Waterstones and Kindle: will it last long?Martin Tripp 21st May 2012
It’s not every week you wake up to the noise of a well-run business shooting itself in the foot. But Waterstone’s decision to start selling Kindles in-store certainly looks like a case of “letting the fox into the chicken coop” as Today interviewer Simon Jack said this morning.
And there is no doubt that Amazon can be cast in the role of fox. If you don’t believe me, ask Target, the US retailer. As reported in the NY Times this month, Target recently withdrew Kindle from its stores after warning Amazon about its encouragement of “showrooming”. This is the practice by which smart phone users scan products in a store with Amazon’s Price Check app, so that they can see the Amazon price straight away and order from them. Last Christmas, the company offered an additional 5% discount off any item scanned at a store. Hardly the behaviour to endear you to retail partners.
So what does Waterstones’ CEO James Daunt say about the alliance? On the Today programme, he gave the rather woolly justification that Waterstones were trying to “meet the reading needs of our customers.” In the short term, of course, it will provide an additional revenue stream; but it will be fascinating to see how long the readers’ relationship remains with Waterstones, or how quickly they start to buy direct from Amazon.
On the other hand, it does look like a good deal for Amazon. And more tech media jobs perhaps? There is a hard core of people who “love books” almost more than they love reading. Walking into Waterstones and seeing a Kindle concession will make the e-reader more acceptable to these bibliophiles; it’s the kind of approval by association that is hard to buy.
The other winners will be publishing houses; their margins are far healthier on electronic books than on hard copy. If, as Daunt estimates, the market for e-books will grow to 250% of its current size (partly thanks to this arrangement), this will contribute significantly to their bottom line. As I have argued in other blogs, I think e-readers are a force for good for publishing on the whole. Increased margins for publishers allow more investment in content, and less reliance on “tried and tested” formulae; in short, more innovation.
Ironically, the only players in the chain that I can’t see benefitting from the new technology are retailers. I hope that Waterstones prove me wrong.
Martin Tripp Associates is a London-based executive search consultancy. While we are best-known for our work in the TMT (technology, media, and telecoms) space, we have also worked with some of the world’s biggest brands on challenging senior positions. Feel free to contact us to discuss any of the issues raised in this blog.