Waterstones has withdrawn from the e-book market, announcing an affiliates deal with Kobo that will see the chain bookseller send customers to the third-party website for e-book sales after its boss concluded that it could no longer sell them "effectively".
Waterstones was one of the first UK booksellers to get into the e-book market launching first in partnership with Sony in 2008 and latterly with Amazon: but its own e-bookstore flagged as Amazon's Kindle store grew in dominance. Managing director James Daunt conceded to The Bookseller that the move meant the likelihood of a significant challenger to Amazon’s dominance of the e-book market was increasingly remote.
Waterstones told customers yesterday (22nd May) that it would stop selling e-books from its website from 14th June and instead direct customers to Kobo’s platform, with customers able to transfer their digital libraries over from next month. The move follows Nook’s exit from the UK e-book market in March, directing its 500,000 customers to Sainsbury’s e-book platform instead, and the closure of Tesco's Blinkbox books platform in January 2015 and the end of the Sony e-book platform in 2014, with both the latter companies shifting readers to Kobo as well.
Daunt told The Bookseller he took the decision to stop selling e-books because the company could not do it “to the standard or the ability I would like”.
He said: “The simple reality [is] that we do not do selling e-books particularly effectively, or in any great volume at the moment. I try and always do things that are in our customers’ best interests, there is no better reason than that.”
Daunt explained that the company sold e-books through Overdrive, but it was “clunky” process for customers and Kobo offered a “smoother” service.
Waterstones will not be hit greatly from a financial perspective, Daunt said, because the chain sold “really not very many” e-books and would get a cut of every sale Kobo from customers first going through the Waterstones website.
“Should we have had the capability of giving a good and better service then that is what we would have done,” Daunt continued. “I do not mind how people read, as long as I can sell it effectively and efficiently or in a way that is close to profitable. But if we are not adding value then we are not doing what we think we should be doing.”
When asked if it was now clear no company could compete with Amazon’s dominance of the UK e-book market, Daunt said: “That is clearly the reality as of today. Kobo is the next credible competitor in the market place, but it is tough, Nook has clearly shown that in the UK. There are other companies doing it in niche ways, but 99% of readers read through Kindle or Kobo.” Amazon is thought to have more than 90% of the e-book market in the UK, though e-books are also sold through Apple and Sainsbury's, as well as Kobo.
Douglas McCabe, analyst at Enders, said e-book sales had stabilised after a period of rapid growth, but the UK market for digital books was "effectively a duopoly, substantially led by Amazon".
However, he added that Waterstones’ deal with Kobo “feels like a logical conclusion to a long-term process”.
“E-books are highly relevant to Waterstones customers, but they would be a management distraction for the chain while it implements its stabilisation and recovery strategy,” McCabe said. “The much bigger win for the chain is developing an exemplary membership club, to increase consumer loyalty but also to collect invaluable consumer data from the UK’s core 5m book buyers. This will be a much more core initiative for the country’s leading high street bookseller.”
Following Waterstones’ latest set of accounts, which saw revenues rise 1% in the year to April 2015, Daunt said Waterstones had “no presence in e-books” and added there were “no plans at all” to attempt to acquire an e-book platform to help the company increase digital sales.
Waterstones attempted to acquire Tesco’s e-book platform Blinkbox in January last year, but the deal fell through and Blinkbox subsequently closed.
The retailer also took the decision to stop selling Amazon Kindle e-readers in most of its stores in October last year after sales “came crashing down to zero”. Earlier this month, The Bookseller reported that Waterstones' e-commerce director Ed Armitage had left the bookshop chain.
Figures from the Publishers Association’s annual yearbook revealed that the invoiced value of consumer e-books dropped by close to 11% to £245m, the first fall since it started monitoring digital book sales seven years ago. Meanwhile, physical book sales went up and have continued their rise through the Nielsen-measured Total Consumer Market in 2016.