Publishers are now in constant dialogue with Daunt and his buyers about upcoming books, often nine months before publication, relying on the strength of what is between the covers. Actually, the covers matter, too. Waterstones executives — and this is true of large chains around the world — will often suggest alterations, some large, others tiny. They recommended that the serpent on the cover of “The Essex Serpent” be changed from green to blue for the winter months when it was the chain’s book of the year. (“Sharper, colder, less fusty,” Daunt said.) It went back to green when spring arrived.
Publishers say the result of Daunt’s extreme makeover is a far healthier ecosystem for books.
“Customers see books recommended and know the recommendation is something meaningful,” said David Shelley, group chief executive officer of Hachette U.K. “The book isn’t there because of some deal.”
“Trial and error”
Achilles James Daunt is the son of an ambassador and has a diplomat’s gift for the art of ingratiation. He is formal and not very cuddly, as several friends put it, but when he discusses his favorite subjects — great novels, the Hebrides — he glows with almost adolescent joy. At other times, there is a wink embedded in his voice, a tone that suggests he is letting you into a conspiracy of sane people.
It’s evident when he talks about his brief, early stint as a banker. He joined the corporate finance department of J.P. Morgan in Manhattan, shortly after graduating from Cambridge University in 1984. He loved the work and the money, but his wife, Katy Steward, recoiled at the prospect of 40 years of dinnertime stories about stock swaps and high-yield bonds.
“Have you ever talked to a banker?” Daunt asked. “Banker to banker, they have a lovely time. But for the rest of humanity, it’s just tiresome.”
Looking for a new career, he decided he’d need to work for himself, possibly in the travel business. Daunt has always taken an unusual approach to vacations, at least for a wealthy adult with a wife and two daughters, now 16 and 22.
He and his family have backpacked through Ethiopia, Romania, Cuba and many other countries, for days at a time, bedding down when they find a resident with extra space, which is often a sofa or a floor. On yearly trips to Jura, an island off the west coast of Scotland, they stay in a cave that usually shelters goats and deer. (“The aroma leaves something to be desired,” he said.) In worst-case scenarios, they sleep outdoors.
“If you don’t get out of the weather, then it’s really, really unpleasant,” he said with a grin. “Then you don’t sleep. You just huddle.”
It’s a style of holiday that prizes singular experiences above all else. In 1988, he dreamed up a bookstore that he hoped would be every bit as memorable — one that was organized by country. The section on Brazil, for instance, would offer not just guidebooks but Brazilian fiction, nonfiction and history.
The first Daunt Books, which opened in 1990, dazzled patrons the moment they walked in, although not because of its country-centric arrangement. It was the store itself, the long-shuttered home of an antiquarian bookseller, constructed in the Edwardian age, its oak shelves, galleries, balcony and skylight all gloriously intact.
“The Picture-Perfect Bookshop That’s Designed for Travelers,” reads a headline on the website Secret London.
While Daunt now speaks at conferences on the art of bookselling, he learned it on the fly, without taking a class or even reading up on the subject. “Trial and error,” he said.
By 2010, one of the biggest threats to Daunt Books was the imminent demise of Waterstones. The infrastructure of British bookselling depended on its survival. As much as Daunt loathed the uniformity and soullessness of chain bookstores, he thought he might have the only medicine that could save the company.
A friend would soon introduce him to Alexander Mamut, a Russian billionaire with a genuine love for books. Mamut eventually bought Waterstones for the equivalent of $66 million and put Daunt in charge.
This proved a very wise investment. In April of last year, Mamut sold a majority interest in Waterstones to Elliott Advisors in a deal that valued the company at more than $250 million.
Ditching the planogram
When Daunt took over Waterstones, he did away with so-called mystery shoppers, a common retail tactic in which undercover buyers report on a variety of performance metrics at stores, like speed of service and tidiness. Daunt considered this patronizing and bound to engender ill will between management and staff. He needed employees who relished their work, preferably book lovers who evangelized about their favorite reads.
He needed people like Kurde Atfield. She has been managing the Waterstones in Horsham, a town about 40 miles outside London, since 1999. She grew up in Iraq, where she struggled through Dickens and Proust in an effort to impress her father.
“I remember reading ‘Nausea’ by Jean-Paul Sartre when I was 11 years old and thinking, ‘What in God’s name is this?’” she said, on the floor of the store. “I didn’t understand any of it.”
