Waterstones paves the way for Amazon Source, but will independent bookstores follow?

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

In launch materials for Amazon Source, the program to allow independent bookstores to sell kindle readers and ebooks, Amazon highlights that it was the partnership with Waterstones that delivered the infrastructure now available to independent bookstores.

When it was originally announced that Waterstones were to sell Kindle devices, Managing Director James Daunt was widely criticized. He maintained at the time, and would presumably continue to do so now, that working with Amazon was driven by pragmatism. The prior relationship with Sony was going no-where and Waterstones didn’t have the financial backing, and did not want to attempt, to take on Kindle with a competitive device. Yet they also did not want to close the door to revenue opportunity from the consumer transition to digital reading. Better surely to therefore be in a relationship with the market leader, than to be nowhere?

The launch of Source seems to have been met with skepticism and derision by independent booksellers. Even though it’s not yet been announced if Source will roll-out internationally I’ve read quotes from UK independents suggesting that the moral issues of working with Amazon, and concern over the impact on physical sales, are reasons they would not support the initiative.

Yet Waterstones continues to sell Kindle devices and, I note, is running a click and collect promotion for Kindle devices on Waterstones.com, in one of only four lead carousel spaces (at the exact time of posting this, Waterstones.com is down for “essential maintenance”). The allocation of this valuable marketing space to Kindle is surely proof that the relationship must be generating valuable revenue.

I doubt very much that Waterstones sale of Kindle devices has accelerated the adoption of ebooks at the expense of print sales. Instead I suspect it has brought people into the store who would otherwise have bought the device anyway, online from Amazon. I’d therefore think that independent bookstores should consider Source not perhaps as as ‘olive branch’ from Amazon as has been suggested, but at least as a pragmatic opportunity to earn incremental revenue and increase footfall.

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James Woollam

About James Woollam

James Woollam is the Managing Director of F+W Media International, the UK business of F+W Media. After nearly 10 years in the advertising and direct marketing industry, including 5 years at Saatchi & Saatchi London, James joined F+W Media to oversee the launch of new consumer eCommerce businesses and focus on digital project opportunities. He became Managing Director in March 2010 and has continued to lead the shift from legacy print businesses to digital first and direct to consumer revenue streams. James can be found at www.jameswoollam.com or @jawoollam

8 thoughts on “Waterstones paves the way for Amazon Source, but will independent bookstores follow?

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  3. Michael W. Perry

    I have trouble imaging how a local bookstore could ever develop an enduring \revenue opportunity from the consumer transition to digital reading.\

    Yes, an odd customer here and there may buy their first tablet through that store. But it’s Amazon who has established the contact and Amazon who’ll do its best to make sure the next purchase comes directly from them so they need not pay that 6% or 8%. Just this morning, I got an email from Amazon that says, \Our most affordable Kindle Fire tablet is now in HD, starting at only $139.\ It includes a link to an Amazon webpage. I doubt those emails will ever suggest that I visit my local bookstore, much less link to its webpage.

    There is a way to test Amazon’s commitments to these stores. Has it promised that it’ll never sell Kindles online for less than the retail price being offered through these stores? I think not. Amazon will simply scoop up their customers and make them its customers.

    Waterstone’s behavior reminds me of something I once read about the UKs manufacturing industry. In the early 1800s, it claimed, what the UK exported were manufactured goods, such as cotton cloth. By the late 1800s, however, what the UK was exporting were the machines to make goods, meaning looms to make cloth. Once sold, those machines drove the UK’s textile companies out of business.

    I certainly hope that local bookstores, either stand-alone or as parts of chains, come up with a way to continue in business. But the path to doing that does not lie through joining the digital revolution as a mere secondary party. It can’t. I can buy a digital book online from Australia easier and quicker than I can walk a mere block to a bookstore and buy that book. As best, that local bookstore can keep me informed about local authors and books with a local setting. Amazon could do that too, but I doubt it will bother.

    Perhaps the best these bookstores can do is publicize the dark side of Amazon, particularly its obsession with control, its Amazon-only exclusives, and its bullying of authors and publishers. That would create for them the same market niche that ‘fair trade’ coffee outlets offer. People would be making a moral statement by buying locally. It’s not much, but it is better than nothing. It might even get Amazon to behave a bit better.

    –Michael W. Perry, author of My Nights with Leukemia: Caring for Children with Cancer

    Reply
    1. James WoollamJames Woollam Post author

      Thanks for your comments Michael.
      I too agree that there may not be an enduring revenue opportunity for independent bookstores here, but at least there is some opportunity for an undefined period, as Waterstones are finding.

      As to Amazon’s commitment to these stores, I don’t take the view that Amazon are doing this out of any sympathy for/need to support the independent bookseller. Amazon Source will help Amazon sell more Kindle devices and more ebooks and that will be the primary motivation for launching this I assume.

      Like you I hope that independent bookstores can continue in business, but I don’t believe a strategy of disliking Amazon is a solution to this. I hope and believe there is opportunity for independents to create a unique, curated, relevant and personal experience for customers that Amazon simply cannot achieve.

      Reply
  4. mick @ ebook bargains uk

    A few points here, Michael.

    First, Waterstone’s has its own ebook store and has had one for several years. It currently obtains its ebooks through OverDrive, selling epub.

    From discussion with indie authors who have sold well in Waterstone’s it’s clear the traffic is low, but by no means insignificant, and of course being epub files users of non-Kindle ereaders can buy and download with confidence.

