Waterstones

This article is about the British book retailer. For sharpening by stone, see Sharpening stone.

Waterstones

Company type	Private
Industry	Retail Bookshop
Founded	Old Brompton Road, London, 1982
Founder	Tim Waterstone
Headquarters	London , United Kingdom
Number of locations	275 stores (Oct 2013)
Area served	UK, Ireland, Belgium, The Netherlands
Key people	James Daunt (MD)
Products	Books
Number of employees	4,500
Parent	A&NN Capital Fund Management, owned by Alexander Mamut
Website	www.waterstones.com

Waterstones, formerly Waterstone's, is a British book retailer that operates 275 stores and was employing around 3,500 staff in the UK and Europe in February 2014. Established in 1982 by Tim Waterstone, after whom the company was named, the bookseller expanded rapidly until being sold in 1993 to W H Smith. Bought again in 1998 by Waterstone, EMI & Advent International, the company was taken under the umbrella of HMV Group, which later merged the Dillons and Ottakar's brands into the company.

Following several poor sets of results for the group, HMV put the chain up for sale. In May 2011, it was announced that A&NN Capital Fund Management, owned by Russian billionaire Alexander Mamut, had bought the chain and appointed James Daunt as managing director.

As well as the Waterstones brand, the company owns the London bookseller Hatchards, and Irish shop Hodges Figgis. An average sized Waterstones store sells a range of approximately 30,000 individual books, as well as stationery and other related products. The bookseller has previously had concession agreements with Costa Coffee, Paperchase and Starbucks in some stores, but since 2012 has introduced its own Café W brand. For a time, Waterstones sold eReaders, including in 2012 partnering with Amazon to sell the Amazon Kindle, but has since pulled out of this market due to commercial reasons.

History and developments

Early versions of store signage were gold in colour

Formation & W H Smith: 1982–1998

The chain was founded by Tim Waterstone after he was fired by W H Smith, having failed to establish W H Smith as a brand in the United States. Taking the £6000 redundancy payout, he set up his first store in Old Brompton Road, Kensington with the ambition of creating a 'different breed of bookshop', using techniques he had seen in the United States. He used literary authors in front of store displays and employed highly literate staff.

The model proved successful and the chain set about expanding its store portfolio. By 1989 however, W H Smith had taken a controlling stake in the chain. W H Smith took over full control in 1993 for £9 million. Under W H Smith, Waterstones pursued international expansion, opening its first US store in Boston in 1991, as well as further domestic expansion – opening its 100th UK store in a former chapel in Reading.

The chain was part of the eventual dismantling of the Net Book Agreement, when in 1991, following a promotion by then rivals Dillons, the company decided to pursue its own discounting promotion on selected titles. By 1997, the agreement had collapsed and been declared illegal.

HMV Group: 1998–2011

Following an attempt by Tim Waterstone in 1997 to buy the entire W H Smith group, W H Smith sold the Waterstones chain for £300 million to HMV Media plc (now HMV Group) – a joint venture between EMI and Advent International. This included high street brands HMV and rival Dillons, creating an international entertainment retailer. Waterstone was appointed chairman of the group but stood down in 2001, citing "concerns for the way the company was being run". He was replaced by Alan Giles. A year later, all Dillons stores were rebranded as Waterstones, with some sold to rival Ottakar's making the brand defunct. The chain had also begun pulling out of its US overseas venture.

Waterstones launched the Waterstones Books Quarterly magazine in 2001, containing book reviews and author interviews. In the same year the booksellers' online operation: Waterstones.co.uk was franchised to Amazon.com, with the company expressing a desire "to concentrate on its high street and campus stores". The move resulted in the loss of 50 jobs. In 2003, Waterstones announced it was supporting Dyslexia Action as its chosen charity, helping to raise awareness and understanding for dyslexia.

Waterstones logo until 2010

In 2006 Giles stepped down from his position and was replaced by Gerry Johnson as managing director of Waterstones and Simon Fox as group CEO. In April 2006 following two bids by Permira for the group, Tim Waterstone attempted to buy back the company from HMV for £256 million, but later withdrew his offer specifying the conditions set by HMV were "too punitive" to accept. A strategic review in September saw Waterstones pull out of its franchise agreement with Amazon to re-launch its online business, Waterstones.com, independently. The chain also began to pilot a loyalty programme in South West England and Wales. The scheme was successful, launching nationally as The Waterstones Card across its entire store portfolio.