Shelves in the store were strewn with her handwritten raves on small pieces of paper. “Oh how I envy you if you are reading this wondrous book for the first time,” said a note under E.M. Forster’s 1908 novel, “A Room With a View.”
Waterstones’ previous owner, HMV, best known as a music retailer, would never countenance this quirky brand of enthusiasm. For years, Atfield would receive weekly planograms from company headquarters, a visual layout that determined nearly every square foot of the store — which books were placed on tables, where those tables stood and so on.
The planogram was enforced by occasional visits from HMV managers. Deviations were noted, and scoldings were delivered in follow-up emails.
As HMV foundered, the company was in too much disarray for spot checks. So Atfield, for the first time, configured the store exactly as she wanted. She ditched the pink cardboard lining that was supposed to cover the shelves of promoted books. She and her staff didn’t wear the black polo shirt with the Waterstones insignia. And she stocked the most prominent shelves with the titles that were selling well in Horsham, rather than the ones mandated by HMV.
Like “Bloody Southerners,” a book about a soccer team in the south of England, written by Spencer Vignes. The 2018 release is precisely the kind of area favorite that she once was forbidden to feature.
“In the HMV days,” she said, pointing to a table with nothing on it except copies of that book, “there’s no way I could have gotten away with that.”
Soon after she had laid out the store to her tastes, Daunt came to visit. It was not long after he had been put in charge of Waterstones, and the scuttlebutt was that he would give store managers unprecedented freedom.
Yeah, right, Atfield thought.
Daunt toured the store by himself, quietly scribbling notes. Then he left. For days Atfield braced herself for a reprimand and a long list of corrections. It never came.
“From that day on, I’ve never once been asked, ‘Why are you buying this book?’ ‘Why are you recommending that book?’” she said. “I’ve literally been left to turn this shop into a place I think will be fantastic for our customers in Horsham. The difference is almost incalculable. I love coming to work.”
Others are less enthusiastic. That’s especially true among the ranks of newcomers. In April, a petition signed by more than 600 employees was delivered to Daunt at his office, above the Piccadilly Circus store, imploring the company to pay a starting wage equal to $13.19 in Greater London and $11.25 elsewhere — about 10% above its current rate. Roughly 2,400 authors signed a separate petition of support. They included Sally Rooney, whose novel “Normal People” was named a Waterstones book of the month.
“People feel undervalued,” said April Newton, who spearheaded the petition and has since quit her Waterstones job. “A lot of people I know are leaving.”
In the interview, Daunt agreed that the starting pay at Waterstones was “rubbish.” But he said the demanded raises would cost the equivalent of $6.2 million that the company could not yet afford. The current pay structure, he went on, gives decent increases to employees once they have committed to a career with Waterstones, which typically takes years. The point is to provide an incentive to stick around, even if that means stinting on those who will not.
That said, Daunt completely sympathized with the complaints. Enough so that in late July, he announced a surprise 4% bonus to everyone in the company. He said that sales were strong and that “shops were simply a little bit better than a year earlier.”
Organizers of the employee petition called the bonus both a victory and a token gesture, one that leaves many Waterstones booksellers unable to afford food and rent.
Once Daunt commences his overhaul of Barnes & Noble, he will again try to turn a large chain into what looks and feels like a collection of independent bookstores. Again, he will do battle with a culture of stifling uniformity.
“Each store was told: ‘This is your display. This book should be in this exact spot,’” recalled Steve Galindo, an Oklahoma resident who worked at three Barnes & Noble stores over 17 years before being laid off in February. “Individuality was often something you got in trouble for.”
Barnes & Noble’s staff needs to feel a sense of agency, Daunt said. And from past experience, he has a surprisingly simple test to determine when that has occurred: Employees start to answer the phone.
“If I can get the phones to stop ringing and ringing at Barnes & Noble, it will be a miracle, a stunning miracle of life,” he said with a laugh. “If I pull that off, everything else will be working. It means employees have a sense of absolute mastery over everything they do.”
At Waterstones, phone-answering mastery can be found at just 120 stores, Daunt said, which are fewer than half. And that is nine years after he took over.
“I can guarantee that if you call the Piccadilly store,” he said, “no one will pick up the phone.”
He was right. Five calls were made to the store the next day. Five times, no one answered.