At HarperCollins’ global sales conference two years ago, HC UK c.e.o. Charlie Redmayne took to the stage to interview James Daunt about saving Waterstones. When the subject of Barnes & Noble (B&N) came up, Daunt plunged into a "thorough critique" of its sorry state, Harper president Jonathan Burnham recalls: "Bad organisation, too much non-book clutter, tired stores, etc."
Today, Daunt owns that problem. Elliott Advisors took control of B&N in August, having bought Waterstones in the spring of 2018, charged him with an extraordinary juggling act: keeping the UK on an even keel, while also righting B&N. With this very proper Englishman now ensconced in the wilds of New York City, The Bookseller contacted a sample of US publishers and bookshop owners to discuss the challenges facing him.
One word, summoned by all, encapsulates the biggest: scale. Waterstones boasts 293 stores (including six Foyles). But B&N, albeit down from a high of 1,011 in 1997 (some were smaller B Dalton stores), has 627 locations, spread nationwide across thousands of miles. Such numbers carry challenges of distribution, human resources, regionalism—including enormous economic disparity and population diversity.
With that kind of scale, Daunt "has his work cut out", George Gibson, ex-Bloomsbury US and now executive editor at Grove Atlantic, says. "But it’s doable. He has to learn what motivates US book-buyers and make the case to them and to the trade. He must woo readers back—people who may feel out of place in an independent but have stopped going to B&N. It will all take a lot of investment." There’s a question mark over capital.
When Daunt was brought in to fix Waterstones, it was owned by deep-pocketed Alexander Mamut. However, as Roxanne Coady—an accountant-turned-bookseller, owner of Connecticut outlet R J Julia—notes: "Often, private equity firms like Elliott buy companies and, in order to make the acquisition profitable, pursue strategies including cost-cutting, restructuring, disposing of profitable assets, or support purchase price by creating debt at the company level. For instance, if there are valuable B&N leases, would the decision be made to sell those and close the stores, which is what former c.e.o. Edward Lampert did, devastatingly, with Sears. But in this case, my hope is that Elliott hired James Daunt to complete a strategic turnaround, à la his work with Waterstones. We have to hope Elliott’s objective is to make B&N strong again, a force in bricks-and-mortar, or in bookselling, period."
Under the regime of founder Leonard Riggio, one of B&N’s long-time sources of income was promotion money paid by publishers: a store’s internal real estate and special promotions were all for sale. At Waterstones, Daunt rejected that strategy. If he dispenses with it at B&N, something else will have to replace it on the balance sheet.
But as ex-Faber and current FSG publisher Mitzi Angel points out: "although promotions chosen by booksellers, rather than paid-for by publishers are more nerve-wracking for us, they’re real. They bring incredible excitement, and have tremendous hand-selling power: a boon for booksellers and readers alike. They also mean fewer returns." The chain’s returns policy is another area needing fresh eyes.
Refreshing the offer
Transforming the stores themselves is one of Daunt’s most important tasks. Coady describes it as "creating environments that compel readers to be in the space, to feel the pleasure of discovery. When I went into three Waterstones a year ago, I had to contain myself from buying a lot, simply because of the merchandising. There was such a smart integration of head and heart." But B&N’s decline has occurred over many years, and will require years to reverse.
Burnham and Angel (both transplanted Brits) point to the recent ground floor makeover of B&N’s flagship Union Square store in Manhattan, located near the corporate HQ, as a good sign. "He’s begun energetically," Burnham says. Instead of the usual hardbacks, Angel notes, "when you walk in, there’s a big table of trade paperbacks with a wide range of titles, with new releases to the side. Given the scale here, [Daunt] will have, to an even greater degree, to treat individual stores as regional and local, with a lot of strategising."
Daunt "needs to empower store managers and make staff feel they have a stake in what they sell", Burnham says; "employees have to read and be aware of what’s working", Gibson adds. Unfortunately, it hasn’t been uncommon to go into a B&N and be served by someone who seems to know little about books.
Bradley Graham, American Booksellers’ Association (ABA) vice-president and the co-owner of the Politics & Prose stores in the nation’s capital, identifies another significant HR issue: "Labour costs in many US cities are much higher than in the UK, and he’ll have to deal with even more payroll pressure." The "living wage" campaigns at Waterstones didn’t have the law behind them; however, cities like New York and Washington are soon mandating minimum wages of $15 per hour.
B&N’s long-time buyers are viewed by many as terrific; Daunt will need to inspire, but also to listen to them. Inevitably, some staff, high and low, will be replaced: its head of PR and chief merchandising officer have already departed. As one observer notes, "finding good people is hard"; some suggest that wooing them from indies is a possible solution, and makes more sense than fishing in completely unrelated industries, as B&N repeatedly did.
Bricks-and-mortar entails being in the real estate business, and the chain’s mall stores present an existential problem at a time when many shoppers are abandoning malls. Another issue is superstores’ square footage: previous attempts to fill large areas with non-book merchandise often served to clutter and dilute their identities.
"B&N has to make people feel they’re in a bookstore," Graham stresses, adding: "Some indies have 30%–40% [non-book] stock, but there’s a way to integrate it to make manifest the primary mission is books." Restoring the company to health will also likely mean more variety in store size. ABA’s Abacus survey, of several hundred independents, showed that medium-size stores (5,000–15,000 sq ft) were more profitable than big ones.
Everyone is rooting for Daunt. "The more people understand the value of physical space for exploring books, the better for us all," Coady observes. "Also, having a strong B&N can provide an economic counterweight to the Amazon behemoth; Daunt could bring considerable intelligence to ways the industry could be better and fairer."
All agree that years of work lie ahead, but within the next 12 months, several will look for "little wins that could be scalable", or "one or two changes that will appear bold".
PRH US c.e.o. Madeline McIntosh reckons that "Daunt’s depth of experience" in turning around Waterstones makes him "unparalleled" for the task in hand. "A true book person, he understands why each [book] is a unique proposition to the reader and that this is not a commodity business—and that gives me great optimism." If he succeeds, "there’ll be more serious competition for indies", Graham recognises, but "the idea of B&N failing is so alarming, we breathed a collective sigh of relief when Daunt arrived." He is "the right guy for the job", Coady concludes, "but Barnes & Noble is a complicated, big ship to turn around".
New York is a welcoming place for Brits, Angel and Burnham affirm, and one thing is certain: US publishers and independent booksellers alike are rooting for Daunt. B&N is effectively the last major barrier standing to Amazon exercising monopoly domination of the US book business.
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