    Going into UK stores of Waterstone’s and W H Smith provide some interesting reality checks. In W H Smith Kobo has high-visibility, well-lit plinth displays with a range of well-presented Kobo devices and a large video screen extolling the virtues of Kobo. In Waterstone’s the Kindle plinth in most stores is so inconspicuous one could easily walk past and not realise it was there. Pretty much zero Amazon / Kindle branding bar the devices themselves. Poorly lit displays, etc. The idea that the Kindle devices in Waterstone’s are attracting customers into the store is laughable.

    You mention Waterstone’s prior relationship with Sony, but there really wasn’t one. Waterstone’s sold Sony ereaders and also iRiver readers back in it s early digital days, pre-Daunt. The decision to go with Amazon (amid much speculation about a team-up with B&N’s Nook) seems to have been a pragmatic move to counter the Kobo team-up with W H Smith, given Waterstone’s Russian owner seems to have little interest in the digital future.

    Daunt indicated earlier this year the Waterstone’s site and ebook store would be revamped, and with the new competition from the UK supermarkets selling ebooks Waterstone’s certainly does need to shift up a digital gear if it is to hold its own through 2014-15.

    Presuming the Amazon arrangement is on a similar short-term contract to that Amazon is offering with Source it may be Daunt is planning to end the arrangement with Amazon as and when, and push its own ebook store in some more meaningful way. The decision to switch suppliers to OverDrive earlier this year is perhaps indicative of things to come.

    That would certainly be the best way forward from Waterstone’s. Print-book stores won’t be going out of business en masse any time soon. Waterstone’s is a major book-lovers brand in the UK and needs to work with its loyal readers to keep them on board as the transition to digital continues.

    Realistically Waterstone’s has four options: a) stay with Amazon long-term (suicidal); b) break with Amazon and promote the ebook store with the OverDrive supply, selling epub ereaders and a variety of tablets in-store (the cheap option, but low margins); c) break with Amazon and get a branded ereader / tablet of its own, obtain ebooks direct from publishers to increase margins, and really push the Waterstone’s ebook store to its loyal customer base (conceivable, if the billionaire behind Waterstone’s can be convinced digital is the future); d) team up with Kobo.

    The latter may be the most likely. W H Smith may not be too impressed, but Kobo has multi-store partnerships in New Zealand and Australia and presumably has not got a contractually exclusive arrangement with W H Smith in the UK.

    A partnership with Kobo (which does not sell print books so is not in competition with the Waterstone’s core operation) selling Kobo devices in-store and letting Kobo handle the Waterstone’s ebook store under the Waterstone’s brand would be by far the most effective and least expensive option.

    As for the US and UK indie stores currently being approached by Amazon Source, I suspect Amazon is shooting itself in the foot.

    This is the clearest indication yet that the Kobo and ‘txtr partnerships with indie store around the world and in the US is a) working and b) hurting. Both ‘txtr and Kobo are aggressively pushing partnership deals and Amazon is understandably anxious to get a piece of the action. But by making clear these are profitable options Amazon will just be driving more and more indie bookstore s into the arms of no-print ‘txtr and Kobo, or one of the many smaller start-ups now offering white-label ebook stores.

    The ebook pie will continue to grow (at an ever slower rate) but the days of Amazon’s market-share domination are numbered as market fragmentation continues.

    Reply
    1. James WoollamJames Woollam Post author

      Thanks for your comments Mick.
      I agree that Waterstones needs to shift up a digital gear, something that I think is as applicable to how it sells print books as much as digital. I think some of that work to improve the online offer has been done, notably the addition of click and collect, but I hope there’s more to come.

      From personal experience I know that the Waterstones/Overdrive numbers are modest and I find it difficult to believe that this is going to be a significant forward strategy. Similarly I just don’t think there is the appetite to enter the device war, which leaves the two partnerships: Amazon or Kobo. You’re right the in store presentation of Kindle is mixed at best, as indeed it was in WHSmiths when the Kobo partnership was first launched. Nonetheless, Waterstones still features Kindle devices in promotions and my understanding is that much needed revenue is coming from the partnership as a whole.

      Ultimately, I think that decision on the time frame of the Amazon relationship and/or any change to a new approach hasn’t been made. For now, selling Kindle is a pragmatic decision while the physical business changes to the type of store offer Daunt is searching for. I suspect that the strategy behind this doesn’t go much further but it will need to shift and evolve as we see the market changing and new opportunities emerge.

      Reply
  5. mick @ ebook bargains uk

    Sorry, James, that comment was directed at you, not Michael.

    To Michael, some interesting points about how Amazon is perceived by authors, who either love or hate it.

    I think the key to the success of indie bookstores is their personal service to their loyal customer base. If they can combine new-title discoverability (which bookstores do far better than any on-line store) with back-list availability and indie ebook availability the they will keep the customers who have not already jumped ship because Amazon can offer a print book at a good price delivered to the door.

    Co-existence of bricks and mortar and online stores can only continue with compromises on both sides. the big threat to both bookstores and online retailers like Amazon comes from the cash-rich supermarkets jumping on the ebook bandwagon.

    Lots of retailers with no previous affiliation with books or ebooks are now have ebook stores (JB Hi-Fi and Big W in Australia, for example) but supermarkets like the UK’s Sainsbury (up and running and making serious headway) and Tesco (Blinkbox Books ebook store imminent), buying ebooks direct from publishers and promoting in-store are going to be the game-changers for he industry. Expect Walmart, Target and Costco ebook stores soon.

    As per previous comment, the days of Amazon’s market domination and numbered, but hopefully it will be a win-win situation for all parties.

    Reply
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