retail news in context, analysis with attitude

Barnes & Noble is now in the hands of James Daunt, the New York Times writes, as the private equity fund that now owns the retailer hopes that it can achieve some of the same results it achieved at UK book retailer Waterstones.

Daunt became CEO of Waterstones in 2011, as it seemed headed for bankruptcy, and the turnaround has been remarkable: “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.” In essence, the story says, Daunt created a chain of independent bookstores that “returned to profitability in 2015 … and earns a steady 10 percent margin on sales of roughly $500 million.”

The Times writes that “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 last five years. This week, Elliott Advisors, the private equity firm that owns Waterstones, closed its deal to buy Barnes & Noble for $683 million. Mr. 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.”

You can read the Times story here.
KC's View:
I’ve long been pretty skeptical about Barnes & Noble’s ability to survive, mostly because the experience generally has been crappy - mausoleum-like and homogenous all at the same time, with little personality; it is no wonder that independent bookstores have seen a revival even as B&N has continued to suffer.

But … call me a cockeyed optimist, but the Times story gives me a little bit of hope that maybe Barnes & Noble can find a new way. It won’t be easy - it is a much bigger country, with more than twice as many stores as in the Waterstones chain.

There are a few things in the story that impress me.

One … the notion that Daunt believes in the long game. Here’s the relevant passage from the Times:

“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,’ Mr. 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’.”

I’m a little surprised that private equity is funding such an approach, but this strikes me as exactly the right way to make this work.

Two … Daunt’s understanding exactly how much the experience needs to change. Here’s his quote from the Times:

“Frankly, at the moment you want to love Barnes & Noble, but when you leave the store you feel mildly betrayed. 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 …”

Exactly.

Three … Daunt seems to be understand what it means to be a merchant. The Times describes him a perhaps “a bit too erudite for a mass-market retailer; his style was more sommelier than salesman.” That means he understands the notion of curation and recommendation. At the same time, he vetoed at Waterstones the acceptance of what essentially were slotting allowances, which would’ve meant making money on the buy not the sell. That’s huge and exactly, in my mind, the appropriate way to define a differential advantage.

Daunt has faced some controversy from employees over wages in the UK, but he seems to have weathered them; he didn’t give raises when the company was in severe trouble, but he recently gave everybody in the company a four percent bonus to celebrate its resurgence. Wouldn’t that be something if he could repeat the feat in the US?

Let’s be clear. Daunt’s job will be, well … daunting.

But I’m a little hopeful … and I wish him luck.