Waterstones piloted a brand refresh exercise in selected stores, beginning with Manchester's Arndale Centre in 2007. On 19 November 2007, the chain closed its first branch on Old Brompton Road. Following a consultation, the company's supply chain was overhauled in 2008 with the implementation of a 150,000 sq ft (14,000 m²) warehouse and distribution centre, located in Burton-upon-Trent. Existing direct-to-store deliveries from suppliers were replaced by a centralised warehouse capable of receiving merchandise and sorting an estimated 70 million books per year and 200 staff were made redundant by the process. In September 2008, Waterstones began selling the Sony Reader in an agreement which saw the booksellers' branches and Sony Centre stores stock the reader exclusively for two weeks after its release. Waterstones.com began to supply eBooks in the .epub format. In November 2009, Waterstones moved into second-hand bookselling in a partnership with Alibris setting up an online reselling tool called Waterstones Marketplace, part of Waterstones.com.

A re-branding saw the logo change from Baskerville to FS Alberta Pro until 2012

In January 2010, HMV Group announced that Waterstones like-for-like sales over the Christmas period were down 8.5 per cent on the previous year. This culminated in the resignation of managing director Gerry Johnson with immediate effect. He was replaced by development director Dominic Myers, who was managing director of the British academic bookselling chain Blackwells until 2005. Myers joined HMV in 2006 to oversee the integration of Ottakar's into the chain. In response to the decline in sales, he implemented a three-year plan in which branches were tailored to their local market alongside a "rejuvenation" of the company brand and an increase in range. As part of these changes, Waterstones implemented new branding in May 2010, developed by agency VentureThree. The company also moved to support the Rainbow Trust, which provides support to children with life-threatening and terminal illnesses and their families, in the same year.

After an announcement that profits would be at the lower end of analysts' forecasts due to falling sales and a share price fall of 20%, HMV Group indicated its intention to close a number of Waterstones branches in January 2011. These stores closures, including two in Dublin, Republic of Ireland and nine others across the United Kingdom occurred in February 2011. Further branch closures in Luton, Dorking, Lancaster University, Harrods, Gateshead and Norwich Arcade were completed by the end of 2011.

Alexander Mamut & James Daunt: 2011–present

In May 2011 HMV Group announced the sale of Waterstones to A&NN Capital Fund Management, a fund controlled by Russian businessman Alexander Mamut for £53 million. The takeover was welcomed by publishers as "a step forward to re-establishing a proper physical presence". On 29 June 2011, the sale of Waterstones was completed and approved by the vast majority of shareholders at an emergency general meeting. Mamut appointed James Daunt, founder of Daunt Books, as managing director and a Board of Directors was announced in October 2011 including Miranda Curtis as Chairman. In September 2011, the bookseller announced that it intended to drop its 3-for-2 deal on books after a decade in place. The offer was replaced with a 'bespoke offer', based on branches choosing their own pricing structures from available discounts.

In January 2012, the company announced that it would be moving away from the branding developed in 2010 by agency VentureThree, and reverting to its original logo. This involved the removal of the apostrophe from its name, saying it would be "a more versatile and practical spelling". This decision received media coverage, in which the company was subject to criticism. John Richards, of the Apostrophe Protection Society, said that the change was "just plain wrong" and "grammatically incorrect" while the move sparked outrage on Twitter, involving debate on whether the move was grammatically incorrect or not. James Daunt expressed "Waterstones without an apostrophe is, in a digital world of URLs and email addresses, a more versatile and practical spelling". Linguist David Crystal on his blog added: " ... if Waterstone's wants to become Waterstones, that's up to the firm. It's nothing to do with expressing possession or plurality or anything to do with meaning."

In the same month, Waterstones confirmed plans to open a Russian language bookshop in its Piccadilly branch, intending to stock 5000 titles with the shop being entirely staffed of Russian-speaking booksellers. The concession, named The Russian Bookshop, opened in March 2012.

