“Crazy… Irrational… Catatonic… Rubbish… Abysmal… Tired… No respect… A visual catastrophe… Jumble sale… Shoot-yourself-bad.” It’s 8 a.m. on James Daunt’s first day as the new chief executive of Barnes & Noble and he’s first on the floor of its four-story, 60,000-square-foot flagship in Union Square in New York an hour before customers start arriving. He does not like what he sees.
“What in God’s name is this?” he asks, studying a display table with a prized spot at the store entrance. “Salman Rushdie next to Debbie Macomber! Bloody hell! How could a bookseller conceivably put those two books next to each other — ever?” Macomber is a bestselling author of romance novels who also writes cookbooks. On the next table, Daunt finds How to Have Your Life Not Suck by Bianca Juarez Olthoff next to a biography of Benjamin Rush, “one of the great founding fathers of America. This is an irrational selection — a crashing assault of the appalling, next to the wonderful, next to the indifferent. And we’re putting it front and centre!”
Daunt walks and talks with the air of a new maitre d’ making a fix-it list at a grand hotel fallen on hard times. “The missing range is terrifying. You want to go to a section and go, ‘Yep, everything that matters is here.’ It’s not.” He does not much care for the design, either. “The lighting is flat and the metal shelving is so cheap.” He walks into the CD section — “I think there are 20 people in New York who still buy CDs” — before winding up at the cash desks. “There isn’t a single book here but there are apple and blueberry bars and plastic bottles of warm water…”
“Salman Rushdie next to Debbie Macomber! Bloody hell!”
Daunt, a bookish former banker who quit his job in the City to found Britain’s best-loved independent bookseller, Daunt Books, in London’s Marylebone in 1990, has had this depressing feeling before. It was eight years ago when he was lured to run Waterstones and first walked into its flagship store on Piccadilly. Then, it was hot pink cardboard shelving that made him cringe. “It was so tacky,” he recalls. “It looked like a discount store. The parallels here are uncanny.”
What he did next at Waterstones is worthy of a hardback business manual. With the backing of a new owner, Russian billionaire Alexander Mamut, he ripped out the pink shelves, tore up the business model and overturned the conventional wisdom that chain bookstores were doomed in an Amazon world. Waterstones returned to profitability in 2015 and now earns a steady 10% margin on sales of roughly £420m a year. Analysts estimate it is worth £250m, four times its value when Daunt took over.
Books and Mortar
Now, for the third chapter of his storied career, Daunt wants to go one better: to prove that bookstores have a future in the world’s biggest and toughest marketplace, America. As boss of both Barnes & Noble and Waterstones — he is keeping his UK post — he is the most powerful bookseller in the world. But transforming Barnes & Noble won’t be easy. It is a retail zombie. It has shuttered almost half its stores since 1997 and its value has plunged by £1bn in the past six years. It’s still profitable — just — but with sales falling by 5%-8% a year, it has two years to recover before it suffers that same fate as Borders, its former rival, which went bust eight years ago. To make it even harder, the competition from Amazon is greater in America than here: as well as its enormous online presence, the Seattle giant has 19 bricks-and-mortar bookstores across the US, and plans to open more.
“We need to get back to a 10%-ish margin,” Daunt says. “That’s when you’re making enough money to reinvest in your stores.” But how? By importing the Waterstones playbook. First order of business, build a war chest. When Daunt took over at Waterstones in 2011 he secured £47m from Mamut to turn round the business. This time, Daunt has teamed up with Elliott Advisors, the private equity arm of a notoriously hard-charging hedge fund founded by the billionaire Paul Singer. It bought a majority stake in Waterstones from Mamut last year for an estimated £200m, and last month added Barnes & Noble to its stable for £538m. How much has Singer given Daunt to spend? “There isn’t a number.” Eh? “There will be one, but you have to really work it out. That will take a little while.” I suggest that $100m sounds solid. “That would be a nice start, but this is a very big business.” He’s clearly gunning for several hundred million.
Transforming Barnes & Noble won’t be easy. It is a retail zombie.
Second on Daunt’s to-do list is transforming the business model. Like Waterstones before he arrived, Barnes & Noble has a one-style-fits-all strategy — it stocks and promotes the same books in an identical way in all its stores from Alabama to just up the road from Zion in Illinois. That might work in supermarkets or high-street fashion, where it’s all about flogging the big brands everyone loves, but it doesn’t work in books because people in different places have very different cultural tastes and expectations. “I want to become the anti-chain chain,” he says. “We need to make each store like an independent bookshop unique to its location, while using our power and resources to create great physical stores.”
The key, he says, is to curate a selection of books that is right for each town or city. In future, each individual Barnes & Noble will be able to pick its own recommendations, bestsellers, book of the month and book of the year “entirely as they see fit. I’m not going to change this store. Amy downstairs is going to change this store,” he says, referring to a sales assistant he met as he walked in earlier. “She’s going to get on and choose the books that will make this the greatest book store in the greatest, most sophisticated city in America.”
