Life after Waterstones

When I spoke to Waterstones m.d. James Daunt last week ahead the announcement of its purchase of Foyles, I warned him that he was in for a busy day. Waterstones may be the bigger brand, but Foyles is 80 years its senior. It is a beacon for independents, and its takeover a moment of sadness. I expected dramatics.

Yet, if there were histrionics, I saw none. The trade was calm, the media untroubled; even the two once opposing Twitter accounts (@Waterstones and @Foyles) came together in fidelity. The former wrote: "As a bookseller, we love books and we love other bookshops. Foyles has served loyal customers for 115 years with its unique personality and bookselling and we don’t want that to change." As is the custom, Foyles shared the post with its own followers.

Part of this is that though the heart sings one tune, the head hears another. Foyles is held in great esteem. Before its move along Charing Cross Road, The Bookseller helped crowdsource two events to re-imagine the new Foyles. We were not short of numbers, enthusiasm or ideas. There was a sense that though digital had taken a chunk out of the business of bookselling physical objects, there was still more to save and savour. We were not wrong. The new store is wonderful; bright, airy and brimming with bookish intent. Beyond the move, Foyles has done much to regenerate under the light touch of Christopher Foyle.

Yet the high street remains an unforgiving place, held back by recalcitrant landlords and an absentee government. Foyles has rates, rents and the delayed opening of Crossrail to contend with: despite being 1% its size, Foyles pays almost as much in rates as Amazon UK does in corporation tax. Since the sale of its former store, it has had to find upwards of £2m in rent each year. Foyles’ gross margin has actually improved over this period, but its fixed costs are now obdurate. The loss made in its past financial year showed that its future was far from certain.

For Waterstones, the benefits of the deal are clear. The fee was not great—"modest" is how the Daily Telegraph reported it—and the chain has a record of running distinctively independent bookshops within its growing portfolio, from Hatchards to Hodges Figgis. Foyles will also gain from the economies of scale Waterstones enjoys, its better terms, and from stripping out a layer of management Daunt will inevitably find superfluous. Daunt wants to run Waterstones as a chain of independent booksellers, and Foyles will add to that—in business terms it is not a significant acquisition, but the message it sends out is clear.

Not everyone wants to give Daunt a free pass. Publishers are wary over the new terms negotiations, and there are concerns over whether Foyles’ delicate ecosystem can really survive the change—as those of Ottakar’s and Dillons did not. Daunt says he won’t "Waterstonesify" it, but the real answer to both will be not just survival but growth.

As the Booksellers Association Conference showed, the mood among indies is positive, with bookshops seen as a counterpoint to online retailing. But sentiment only takes you so far. The new reality is still taking shape.