Following a decision in late-2011 to scrap an e-reading offer in-branch, it was announced in May 2012 that Waterstones would be selling the Amazon Kindle across its estate. James Daunt launched the new agreement with Amazon stating that Waterstones would be offering "e-reading services and offer Kindle digital devices" throughout the company's branches and on its website, with an intention to "make the Kindle experience better". This announcement was received with surprise across the book industry as it had been suggested that Waterstones was developing a partnership with Barnes & Noble to launch the Nook in the UK, or that the company was developing its own device, but Daunt 'ultimately rejected' other avenues as Waterstones 'would have been out of the market' before their implementation.

Sutton, Surrey/Greater London branch, with Café W signage

It was also announced in May 2012 that the company would begin a refurbishment plan, with Mamut 'investing tens of millions of pounds' to fund the refit of a planned 100 stores before the end of the year. The plan saw the introduction of wi-fi into shops, reorganisation of shop sections and space dedicated areas for Kindle devices, and a number of own-brand coffee shops called Café W. The Café W brand was trialled in the Sutton branch, with an expressed aim for around 130 shops over a 3-year period to be fitted with a café. The announcement also noted the introduction of a 'click-and-collect' service.

The Amazon Kindle officially launched in-branch on 25 October 2012 with an 'outdoor and press advertising campaign' promoting the launch, with the Kindle Fire and Kindle Paperwhite model going on sale for the first time in the UK along with older models. The Kindles were tailored with Waterstones screensavers, which led to some complaints and customers attempting to return their devices. The release of the Kindle coincided with a relaunch of the company's brand in the same month, pushing the message that the chain was the "nation's leading bookshop" and producing an exclusive anthology, the Waterstones Red Anthology, to help promote the shops.

By the end of 2012, the Waterstones estate had shrunk to 288 stores, with "commercial reasons" given for the closure of branches in Bromsgrove, Stevenage, Watford, Fleet Street, High Holborn and Epsom among others, with staff being redeployed where possible. In 2012, Daunt stated that future expansion was being considered, based on the performance of the company. The accounts for the year to 2012 showed Waterstones, prior- and post-acquisition had made losses of £37.3 million

To compete with other retailers and return the business to profitability, there was an overhaul the company's business strategy to emphasise traditional bookselling techniques, which saw a move away from centralised decision making to stores based decisions. As such, across 2013 Waterstones embarked on a major restructuring of staffing levels, with a company-wide consultation with 560 managerial staff to subsequently reduce roles within the company. This led to 200 managers leaving their posts by September and Head Office staff departures. Waterstones launched a number of new partnerships through the year, including with the University of Derby to launch a professional qualification programme for its staff, with the Folio Society to extend customer reach and stock selection in London-based bookshops, as well as partnering with a new charity, BookTrust, which looks to inspire children to read for pleasure. By the end of 2013, Waterstones had cut its losses to £12.2 million, opened 12 further Café W and embarked on a capital investment in its store portfolio of £29.5 million.

In 2014, the chain continued to manage its store footprint opening new stores, with locations in Ringwood, Blackburn and Southwold, its first branch to be without Waterstones branding, as well as closing stores in Eastleigh and St Neots. Continued business strategy change saw further departures from Head Office in brand communication and PR and a renewed agency contract for Waterstones’ digital marketing. The retailer also overhauled its business technology with new algorithms on its website to help personalise the online shopping experience, updated point-of-sale IT and also introducing contactless payment in its stores. The retailer also partnered with Airbnb to hold a one-off ‘sleepover’ for customers in its Piccadilly branch in October 2014 after a customer was accidently trapped in the Trafalgar Square branch after closing. Accounts for 2014 saw operating income losses narrow to £3.8 million, but sales slip by 5.9%.

