Doing the splits – HMV/Waterstone’s, WH Smith, Blackwell

We may be mired in public holidays and wedding froth, but news from the bookselling end of the retail sector has been coming in like heavy artillery over the past few days.

Waterstone’s:  Every paper has been carrying the exclusive news that Alexander Mamut’s bid to acquire Waterstone’s from HMV is likely to settle at around £35m.

What nobody publicly knows yet:

  • Is £35m the headline number (total value of the deal)?  Does Mamut acquire Waterstone’s for a lower amount, paying the rest to HMV as a function a future earnings, and shoring up HMV’s balance sheert in the meantime?
  • Does £35m buy the entire estate, at around £120k per store?  Or does Mamut get a smaller number of more robustly posiotioned stores with stronger future prospects?
  • Is the current management team staying on?  Most serious observers very much hope so.  But a change of ownership to Mamut/Waterstone would inevitably bring major strategic changes in its wake.

What everybody does know is that this story has been rattling on for long enough, and for the sake of the business and its employees – and to enable HMV to focus on its core concerns – the sooner Waterstone’s sale is resolved, the better.

Afterword – late afternoon, 27th April:  “Any deal to sell Waterstones to Russian billionaire Alexander Mamut is unlikely this week, and could be several weeks off, according to sources familiar with the situation” – Retail Week

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WH Smith:  Kate Swann gave an interview at the weekend.  Kate Swann interviews come along about as regularly as Harper Lee novels, so it bore careful analysis.

Much of the discussion is around cost-cutting – threadbare carpets, cheap rail tickets etc – all of which will enable WHS to continue to deliver value to its over-stretched customers.  Like many retailers, Swann emphasises the unanticipated hike in fuel prices in recent months – a litre of diesel is now about 40% more expensive than it was in January 2009.  So, the consumer isn’t just cost-conscious becuase they’re worried about the economy, the impact of tax rises or the risk of losing their job – they are being hit hard, daily, by a major (and largely unavoidable) increase in the cost of living.

The article reiterates WHS’s plans to continue to open Travel and High Street stores, but acknowledges that many of the high street stores are now much too large for purpose (up to 27,000 sq ft), and that introducing Post Offices and other services can only go so far in mitigating overspace.  Positive like-for-like growth does not appear to be on the horizon (and this writer contiues to doubt the line that this is all down to falling sales of CDs and DVDs).

But the nub of the discussion at “Britain’s least popular store” is creating value – nearly £300m has been returned to shareholders over the past five years.  With News long gone, but international again in the ascendant, might there be a demerger of High Street and Travel?

“It’s not a plan right now, [but] if we thought it was value enhancing than that would be fine,” she says.  “We’re in the fortunate position that commercially it actually makes sense to keep the businesses separate.  They operate in different ways and buy different products.”

So what would persuade Swann to split them?  “Two things.  One, if the businesses grew to be so completely different – if the international business became a big part of travel we might well say, ‘Strategically the businesses are now competing with different people in different countries.’  Or, if it was difficult for the businesses to be valued appropriately as one entity.”

That would be a Yes, then, to WHS doing the splits.

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Blackwell:  Academic bookseller Blackwell has announced the departure of CEO Andrew Hutchings, and a separation of the academic bookselling business from the library supply arm.  Further announcements – and restructurings – are anticipated, and with only one major shareholder, the business is under less pressure to share its plans publicly than other store groups.

Library supply and retail bookselling are two different businesses; splitting them internally will make any future restructuring easier to execute.  In the meantime, good luck to Andrew, and to the new MD of Blackwell Retail, David Prescott.

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In other news… Sony have announced that their S1 and S2 tablet computers will launch in the autumn, offering major competition for Apple, with WiFi connectivity and 3G mobile internet, as well as 4G where it is available.  If you’re interested, send them your personal details, credit card numbers etc and sit tight…

But seriously, the little avalanche of bad stories about data theft (Sony) and personal tracking (Apple), allied to general concerns about “cloud” security, take us back to the early days of internet commerce and the loss of personal data to hackers.  Once you’ve built it, someone else can break it, I guess.  I’ll just (Luddite!) check through my bookcases and LP stacks to see if any of my paperbacks or albums has leaked my personal details to anyone…

Photo: Lots-a Books, Cold Lake, Alberta


Friday charivaria IV – Press, turning out my pockets etc

Press cuttings…

This has been widely commented on, but worth checking if you havent seen it.  Ross Dawson suggests here that Amazon might be giving away Kindles free by the end of 2011. His evidence is based both on the current falling price, but also on an interesting assessment of Amazon’s likely ebook strategy.  The embedded link to John Lancaster’s piece for the LRB on the future of the newspaper industry is also worth a read.

This, from the Pittsburgh Post-Gazette, picks up on the Borders story and posits that gargantuism has hurt the quality of publishing quite as much as it might have hit the independent bookstore.  Interesting reading, and rude about James Patterson too, which is always a bonus.

One more on Borders, from PW, with a nice title – fewer superstores doesn’t equal better times for the bookstores that are left behind.  Cheer up at the back there.

Robert McCrum argued in the Observer that authors have to get hipper to social networking.  This site is dedicated to connecting self-published eBook writers to a wider audience.

I am marshalling further thoughts on World Book Day and Night, so more to follow on this topic.

