Some MORE Thoughts On Amazon & Waterstones

The possible pit falls of Waterstones decision to link up with Amazon and sell Kindle devices in-store have cropped up again, most especially in this blog post over on the Telegraph by Mic Wright:

Unless the customer buys e-books on the company’s own in-store WiFi network, Waterstones gets no cut of future sales. Effectively, the book chain is shepherding customers over to Amazon. The sheer convenience of being able to shop for new titles directly from their Kindle means most of them are unlikely to darken the doors of a real-world bookshop very often in the future.

While many people are still wedded to the experience of reading a traditional book, customers seduced by the Kindle tend to stick with it. Russ Grandinetti, the Amazon vice-president who heads up its Kindle efforts, told the author Peter Nowak earlier this year: “Customers buy three to four times as many books after they buy the Kindle device.” If that’s true, and the Kindle makes for more engaged readers, Waterstones is actively going to be losing valuable customers.

It is true that the deal presents challenges for Waterstones but as I wrote a little while ago I wrote:

Alternatively it could be very seen as a sensible decision. It relieves Waterstones of the burden of competing with Amazon on more fronts and crucially reduces the need for a huge capital outlay on technology R&D (the kind B&N has committed itself to). It also enables the management to concentrate on making the stores profitable and on selling print books (still the company’s core product). It makes the decision about selling Amazon’s print books easier (I would think that’s a big one for authors). It probably presents more opportunities than it closes off for Waterstones in other words.

If I was to think of one single reason for the move being a good though I would say it is this, it allows Waterstones to stand still and observe for a little longer. The value of inaction is often underestimated and right now when the ebook retail and distribution space is changing rapidly and requires such a huge investment, this move brings revenue, options but most crucially of all, time to just see what happens while rebuilding the core bookselling business.

The other issue that gets glossed over in the discussion is that Waterstones other potential partners are either currently or would become by way of a partnership, direct competitors in the ebook marketplace. Enabling any one of the major players (or even a smaller scrappy rival) would make the marketplace more difficult for Waterstones.

You might even argue that Waterstones, in choosing Amazon were choosing the partner who already has the most exposure in the market and the one least likely to make a dramatic splash in store. After all, what Waterstones customer hasn’t heard of the Kindle five years after launch? Nook & B&N on the other hand, had they entered the market via Waterstones would have done so as a fresh and potentially big arrival on the scene. They might well have given a more dangerous rival a platform rather than a known entity.

Still the threats are real for Waterstones, they’ll need to make sure they take the painful closure and revamp decisions the chain needs while taking advantage of the fact that they don’t need to compete in the ebook market. They can also watch and wait and plan for the day they DO step back into the market, if they ever do.

If the ebook market does grow to more than 50% of all book sales, then perhaps the best they can hope for is a graceful decline towards a rump of the former chain, but a profitable and sustainable one if they can adapt and change.

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