Let the right ones in

Another week, and another two major pieces of the new Waterstone's hove into view: dropping paid-for promotions, and bringing in a branded e-reader.

This comes after scrapping three for two last week, but my understanding now is that an even more radical change in retailing philosophy is in prospect. The intention is to bring in a broadly flat discount rate at higher levels across all publishers (the figure we have heard is 59%, up from 55%) with publishers generally no longer charged for individual promotions on books. Instead, Waterstone's will decide which are the best books and promote accordingly, although the precise funding formula between the publisher and Waterstone's will vary.

Under the old system, publishers could essentially buy their way into three for twos and on to the promotional tables. The inherent danger of this "pay and display" model is that the retailer is allowing the supplier to choose what to put in front of customers, and suppliers are neither objective nor do they know the end customer as intimately. Over time, the customer may lose trust in the retailer's offering and hence brand.

By dispensing with this, and allowing books to sink or swim on their own merits—or at least on the judgement of Waterstone's booksellers—James Daunt is returning Waterstone's to the purist vision of its earliest days. It is a move that has already found favour with smaller publishers, who couldn't afford to bankroll many books under the paid promotion system. Certainly niche publishers, from high-end literary fiction to local history and all specialisms in between, will feel a rush of excitement: if the book is good
enough, it will receive the prominence it deserves.

More responsibility than ever now rests on Waterstone's buying skills, and it may be that the chain needs to upgrade its sales and customer information data to assist that, but this feels like the right change. The old system was gradually failing, and customers instinctively want booksellers to choose the books on display, not publishers.

But away from the print books, Daunt is also looking at bringing in a Waterstone's branded e-reader next spring, citing Barnes & Noble's Nook as an inspiration. It's a move HMV-owned Waterstone's toyed with, but never implemented, and one hopes that a Daunt-led Waterstone's could sell the devices with more panache than the Sony e-readers have been sold in stores.

There is a certain sense that Waterstone's needs to do this, but it is a path fraught with danger; it is, for example, true that B&N are growing sales through Nook, but are profits also growing? Moving from selling other people's books to selling your own-brand technology is a big step; get it wrong and customers are unforgiving. Wi-fi and a good reader experience are vital, and until the technology partner, and the technology, Waterstone's is working with, are revealed we will have to withhold judgement.

Either way, Daunt has made more progress in six months than the old Waterstone's made in six years.