EXCLUSIVE: Barnes & Noble’s CEO On New Store Strategy And Rewriting Retail By The Book

Amazon should have wiped Barnes & Noble out. And at one point, it looked like America’s biggest book chain might indeed be going the way of megastore rival Borders — into the great archive library in the sky.

Instead, Englishman James Daunt is talking to Bisnow about bookselling, expansion and soaring readership. The bookseller has turned bestseller, opening stores in new and old locations, and as a dish served cold, some of those sites have been at vacated Amazon Books stores too.

With around 600 Barnes & Noble bookstores across the U.S., plus an online platform, Nook e-books and audio books, SparkNotes and publisher Union Square & Co., Daunt as CEO presides over a literary emporium that also encompasses 293 Waterstones and Blackwell’s stores in the UK.

The group has been owned by hedge fund Elliott Advisors since 2019, and Daunt has been entrusted with reshaping and expanding the company, including in New York, where Barnes & Noble's huge and iconic Fifth Avenue flagship closed in 2014. He gave Bisnow an insight into where the company is heading and how he is turning it around. 

Chapter 1: Data Be Damned

“We are looking at between 13 and 14 more new stores in 2023 across a large range of sizes and types,” Daunt said. “We've got one that's 30K SF opening in New Jersey, we've opened up some 25K SF-type stores, but we've also got some really quite small ones of 5K SF to 7K SF.”

The company looks at locations where it has either closed recently, as it knows it has a customer base and people familiar with the store, but also at completely new markets.

Yet in an age of death by data, its locational strategy is distinctly old-school.

“The [new locations] are very much driven by self-observation,” Daunt said. “We get that from the field people who identify possible sites where they have the appetite to open stores and also assistant store managers who want their own stores. And also, we’re reacting to landlords, so it's quite opportunistic at this stage.”

It is a highly unconventional approach and one that he conceded probably reflects his own history as a bookseller — including his personal book chain, Daunt Books — rather than as a retailer.

“We're not that traditional big-box retailer where it's all driven by the real estate dynamic,” he said. “Of course, you need the landlord with properties who wishes to lease them to you. But we're in places where we think we will do well and where people want to buy books.”

That includes New York, where it has opened in Brooklyn and has another location opening on the Upper East Side imminently. Daunt said he would also love to go to the Bronx if he could find a suitable store.

“Just the very evidence of 600-plus stores in very varied situations and serving very different communities shows that you can run successful bookstores pretty much anywhere,” he said. “The model that we now have, which devotes considerable responsibility and accountability to the store teams, means you can set up a store appropriate to the place in which you find yourself. We're not trying to have the same store on the Upper East Side as we would have if we're opening in, say, Montana or indeed the Bronx, just a few miles away.”

Daunt is equally determined that the store estate will be just as eclectic as the site selection, although new stores generally are smaller than the larger-footprint outlets for which it used to be known. This reflects both the changing nature of book buying and the more cost-effective nature of smaller units.

“We don't have a cookie-cutter approach in any respect,” Daunt said. “Clearly, we do want to serve communities where there are a large number of people who buy books. A certain level of education and a certain level of affluence is associated with successful bookstores.”

Chapter 2: The Power Of The Bookstore

“It would be nice to say it's all going well because we've become so much better now, but the reality is, rising book readership is clearly something that has been universal,” Daunt said of the effort to turn around the fortunes of Barnes & Noble, which until last year was more synonymous with store closings rather than openings.

Data firm Nielsen showed book sales rising by about 5% in the U.S. and UK in 2020 and 2021. 

“I think [rising readership] is directly as a consequence of a lack of community engagement during Covid and particularly among young people who've come out of that wanting to be in places where they can feel part of something social,” Daunt said. “And bookstores do that brilliantly.”

Given the positive climate, Daunt, who has been at the helm of Waterstones since 2011, said bookstores will remain successful if they are engaging, interesting, dynamic places that are well-presented with friendly service.

“If you tick all of those boxes, you'll be successful,” he said. “That’s underpinned the strategy of Waterstones for over a decade, and now it's very much the strategy at Barnes & Noble. Waterstones has been extremely successful in a very sustained way, but what is a bit different over these last couple of years is the sheer strength of the market. It's always easier if you're tacking with the wind behind you.”

He has approached Waterstones and Barnes & Noble, both owned by Elliott, in an identical way, he said, which also mirrors the small, independent chain bearing his name that he still runs.

“We brought that ethos and philosophy to Waterstones and now to Barnes & Noble,” he said. “It is the very fact that you don't have a model. That is the common ingredient. Beyond saying we really have to address bookselling in the stores, we have to empower teams. And the teams have to take responsibility to engage.”

Those qualities retain value for retailers, and Daunt pointed to the auction of the Bed Bath & Beyond business, saying that despite its bankruptcy, there were companies interested in its brand that said, “OK, we can use these spaces.”

As a physical bookseller, Daunt said Barnes & Noble is “fortunate that we don't compete with anybody,” providing it with more options for where it can take space.

