James Daunt was appointed general manager of Britain’s largest book retailer Waterstones a couple of years ago to turn the business around. Daunt did it and he is now trying to work the same magic on another ailing book chain.
Waterstones paid US$680 million to buy Barnes & Noble, the biggest book chain in the United States.
Daunt, 56, joined JP Morgan as a banker after graduating from Cambridge. In 1990 he founded Daunt Books in London.
He expanded Daunt Books into a six-store chain despite a tough operating environment. Impressed by his achievement, Waterstones appointed him general manager in 2011 to help save its ailing business, which at one point was close to bankruptcy.
The book chain posted a profit of 18 million pounds (US$22.83 million) last year, up 80 percent from the year before.
That encouraged the parent company of Waterstones to acquire struggling Barnes & Noble.
It is hoped that Daunt will be able to replicate the success of Waterstones in Barnes & Noble.
Currently, Waterstones has 293 shops while Barnes & Noble has 627 branches.
It’s widely known that the bookstore business is bearing the brunt of rising competition from e-commerce giants led by Amazon.
In addition to selling books online, Amazon also offers e-books through its Kindle device.
How did Daunt win the battle against Amazon and other e-vendors? Well, he has adopted three controversial tactics.
First, after taking the helm at Waterstones, he laid off 25 percent of the employees. Up to 50 percent of the managers were fired. Experienced employees were required to take steep salary cuts.
As a result, all Waterstones employees now earn the UK minimum wage.
Customers and authors have called on Daunt to raise the salaries of his staff, but their petition was simply ignored.
Second, managers and staff at each Waterstones shop are given full autonomy in procurement, marketing and pricing.
The strategy worked well as customer tastes vary in different regions. No one knows customers better than frontline staff.
It’s estimated that 97 percent of books on its shelves are sold within one year, against the usual rate of 40 percent.
Employees were also given comprehensive training. As such, job satisfaction made up for the low pay.
Daunt has also considerably downsized the non-book business of Waterstones to maximize the use of store space for selling books. Even regular online book shoppers would pop into Waterstones stores from time to time to see if they can discover some niche titles.
This article appeared in the Hong Kong Economic Journal on June 19
Translation by Julie Zhu
[Chinese version 中文版]
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