Currently part of the HMV Group, Waterstone's is the largest specialist retailer of books in the United Kingdom. The company was was founded by Tim Waterstone in 1982. A former employee of W H Smith he had the novel idea of creating a chain of bookstores where the customer really wanted to go in and buy books.
Waterstone's began life with a single store on the Old Brompton Road in London in 1982 and established the format of smart modern stores which employed staff who were knowledgeable about books, and stocked a wider range of books than typically seen on the British high street. As Waterstone's expanded and began opening more branches it also followed the policy of allowing individual store managers considerable discretion in deciding which books to stock. This proved to be a successful formula, so much so that Tim's former employers W H Smith acquired a stake in Waterstone's in 1989 and then took over full ownership of the company in 1993. This made Tim Waterstone rather wealthy but it seems that it was a decision that he later regretted as he has made a number of attempts to regain control of his offspring.
Tim Waterstone left the company when it was taken over by WH Smith in 1993, and the performance of the Waterstone's chain was less than spectacular under its new owners. Tim decided that he could do better and in October 1997 Tim submitted his own proposals to take over the whole WH Smith group. The board of Smith's rejected this proposal but it did encourage them to conduct a strategic review of their businesses. They initially contemplated floating Waterstone's as a separate business, but then decided to sell it to EMI in 1998. EMI then decided to make common cause with Tim Waterstone, and set up a joint venture with the American venture capital group Advent International. They agreeed to set up an entirely new company called HMV Media Group which bought Waterstone's for £300m and also EMI's own HMV music chain and its Dillon's book shops for £500m. The Dillon's stores were then either rebranded as Waterstone's or closed down, therefore creating a much enlarged and potentially more profitable chain.
Unfortunately the HMV Media Group began life just at the time when the internet was taking off and the likes of Amazon.co.uk were beginning to make headway. While Waterstone's set up its own online operation it later decided that it did not have "the scale of operations online to compete" and sub-contracted the whole thing out to Amazon in 2001. It still had to face the effect of competition from online business (which effected the music retail business as much as Watersone's book sales) and also faced increasing competition on the high street as the US chain Borders brought Britain's third largest independent bookseller, Books Etc in September 1997 and then began opening its own Borders UK shops. On top of which the country's supermarkets were also moving into the business of selling books.
The net result of all this was that under HMV, there was pressure on Waterstone's to adopt a more 'commercial' attitude to its business. At the beginning of 2000 this meant big reductions in the number of books stocked in each shop and a higher focus on shifting bestsellers. The Guardian of the 1st July 2000 reported on the case of Robert Topping, the manager of Waterstone's in Manchester for the past sixteen years, who had been sacked for "stocking too many good books", while the trade magazine The Bookseller was full of complaints from publishers about the level of books being returned by Waterstone's.
During this time both Bertelsmann and Borders made offers to buy the Waterstone's business which were rejected, as was a further offer from Tim Waterstone himself. Although Tim Waterstone remained as chairman of HMV Media he became increasingly unhappy with the direction the company was taking and so left the company in early 2001. The impression was that the company was stagnating; between the years 1999 and 2003 HMV failed to open a single new Waterstone's outlet.
Little had changed by 2005 when the private equity firm Permira made two offers (of £672m in February and £842m March) for the whole HMV Group after the chain turned down the approach. Tim Waterstone made another offer of £280 million to buy back the business from HMV, but eventually withdrew after complaining that the conditions HMV was imposing on his consortium were too punitive.
The HMV Group preferred to make a bid for the rival book chain Ottakar's. Complaints form publishers and authors ensured that the proposed takeover bid was referred to the Competition Commission on the 6th December 2005, but they ruled on the 30th March 2006 that the takeover would "not result in a substantial lessening of competition" and allowed it to proceed. On the 31st May 2006 HMV announced that it was proceeding with its purchase of Ottakar's. According to chief executive of HMV, Alan Giles claimed that the combination of the two chains would "create an exciting, quality bookseller". It was also the trigger for another round of redundancies which led to a number of high-profile departures from the head office team.
As of April 2006 there were 195 Waterstone's outlets and once the
rebranding of the former Ottakar's shops are complete this will rise to a total of over 330 stores. It also owns Hatchards in London and Hodges Figgis in Dublin and has two specialist English language bookshops in Amsterdam and Brussels. Its flagship London store, which opened in 1999, is in Piccadilly and at 66,000 square-feet claims to be the largest bookshop in Europe.
Waterstone's sales were £418.7 million for the year ended April 2006, and will be considerably more with the addition of Ottakar's; the Competition Commission estimated that 22% or one in five of the of all the books sold in the United Kingdom will now be rung up on a Waterstone's till. In September 2006 it decided to end its relationship with Amazon and re-established its own online retail operation.
All this corporate activity has not necessarily produced the desired result as the chairman of the parent compnay HMV resigned in January 2007 after the company posted an interim loss of £30m. The Times in March 2007 was referring to HMV as a "struggling company" and said that it planned to close up to thirty of its Waterstone's outlets, and was in danger of breaching its banking covenants.
From BBC News
Ottakar's agrees to HMV takeover 31 May 2006,
HMV-Ottakar's deal gets go-ahead 12 May 2006,
Waterstone's goes it alone online 9 May 2006,
Founder ends bid for Waterstone's Tuesday, 2 May 2006
Amazon in Waterstone's deal 26 July, 2001,
Waterstone heads back to books 21 February, 2001
New chapter for Waterstone's bookshops? January 9, 1998
WH Smith unloads book shop chain February 25, 1998
From Times Online
Pressure mounts on HMV balance sheet March 20, 2007
HMV chief goes after £30 millon loss January 11, 2007
A document called 'HMV Fast Facts' located at the HMV corporate website