“I think landlords appreciate that we bring an attractive destination retailer and that our customers will be spending money with our neighbours,” he said. “All things considered, we’re probably among the most attractive of retailers.”

In terms of where and how the company will grow, filling in the gaps around its existing estate means identifying sites “slightly off-pitch but still prominent, where we really punch above our weight,” and also ensuring that the company has local teams available that can run them effectively.

Chapter 3: Amazon Books And A Plot Twist

“Amazon bookstores were a different sort of a thing. In their own sense, they were absolutely fine, but it was a very small selection driven by the star ratings rather than a real bookseller curation,” Daunt said of the demise of the online giant’s physical bookstores, which came and just as rapidly went. “And they were selling an awful lot of things that weren't books.

“They dominate online in a dramatic sense. Absolutely brilliantly. And this was probably always a sideshow as they were slightly a hybrid thing.

“But is it welcome that somebody with more resources is not expanding in the physical book space? Absolutely!”

He also said that the rise of online shopping has changed the nature of physical bookselling, which has given the retailer more free rein to focus on what he feels it does best.

“The discovery process online is very different to browsing in a bookstore,” he said. “It actually in some ways was really helpful because I had to have these really boring sections of books that people kept coming to us for and I was therefore obliged to have. Demand for all of those, particularly the technical books, has just disappeared, as it’s all gone online. We don't have to carry those titles, which has given us much more space to do what we do best.

“The challenge for us has been how you move from the type of store which Barnes & Noble thought it had to be, in which you just rack everything up, and that was predicated on a pre-Amazon world. That, frankly, was the business that I inherited in 2019, with the maximum number of bookcases, everything arranged alphabetically.

“We are now moving to something where you curate your store to create maximum interest. Take history: Now it's chronologically ordered and you’ll find all your books on the French Revolution together, arranged and curated with the intention that they make discovery and learning as easy as possible.” 

Daunt said that means getting back to bookselling basics and executing well.

“So which are the books that are face-out? How do you make them attractive? How do you make it interesting? How do you stimulate a narrative guide? That's where the skill of the bookseller really comes in,” he said. “And it's something that Barnes & Noble hasn't frankly practised much in the past. And it's now busy learning how.”

That will also make the retailer more resilient in a period of enormous disruption, he said.

Chapter 4: The Labour Pool

It would be fair to imagine that soaring labour costs and the first store unionisation would not sit comfortably with a turnaround CEO backed by a hedge fund. Instead, Daunt is fiercely affirmative of the workforce and its importance in bookselling.

“We shouldn't remotely be complacent [in retail] of the necessity to pay wages which are real wages, which are going up significantly and in many ways in a very welcome way,” he said. “But there is much more pressure around labour availability than traditionally, and we're not immune from that.

“I do think bookstores have traditionally been an attractive place in which to work, and we are also changing the model. My predecessors deliberately skewed heavily towards part-time and short-term as cheaper. I skew diametrically in the opposite direction, always wanting tenure and the bookselling skills that come with tenure, ideally with the highest proportion of full-time that we can achieve.”

He said that is a very different model that makes the business much more resilient when times are tough because employees are much more loyal.

“There's a lot of change going on at the moment,” he said. “We ourselves have had our first stores choose to unionise, so that's something completely new for Barnes & Noble at two New York stores and one in Massachusetts.”

Chapter 5: Further Reading

While Daunt might be expected to be well-read given the job, it would be understandable should he not find a lot of time to read for leisure.

In fact, a “lot of time spent on planes,” plus the tongue-in-cheek observation that “I can claim books on work,” means he does have some recommendations.

“The best book I've read this year is a not-yet-published novel called Clear,” he said. “It’s a very short little novel by Terence Davies. Also fiction, I thought This Other Eden by Paul Harding was just sensational. And I've just started, and am wondering whether I'm really intelligent enough, the new Ben Moser, who has written a book about appreciating Dutch art.”

Epilogue: Disruption And The Future

“Amazon coming up was a big event for every bookseller, and then in the UK we had the net book price agreement, and then we had the massive implosion that Amazon caused big chains like Borders, plus all the others, going bankrupt, dramatically fewer independent bookstores and a huge contraction of physical space, the Kindle and subsequently audio, then the pandemic,” Daunt said.

“You're constantly having these big tectonic shifts. So in 30-plus years of being a bookseller, nothing has stayed the same. So it’s important to stick to what you do and do it well.” 

Daunt said he measures success in having well-invested, attractive stores that are well-stocked, with everything working through bookselling teams that are able to run really good bookstores.

“Then there is a financial side,” he said. “The owners have been fantastic, and they committed their support to the acquisition of Barnes & Noble, which at the time looked like it was catching a falling knife. That was brave.”

Daunt said unlike “every other retailer” that furloughed staff, it asked to stay open and keep its people working. That came at an eye-watering cost, as how long the pandemic was going to go on was an unknown. It played in Barnes & Nobles' favour, though, increasing book readership, but that is easy to say in retrospect, he said.

“Hopefully, we have been a very good investment for them. We've repaid that trust, and I'm sure they will sell us at some point and reap the rewards for their bravery.”