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Sometimes the speed of change is dizzying, and you have to stand back and reflect for a moment.

Back in the day, I used to haul myself around London, area managing record shops.  I’ve been thinking idly about all the stuff I needed to do that job; how much of it is obsolete now and (to ensure this isn’t just an easy nostalgia trip for the day before yesterday) pondering where the next changes will come.


Pads of paper, reams of company memos and instructions, camera, spare film, diary, address book, shopping lists, calculator, postage stamps, trade magazine, newspaper, phone card, A-Z, dictaphone, Walkman.  Later, a laptop and charger.




Cash, credit cards, business cards, pens, keys – all eminently replaceable, though I suspect the physical business card will be with us for a while.  I’ll hold on to my handkerchief until sneezing is digitised.

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I am reading: The News From Where You Are – Catherine O’Flynn (Penguin). I love her close observation of minutiae, and her understanding that most people are neither overwhelmingly good or bad.  Plus, she worked in a record shop, so that’s a big plus.

I am listening to: Five seconds of every US number one single since 1956.  It’s addictive.  The 500 madeleines of this Marcel Proust.

I am watching: South Riding.  Sure, it’s a Sunday night drama, lurching from one crisis to another, but the acting of David Morrisey and Anna Maxwell Martin is exceptional.  And I’m looking forward to reading the book.

Geronto-tech: shock for mall and high street

Every couple of weeks, or so it seems, we get to read a new iteration of the same research.  What this research tells us is that – shock horror – the “older generation” is not only comfortable with “new technology” (sorry for all the quotes marks), but has welcomed it to hearth and home.

Yes, it’s the over-40s/50s/60s that are buying the Kindles, shopping voraciously online and playing Angry Birds.  Who would have thought that the wrinklies, brought up in a world of hansom cabs and gaslight, could have figured out where the On switch is, just like that?

Of course, anyone aged under about 75 had plenty of exposure to PCs in the workplace, and has been living with the internet, digital cameras and novelty phones for the past 10 years and more.  Old dogs are very happy to learn new tricks when there is a palpable benefit available to them.  Indeed, the old dogs have proved remarkably adept at figuring out which functions to ignore on a PC or a TV handset (ie most of them), and how to exploit technology to do straightforward and useful work.  Some applications – eg Twitter – have built their success on the middle-aged, rather than the young.

What all this flim-flam tells us is that, in the real world, the older generation has adapted very readily to technology.  I’m interested in their predilection for shopping online, and for downloading content.  The hardcore of early adopters to new technology and new concepts may be young, but the next wave will be older and wealthier – people who have been around the block a couple of times, and are prepared to pay good money to make life a little easier and a little more interesting.  They’ve learnt the value of shopping around, so they are avid users of price comparison websites; and they’ve got a pretty clear idea about what they enjoy doing, and what leaves them cold.

And increasingly, the business of “going to the shops” is at the frigid end of the scale.  Not just mechanical, repetitive shopping for groceries, that they’re happy to outsource to Tesco or Ocado, perhaps adding a twist of unpredictability with Abel and Cole.  No, more and more consumers reach a point in their life when they know what they like, and they know how to use technology to get it, at the best price.

For teens and early 20s, shopping is a social experience.  Hanging out in New Look or the Apple Retail Store is fun when you’re young.  Ten years later, dragging yourself and family around Debenhams or Currys is precisely the opposite.

Those in their middle years – which for the sake of this argument we’ll extend from the mid-30s right through to the early 70s – are time poor.  Some of them are still cash rich, in the old noughties equation, but the proportion that feels comfortable is falling.  They want value, and they want efficiency.  Online shopping for goods and services provides this, and the physical stores struggle to compete.  For many customers in our broad, middle-aged bracket, the high street is toast.  It’s for the birds.  It’s history.  And if you want to buy this stuff – well, what’s the name telling you?

I think that we are a very long way from seeing this shift from physical store to online shopping flattening out.  Online retailers understand what their customers want – they have infinite data to enable them to continually update their offer to maximise the benefit of clicks on different products and categories.  The manager of a physical store has to stand and watch the displays to see what is grabbing the customers’ attention; the online retailer not only knows, but is constantly tailoring the offer for their market, and for that individual customer.

Of course, consumers still enjoy using stores that give them extra, intangible value.  John Lewis genuinely trains its partners in product knowledge and customer service, rather than paying lip-service to these concepts.  Sales may have dipped at JLP in the past few weeks – the partnership publishes sales data every week, which the City uses as a bellwether for the high street.  I would posit that JLP’s public cold will be others’ private pneumonia.

Given the drift away from shops by the over-35s, what is the future for retail real estate, whether in regional shopping centres or old high streets?  I commented a couple of weeks ago, when I was being rude about Camberley, on the impact of major malls across the UK, whereby the number of locations required for national coverage is falling.  I suspect that this trend will continue, and that the future for shopping will be split between the major destination (Westfield; Kingston; Reading) and the genuinely local high street.

Those that fall between two stools – clone town offers with a choice between poor public transport or expensive parking; towns where shopping, working, recreation and residential zones have been scrupulously separated by planners; centres where the amenities that encourage community are absent – are going to suffer significantly.  We need to think seriously about the future of our town centres; and individual retailers must plan for the online trend to continue to erode their physical store sales, recession or not, for the foreseeable future.