To enable Amy to pull it off, Daunt will have to detonate the traditional model of book retailing in the US. At present, American publishers pay retailers “co-op [co-operation] fees” to dictate which books they stock, and where and how they are displayed. Publishers like the certainty of knowing how and where their books will be promoted, and many retailers like the guaranteed cash. The problem, Daunt frowns, is “it takes no account of local tastes and you end up filling your stores with books that customers don’t want”. It also wastes staff time and money — and is an environmental disaster. “Do you know, returns of unsold stock from this store are roughly 25%? One in every four of the books that is trucked here is trucked back again, and when they get back to the publisher many get pulped.”
Daunt will have to detonate the traditional model of book retailing in the US
Daunt intends to persuade publishers to trust him and his local teams to choose which books to stock and promote — while still paying for promotion. “I need to work out a system where they pay Amy to put Fleishman Is in Trouble [a modern, satirical novel] at the entrance to the New York store, but allow her colleague at the Alabama store to choose Fix Her Up by [the romance author] Tessa Bailey. Fleishman Is in Trouble should be front and centre in New York because it’s an extraordinary first novel by a New York Times journalist. But we might not stock it at all in great swathes of the Deep South because it’s very metropolitan.”
Publish or Perish
What if publishers push back? Daunt is the son of an ambassador and has a diplomat’s gift for blandishments. But if his natural charm won’t cut it, he has a trump card: history. He did the same thing when he arrived at Waterstones and it has worked a treat. Sales in the Piccadilly flagship have almost doubled from £8m a year to £14m and returns across the entire UK business have shrunk from 20% to 3%-4%. “We know what will sell,” he smiles. He knows because he reads like a demon. He spends his summer holidays reading on the Hebridean island of Jura, where he sleeps in a cave that usually shelters goats. Of the cave, he says: “The aroma leaves something to be desired.” Throughout our time together, in more comfortable surroundings, he mentions hundreds of titles and authors in subjects as varied as Russian history and romance.
A 55-year-old like Daunt might still enjoy buying and reading physical books, but what about youngsters? Aren’t they just reading on Amazon’s Kindle, Apple’s iPad, or Barnes & Noble’s ill-fated own-brand e-reader, Nook — or gaming or streaming YouTube videos? “No! The great thing about Waterstones is we’re driven by young adults,” he insists. “The children and young adults section has grown and grown. Onjali Rauf’s The Boy at the Back of the Class [the 2019 winner of the Waterstones Children’s Book Prize], Angie Thomas’s The Hate U Give [2018 winner] and Kiran Millwood Hargrave’s The Girl of Ink and Stars [2017 winner] are all books by young, brilliant writers achieving international success, not least because of the backing they receive from Waterstones.”
He spends his summer holidays reading on the Hebridean island of Jura, where he sleeps in a cave that usually shelters goats.
To help create a sense that Barnes & Noble is the anti-chain chain, staff will not wear uniforms, as they don’t at Waterstones. “No name tags, either. It looks pleasingly uncorporate.” When Daunt did this at Waterstones, staff insisted customers would no longer be able to recognise them. “I said, ‘That’s nonsense — if you behave like a bookseller, they’ll know who you are.’ ” There will be no hard sell, either. “The man or woman on the shop floor will be tidying up this table or rearranging that shelf. That keeps things looking good, but it’s also a way of saying to the customer ‘If you want, ask me a question’, rather than ‘Can I help you?’, which is intrusive.”
Daunt is a “retail is detail” obsessive who is particularly fond of different-shaped tables with different kinds of legs to avoid creating a “cookie cutter” look for his stores. He will use his design eye to spiff up Barnes & Noble’s cafes and events spaces “to create a lovely place where people will come in and spend time. Here, we get lots of young New Yorkers picking each other up — in a very civilised way. So we need a great cafe that looks like a cross between WeWork and a pick-up joint.”
It will be hard to change the mindset at Barnes & Noble because, like many US retail giants from Walmart to J.Crew, everything has always been tightly controlled by head office. “We need a huge cultural change,” Daunt concedes. And he will be stretched by having to commute between New York and London. But he thinks he can pull it off by finding the best booksellers in each store and hiring more if necessary — and then letting them get on with it. “I will give each the principles — interest, engagement, quality, tidiness, intelligence but no snobbism, fun, beauty, care, great customer service. Then I will give them the structure, equipment, money and tools to live up to those principles in a way that is right for their location.”
“So we need a great cafe that looks like a cross between WeWork and a pick-up joint.”
