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Dispatches from the Digital Revolution

Tim Waterstone takes aim at Amazon, publishers, in scathing blog post

Waterstones store in England

Source: Kake Pugh, Flikr Creative Commons

Last Thursday, July 19, bookseller Tim Waterstone spun a bitter tale of woe in recounting the decline of Waterstones, the British book-selling chain he founded in 1982. Waterstone alleges that mismanagement of his company, which he sold to HMV Group in 1998, led to publishers and, subsequently, Amazon corroding the book-selling industry as he knew it.

The blog post, published in The Daily Beast, is a one of the rare, direct accusations against publishers for their role in empowering Amazon.

Despite its inflammatory nature, Waterstone makes several important points in his rant. Early in the post he insists that the key to Waterstones’ former succes was that its customers “were heavy, committed book buyers. They purchased at least fifty books a year, and with Waterstones [then] across the country, they bought them from [its stores]. [Waterstones] fitted the profile of what they wanted a ‘real’ bookshop to be.” One of the failures of HMV during its 13 years of ownership (HMV sold the chain to Alexander Mamut in 2011) was its distrust of this business model.

But the goals of HMV were purely financial, he says, and executives couldn’t understand why Waterstones would accept that only 20 percent of the British population were targeted as customers; soon, the stores began to reflect this new philosophy, and because of it, the loyalty of long-time customers was lost. This is powerful statement at a time when independent and chain physical bookstores are struggling to maintain a customer base in light of Amazon’s and other online retailers’ deep discounts and free shipping. In his opinion, physical bookstores need to stick with what they do best: creating relationships with customers by employing well-read, friendly salespeople, and creating a welcoming in-store atmosphere.

Waterstone also argues that HMV executives “read nothing, and knew nothing about the world they were entering,” resulting in HMV’s failure to rein in the practices of publishers, a function the Net Book Agreement (NBA) used to perform before it was declared illegal in 1997. Those practices led to the establishment of Amazon in the United Kingdom, Waterstone alleges. He imagines:

Resale price maintenance [the NBA] was gone, the coast was clear, so let’s do it, said the publishers. Let’s put Amazon into a position whereby they can buy from us on such favourable terms that in time they can discount everyone else into oblivion. And that included the booksellers who have been our supporters for centuries, in good times and in bad…It was the publishers who largely allowed Amazon to create its model. How? In business school speak, by dealing with Amazon on a wholesale model, and with the traditional bookshops—their lifeblood for centuries—on an agency model…It was a savagely disloyal mistake.

After this unflattering portrayal of publishers, he points out that publishers failed to realize the implication for what they had helped create: Amazon could now use its discounting power to undercut the prices of every major bookstore—a result they later regretted. Coupled with HMV’s neglect of customer service-based retail model, all the decks were stacked in Amazon’s favor. Naturally, with Amazon being “impervious to the overall welfare of the industries in which they were operating,” it allowed Amazon to do what Waterstone describes:

Make and build your brand on a reputation for absolutely rock bottom pricing. Even say it upfront, insultingly and aggressively, in your advertising—go, Mr. Consumer, go to Harrods or wherever it is , inspect and admire the goods, then come home and buy them from us. Online. At a deep, deep discount. And f**k Harrods or whoever it is for their trouble. More fool them. And more fool Waterstones.

It’s difficult to call this recollection a fair assessment, however, when Waterstone himself admits that his bookstores became, under HMV leadership, places customers no longer preferred to patronize. So which is it? Did consumers turn to Amazon because of the deep discounts allowed by publishers, or because it offered a superior retail model?

Lastly, Waterstone urges the importance of physical bookstores in new author discoverability. “New authors, building their customer base, need physical bookshops,” Waterstone claims. But in the age of social media, self-publishing, and print-on-demand, is that accurate? Many authors are successful in promoting themselves and making themselves discoverable. It should also be acknowledged that online retailers, like Amazon, are also pretty good at steering readers towards new authors. No longer are expert booksellers the only ones with the tools to attract large followings. What, then, does the future hold for physical bookstores?

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This entry was posted on July 24, 2012 by in Business and tagged , , , , , .

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