December 17, 2015
Who’s behind Waterstone’s miraculous financial recovery?
by Simon Reichley
The quick and easy answer is an increasingly common one: a Russian oligarch.
Last month, we covered Waterstone’s surprisingly profitable turn in 2015, and have previously discussed the company’s restructuring under new CEO James Daunt. Now, Slate‘s Stephen Heyman reports that the U.K. retailer’s recent recovery was aided, in part, by “a complicated, influential figure in Putin’s Russia”—billionaire Alexander Mamut.
Mamut had been talking to Daunt before the sale and immediately brought him aboard to right the ship. “He wanted to make a mark in the United Kingdom, where he had a house, educated his son, and this seemed a positive, beneficial thing worth saving,” Daunt said of Waterstones’ benefactor. “Other people buy football clubs, fund art galleries—this was his thing.”
Mamut was an early investor in the newly-privatized gas and oil companies, Gazprom and Lukoil in the early 90s, and was a prominent bankroller of Boris Yeltsin‘s presidential campaign.
According to a 2011 profile published in the Telegraph:
He remains very close to the Kremlin and he is understood to be close to Russian prime minister Vladimir Putin, with one source describing him as “Putin’s man.”
While it always helps to have a guardian angel in the form of an oligarch come to your aid, this is admittedly unhelpful advice. However, Heyman provides some interesting insight into Daunt‘s biography, too, as well as the reasoning behind his decision to eliminate nearly half of Waterstones’ managerial staff, abandon the co-op, and banish the bookseller’s famous “3 for 2” offer:
[Daunt’s] first target was the so-called planogram, a kind of map that tells chain booksellers which new books go where, ensuring that each store assigns exactly the same prominence to exactly the same titles. The very best locations in the store are actually sold to publishers…In 2011, Waterstone’s earned around £30 million just for this kind of advertising, Daunt said. Considering that the company was hemorrhaging money when Daunt took it over, forfeiting this revenue stream seemed crazy, and it also offended many publishers. “By giving control back to the booksellers, we were telling the publishers, ‘We know what sells better than you.’ That’s never a pleasant message,” said Daunt. “There was extreme nervousness. But we had the advantage of being bankrupt. Crucially for us, Penguin said, ‘Sounds mad. But what are the options? So we’ll support you.’ ”
The larger story of Waterstones’ recovery should be of interest here in the U.S. considering that we currently face the very real possibility of life without a big retail bookstore. While independent bookstores across the country are thriving, Barnes & Noble is rapidly diminishing, and the prospect of a bricks-and-mortar Amazon rising up to replace it is as terrifying as it is unlikely. While it’s hard to imagine B&N taking these sort of drastic steps, Heyman provides some interesting insight into Waterstone’s recovery. Turns out, you’re never more free than when you have nothing left to lose.
Simon Reichley is the Director of Operations and Rights Manager at Melville House.