He knows some stores will fail and have to close. “It may be that 25,000 sq ft boxes on freeways in middle America may not work.” But, overall, he believes he can make people fall in love with Barnes & Noble again and reject the cold efficiency of Amazon. “Online, you have to know what you want already or follow Amazon’s recommendations that are based on your past purchasing history. Great bookstores, where section after section is authoritative, and all the right books are next to each other, spark interests that you did not know you had. I almost never walk out of a bookshop with the book I thought I was going to. That makes me feel lucky, and as if I’ve done something virtuous. Much better than getting a book in the post. If we can create that pleasure, customers will be back.”
Taking on Amazon
The last piece of Daunt’s new business jigsaw is online. He knows he can never compete with Amazon on its own turf — price, efficiency and technology — and it would be mad to try. Barnes & Noble found this out the hard way. A decade ago it invested heavily in e-commerce and lost more than $1bn developing the Nook. The firm continues “to lose an extraordinary amount of money fighting head-to-head with Amazon on price”, Daunt says. “We have to move away from discounting and sell online with intelligence. That means better recommendations than Amazon can muster — all the things that we know how to do in the bricks-and-mortar stores.” Has he tried this at Waterstones, too? “Yeah — and it works. Waterstones’ online sales now account for 5% in the UK, which is small, but the figure is rising by 40% a year.” Critics claim Waterstones’ delivery is too slow, taking days. That won’t fly in the US, where, thanks to Amazon, many customers expect same-day delivery.
Amazon’s dominance is startling: it does not publish figures, but analysts say it now accounts for almost 50% of book sales in America, while Barnes & Noble’s share is down to 20% and falling. Yet Daunt’s experience in Britain offers hope: here, Amazon has 40% of the market, analysts say, but Waterstones retains a healthy 25%.
Daunt tells me he does not rate Amazon’s bookstores much and wants to show me why, so we take the subway to the Columbus Circle branch of Amazon Books. “Every book is good,” he says as he walks in. He praises the design as excellent. “This is an expensive fit-out,” he says, “but the range of books is extremely limited. There’s so little — and no authority or curation. There are only 72 books in the history section. It’s not a bookstore. What they are really doing is selling the Amazon brand experience and tech products. They want you to sign up to Prime and get an Alexa, and they’ve decorated the experience with a few books around the edges. It’s banal.” Amazon’s founder, Jeff Bezos, would doubtless beg to differ.
While the Waterstones playbook is certainly powerful, one area is likely to be controversial. Wages. Daunt has been criticised for paying low rates of pay at Waterstones — barely above minimum wage — and pay is equally low in the US. “We’re a retailer. We’re no worse than other retailers, but we’re a retailer and retailers don’t pay very well,” he sighs. But he insists he is taking steps to address the issue. “One of the successes we’ve had at Waterstones is to introduce much more career structure. I think you should have individual performance reviews every year and a pay rise attached to that. I’ll bring that in.” So people will be paid more? “Uh, some will be paid more.” Entry-level staff? “Probably not.”
“We’re no worse than other retailers, but we’re a retailer and retailers don’t pay very well.”
Back in the Union Square flagship, Daunt is running his beady eye over the shop floor again. “There is a gap between each book on each display table,” he observes. “It will look tidy for 20 minutes after each store opens and then it will look an utter disaster because the books get moved.” He checks the shelves are angled back at precisely three degrees, “just enough for the cover to catch the light but not too much that it puts pressure on the spine and the book starts to bend out of shape.” He loves the green signage outside because it weathers well, but inside “green is terrible. You should never let it in. It’s so dark, so boring you don’t even see it.” He discovers to his horror that the history section is arranged alphabetically by author, not by subject. “That’s terrible, because there’s no way of discovering anything new.”
“Green is terrible. You should never let it in.”
In spite of the challenges and his early-doors gloom, Daunt is optimistic he can turn things around quickly. “We did it at Waterstones. The early wins come fast. You just need to lift the place a bit. I’m sure the people who work here have what it takes.” His optimism is partly explained by a recovery in the market. Sales of books in all forms, including e-books, are rising, or at least have stopped falling. The UK’s industry income in 2017 rose 5% to £5.7bn. In America revenues held steady at $16bn last year.
If demand remains strong, he is even considering “opening up a lot more stores in different sizes, empowering local people to tell us what should be in that location”. How many? “Lots.” A dozen a year? He nods. “America is very under-bookshopped. There’s been an awful destruction of independent bookstores here. That should leave a huge opportunity.” First on his list is Washington DC, because “there is no Barnes & Noble there. It’s insane”.
Wearing both his Barnes & Noble and Waterstones hats makes Daunt a literary tastemaker. Bigger than Richard and Judy? “Well, I hope so,” he laughs, rather insulted by the comparison. Bigger than Oprah Winfrey and Reese Witherspoon? Their book clubs are hugely influential in America and likely to become even more so. Oprah’s new Book Club show begins streaming on Apple TV+ next month. Daunt hesitates for the first time. Then he goes uncharacteristically silent. He does not want to say what he is thinking: if he gets it right, being bigger than Oprah and Reese is only a matter of time.