Further changes in store numbers were announced in 2015, including the closure of Wimbledon and Birmingham New Street, the opening of The Rye Bookshop and a return to Welwyn Garden City. Other activities throughout the year included a partnership with Oxfam to raise £1 million for those impacted by the Syrian civil war crisis through a nationwide campaign called ‘Buy Books for Syria’, with 100% of the RRP going to the charity, as well as announcing a new Children’s Laureate, Chris Riddell. In October 2015, after 3 years on sale in stores, Waterstones took the decision to remove the Kindle from its offer following ‘pitiful’ sales and hand the retail space over to books. This was followed in May 2016 with Waterstones announcing it had sold its ebook business to Rakuten Kobo Inc., subsequently directing customers who had purchased eBooks through the retailer to access their ebooks via Kobo's eBook site. This transaction represented a pull-out from the eBook and eReader market for Waterstones after 8 years and multiple platforms. The ongoing strategic changes made to the way to business operates had given more accountability to booksellers and a generated a more customer focused experience in shops and for 2015, the company reported an operating income of £5.4 million and a further narrowing of losses to £4.5 million from £18.8 million the previous year.

2016 saw further adjustment to store numbers, with the chain closing stores in Oxford Street Plaza, Edinburgh George Street and Reading Oracle, opening stores including Harpenden Books, Glasgow Fort and Tottenham Court Road, the largest Waterstones to open in London for 6 years. Waterstones also returned to Wimbledon and Watford with these stores benefitting from a refreshed brand look, widely welcomed by the trade. An interview with Daunt noted that Amazon ‘defines how Waterstones acts’ and that while the retailer could not compete digitally with them, it could offer a credible alternative to the internet company and that there was a future in physical bookselling. As such, the retailer continued to look at ‘fixing the basics’ such as adjusting store opening hours and harnessing data from the loyalty card as well as continued efforts in development of physical stores through refurbishment, including its Canterbury store and work on its e-commerce routes through improvements to product ranking. The retailer renewed its partnership with Oxfam to continue to raise money for the Syrian crisis, donating £5 for each ‘Book of the Month’ sold in shops during November and it was also announced that Waterstones had raised £300,000 for BookTrust in 3 years since partnering,and would continue the partnership for a fourth year. Waterstones made its first profit in 7 years of £11.7 million in the year ending April 2016. This included increased profits in Ireland, with sales rising 7% over the year and an expressed desire to open more stores in Ireland. The management board was also reduced by 4 members from 7 to 3, with the future composition under review.

The retailer did make public its concern that the UK EU referendum was likely to impact on sales due to an expected retail downturn following a ‘no’ vote, however noted that sales had remained ‘buoyant’ following the decision to leave the EU but remained pessimistic for the future.

Takeovers

Dillons

Acquired in 1995 by the Thorn EMI group, Dillons was the UK's second largest bookseller behind Waterstones and was the bookselling arm of EMI's retail division, which included HMV. Following the demerger of Thorn and EMI in 1996, the retail arm was divested from the EMI portfolio within a year and spun off into the HMV Media Group, an investment venture between EMI Group and Advent International private equity group. This venture included HMV, Dillons and Waterstones (the latter bought from W H Smith for £300 million), combining to make an international entertainment retailer of over 500 stores. Following a rebuffed takeover attempt in 1997 of W H Smith, Tim Waterstone became part of the deal and by May 1998, following the £801 million deal completion became chairman of the group. All Dillons stores were incorporated within the Waterstones brand by 1998.

Ottakar's

Northallerton High Street branch

In September 2005 HMV Group began attempts to buy rival book chain Ottakar's. This alarmed publishers and authors who hoped the Office of Fair Trading would refer the takeover bid to the Competition Commission. In March 2006, the Competition Commission cleared Waterstones for takeover of the Ottakar's, stating the takeover would "not result in a substantial lessening of competition", and is "not likely to affect book prices, range of titles offered or quality of service." Through extensive research they also found that "contrary to widespread perception, Waterstones, like Ottakar's, operates a book-buying system which mixes central and local input on stock selection."

On 31 May 2006, Waterstones announced that it had successfully negotiated the takeover of Ottakar's. HMV chief executive Alan Giles said: "A combined Waterstones and Ottakar's business will create an exciting, quality bookseller, able to respond better to the increasingly competitive pressures of the retail market." Ottakar's chairman Philip Dunne said: "Over the last year the book market has undergone a significant change with new levels of competition from the supermarkets and online retailers impacting all specialist booksellers and in particular those with insufficient scale to compete on equal terms."

