Waterstones and Amazon's Kindle turn a new chapter

It was the twist no-one saw coming.

After previously describing Amazon as "a ruthless, money-making devil", Waterstones's managing director, James Daunt, announced in May that he was teaming up with the US internet store and would sell and promote its Kindle tablets and e-readers in the UK's premier book chain.

Few predicted a happy ending: "A deal for destruction", "Strange bedfellows", and "Waterstones let the fox into the chicken run" exclaimed some of the resulting headlines.

Had the former JP Morgan banker doomed the group less than a year after being appointed as its managing director?

"A world that is totally dominated by Amazon will be a poorer one," Mr Daunt tells the BBC when asked about the decision.

Amazon's boss, Jeff Bezos, says his firm sells Kindle e-readers and tablets for break-even prices

"But that is not to say that I don't think that Amazon is - within the limits of what it does - absolutely fantastic."

Secret deal

The 49-year-old has already distanced Waterstones from its roots, dropping the apostrophe in its name to the dismay of punctuation campaigners. But the decision to ditch Sony's e-readers and promote Amazon's is clearly his most controversial to date.

For someone who has apparently signed his company's death warrant he appears focused and optimistic about the group's future, determined to complete a costly refit programme designed to upgrade its 300 stores.

And though he remains tight-lipped about the terms of the Amazon arrangement, he insists the agreement is to his advantage, whatever others suggest.

"I certainly won't tell you what I'm going to make with Amazon, but what I will freely admit is that we have a commercial business here, and we make sensible commercial decisions.

"I have, rather flippantly, also said: 'Do I look like a total moron? Because what you're describing is the behaviour of a total moron.'

"I may be many things, but I don't think I'm that."

Mr Daunt ditched a previous deal to sell Sony's e-readers shortly after taking charge

Although the criticisms may have stung, Mr Daunt believes he has made the pragmatic choice. His customers are increasingly reading books on digital devices with Amazon proving their most popular option.

To ignore the phenomenon, he argues, would undermine the bookseller's relationship with its readers.

"If they choose to read digitally I have to become involved in that game," he explains, adding that it would be beyond the firm's resources to develop its own family of tablets and e-readers.

Instead he plans to offer add-on services - allowing visitors the chance to use Kindles to browse Waterstones's own recommendations and then read them for free while in-store.

"The principle is simple," he says.

"You are in a bookshop, you can pick up any of these books - you haven't bought them yet - you can browse them. Until you leave the shop you don't have to pay for them, and that same principle should apply to a physical device as well as a digital e-book."

Ultimately he hopes to be able to tailor recommendations to each shop's location and staff - but even in its basic state the feature won't be able to launch until technical issues are worked out and publishers sign up.

Hot drinks

Reports have suggested one way Waterstones would make money out of the deal would be to take a cut of each Kindle sale made over its stores' wi-fi networks. Mr Daunt would not confirm or deny the claim, saying only: "We make money out of everything we sell."

A potential problem with this model is that once shoppers try out an e-reader - whether its a Kindle, Nook, Kobo or other device - they often browse bookshops's shelves, make lists of what they want but then buy via the internet at home.

The e-book trend may be inevitable, critics say, but embracing it will only hasten Waterstones's decline. Mr Daunt suggests they misunderstand his methods.

A Norwich branch of Waterstones was one of the first to be fitted with a Cafe W outlet

"All that we have to do is encourage people to come into our shops and to choose the books," he says.

"I don't frankly care how they then consume then, or read them, or indeed buy them.

"But if you spend time in my shops, and you really enjoy it, and you come back more often and spend longer - you're going to spend money in my shops."

That money won't necessarily be on books. Waterstones stores are already stocking more stationery, games and puzzles. The next step is to create cafes inside the chain following a successful trial.

"It is literally the booksellers that's made you the cup of coffee," he says. "Yes, it's slightly grubby that you've handed over two quid to get that cup of coffee - but it is extremely nice.

"The conversation as you buy your latte is often about the book and it's a really fantastic thing. And our sales have leapt."

The move may appall traditionalists, and making space for coffee and Kindles does ultimately mean less for bookshelves. But Mr Daunt says the action is overdue.

"Do we have an awful lot of books in our shops that don't frankly sell?" he asks.

"Yes, and they actually shouldn't be there. I do think the shops will have less books, but they will remain absolutely first and foremost physical bookshops."

Kindle display units were installed weeks before the launch

Fiction, cookery and biography will stay, he says, but specialised topics, such as law studies, face the chop.

'Fundamentally unsatisfactory'

At the core of his strategy is the assumption that if his staff make the right picks and provide the right environment, customers will want to spend time in a book-browsing environment.

"I certainly believe that ownership of the physical book does matter," he adds.

"Whereas that little file embedded in a piece of plastic isn't pretty to look at. You can't lend it. You can't sell it. And you can't bequeath it to your children.

"Digital is convenient in some situations - travelling, or reading at night when you don't want to wake the wife.

"But it is also fundamentally unsatisfactory in all sorts of other ways. And that will preserve the physical book as being the majority choice for some foreseeable time, even fiction."

Whether Waterstones's next chapter goes as planned will now depend on how much the public are as wedded to the traditional format.