Following the takeover, HMV announced that they would be rebranding every branch of Ottakar's as a Waterstones. In July 2006, a conversion programme was initiated and within four months, every Ottakar's store had been relaunched as a Waterstones and had seen the loss of 100 jobs.

Books Etc

In August 2008, the now defunct Borders chain agreed to sell eight Books Etc. stores to Waterstones for an undisclosed sum. The takeover, which represented 34,000 sq ft of retail space and incurred no staff losses, increased Waterstones' presence within London to nearly 50 stores, 'crucially [in] areas that are not represented by Waterstones bookshops'. The stores, located in Fleet Street, London Wall, Holborn, Wandsworth, Uxbridge, Finchley Road, and Canary Wharf were rebranded and merged into the Waterstones chain by September 2008.

Ethical standards

Tax

Tim Waterstone and James Daunt have been critical of tax avoidance by Amazon.com in the British press. Amazon has received sustained scrutiny for the amount of its overall sales that are reported by its UK subsidiary, in comparison to those 'processed offshore in Luxembourg to avoid UK tax'. In the 2012-13 financial year, Amazon paid £3.2 million in tax on sales of £4.2 billion and received £2.5 million in grants from the government. In the same period, it was revealed that Waterstones paid £11.9 million in tax, despite an operating loss of £25.4 million and sales of £410.4 million.

In a report on tax avoidance in the book industry, the magazine Ethical Consumer argued that A&NN Capital Fund Management, Waterstones' parent company, was located in Bermuda and this 'was likely to be for tax avoidance purposes'. In response to this, Waterstones issued a clarification on their website reading ‘As a UK registered and domiciled business, Waterstones fulfils all its tax obligations. This will include both the payment and reporting of all necessary UK taxes, as set out under UK tax legislation.’ In the 2013-14 financial period, the first full year under A&NN, Waterstones reported sales to Companies House of £398.5 million and an operating loss of £12.2 million.

Environmental impact

Waterstones has worked with the British Safety Council to consider its environmental impact, including factors beyond its carbon footprint. After a 2008 audit, the Council awarded Waterstones three out of a possible five stars for environmental impact.

Awards

Waterstones maintains and supports various literary awards, including the Waterstones Children's Laureate, the Waterstones Children's Book Prize, the Waterstones 11, The Guardian First Book Award and the Pushkin House Russian Book Prize. The company has also received various industry and consumer awards.

British Book Industry Awards

The Bookseller Industry Awards, formerly the Bookseller Retail Awards, are run by the trade magazine The Bookseller.

In 2008, the company "was lauded for the success of its loyalty card, Writer's Year promotion, online growth and its Get Selling bookseller training."

• Headline Bookselling Company of the Year
• High Street Retailer of the Year
• Nielsen Book Marketing Campaign of the Year

In 2009, the company took away awards for High Street retailing and in praise of the Liverpool One branch Manager Ian Critchley, who was "applauded by the judges for his "outstanding" work in launching the new shop"

• High Street Retailer of the Year
• Wiley Manager of the Year

In 2010, Bookseller Clare Boothby was recognised for her accomplishments at her branch in Dorking

• Sue Butterworth Young Bookseller of the Year

In 2011, Waterstones was recognised for its expertise in children's bookselling

• Usbourne Children's Bookseller of the Year

Interior of Reading Broad Street branch

Customer satisfaction

At the beginning of 2008, Waterstones.com was awarded a silver badge for the Best Books Website category at the BT Online Excellence Awards.

In a survey of 96 British chains in January 2009, Waterstones scored 69% for a Which? customer satisfaction survey on "products, price, staff and shopping environment and whether they would recommend the shop to a friend" – placing the chain in joint eight position. In May 2011, another survey commissioned by Which? on customer satisfaction of 100 High Street brands showed that Waterstones had maintained its position in the top 10 shops with a score of 77%, placing it in seventh position.

Waterstones also fared well in an online survey conducted for the consumer show Secret Shopper on Channel 4, hosted by Mary Portas. Out of 101 High Street brands, Waterstones 'emerged as an early frontrunner' and has maintained its top position since.

In 2012, Waterstones won the inaugural "Sports Book Retailer of the Year" category of the British Sports Book Awards.

Children's Book Prize

Waterstones continued the Ottakar's Children's Book Prize under its own brand and since 2005, the Waterstones Children's Book Prize has attempted "to uncover hidden talent in children's writing" by awarding authors with no more than two previously published books (adult or children's fiction).

• 2016
• 2015
• 2014 Rooftoppers by Katherine Rundell
• 2013 Ketchup Clouds by Annabel Pitcher
• 2012 The Pirates Next Door by Jonny Duddle
• 2011 Artichoke Hearts by Sita Brahmachari
• 2010 The Great Hamster Massacre by Katie Davies
• 2009 The Thirteen Treasures by Michelle Harrison
• 2008 Ways to Live Forever by Sally Nicholls
• 2007 Darkside by Tom Becker
• 2006 The Diamond of Drury Lane by Julia Golding
• 2005 The Cry of the Icemark by Stuart Hill

Waterstones is also the main sponsor of The Waterstones Children's Laureate, previously sponsored by Ottakar's. The 2011–2013 role saw the position carry the Waterstones branding, with the company stating it was 'up weighting [its] activity' and 'supporting the role in stores and online in different ways throughout the year and beyond.'

The Waterstones 11

Set up in 2011, the Waterstones 11 was created to promote debut literary fiction from new authors being published in the year ahead. Books were chosen from a list of 100 submitted by publishers, and were announced in January 2011 with in-store and online support, as well as a media campaign for the final 11. The inaugural 11 included the Orange Prize Winner The Tiger's Wife by Téa Obreht, Man Booker Prize nominee Pigeon English, by Stephen Kelman and the Edinburgh International Book Festival First Book Award winner When God Was a Rabbit, by Sarah Winman. The last list was announced in January 2013, as it was discontinued as a prize in January 2014.

Locations

London Piccadilly flagship branch

High Street Kensington branch, near the original Old Brompton Road branch

Waterstones has academic and high street stores in Europe including the United Kingdom, Republic of Ireland (with one store in Cork and previously with stores in Dublin and Drogheda), and in the Netherlands and Belgium (including Amsterdam and Brussels). Some branches in the company are located in buildings of architectural and historical interest.

Flagship superstores

Its flagship store on Piccadilly, formerly the Simpsons of Piccadilly department store and notable for its 1930s-Modernist architecture, is the largest shop in the Waterstones estate and claimed to be the largest bookstore in Europe. The main academic branch, formerly the flagship store of Dillons, is located on Gower Street, between University College London and the Student Central, and promoted as Europe's largest academic bookstore. Aside from these branches, Waterstones operates a number of large stores which are set over multiple floors. Waterstones refer to these stores as 'superstores':

• Piccadilly, London (formerly Simpsons of Piccadilly) – flagship branch with six floors and an estimated 8 1/2 miles of shelving. In 2012, the head office of the company was moved to the store. Waterstones also owns the large Hatchards bookshop on the same road.
• Gower Street, London – academic branch with five floors and 5 miles of shelving
• High Street, Birmingham, trading on six floors. Formerly Times Furniture company.
• College Lane, Liverpool – two floors, including the largest open-plan floor of books in Europe.
• Deansgate, Manchester – three floors, with over 100,000 books in stock.
• Milsom Street, Bath – three floors, with over 55,000 books in stock.
• La Scala Cinema, Sauchiehall Street, Glasgow – five floors, set in a former cinema
• Bridlesmith Gate, Nottingham – four floors, with concessions

Large stores

• Broad Street, Reading, formerly Broad Street Independent Chapel
• Fishergate, Preston, formerly Booths ornate grocery and head office
• St Margaret's Street, Canterbury, the basement has a display of the buried remains of a Roman bath-house
• Wool Exchange, Bradford
• Emerson Chambers, Newcastle upon Tyne
• Dolphin & Anchor, West Street, Chichester
• West End Princes Street, Edinburgh
• The Carlton Cinema, Swansea
• The Tontines Building, Parliament Row, Stoke-on-Trent
• Corn Exchange, Lincoln
• Cornmarket St, Oxford
• Midsummer Place, Milton Keynes

See also

• HMV Group
• Hatchards

External links

• Official website
• Waterstones on Twitter
• Waterstones on Facebook
• Rainbow Trust Children's Charity