Waterstones boss’s tax plea:
Waterstones boss’s impassioned plea to the Government
JAMES Daunt has already done the unthinkable. Twice. After setting up his small book chain and fending off Amazon in the 1990s he was persuaded to do it all over again. ‘Waterstones was bust. It’s easy to forget now but it was absolutely haemorrhaging money,’ he says of the chain where he landed in 2011 as Amazon voraciously gobbled up Britain’s book market.
Retailers the length and breadth of the country will feel his pain – pain they themselves now feel as they fight against obliteration.
‘We got it first and it utterly devastated booksellers and now it is rolling into other retail sectors. If that combines with an economic and a retail downturn, then you’re really stuffed because it’s a combination that will pincer people.’
Daunt, who formerly worked at US bank JP Morgan before deserting the City to pursue his passion, is speaking from the other side.
Loyal shoppers across London still carry the familiar cotton bag from Daunt Books, which he owns but is run separately. And Waterstones is thriving with its 287 shops since he cut costs and gave more power to his ‘booksellers’.
He accepts shoppers find internet shopping ‘hugely seductive’.
But we are once more discovering our love of books, sales of which are incrementally increasing while sales of digital books – mostly read on the Amazon Kindle – plummet 10 per cent a year.
But Daunt remains stunned by the devastation Amazon and others have left in their wake. He talks of the ‘madness’ of a tax system that allowed them to flourish – ‘hoovering up the retail landscape’ – while local town centres implode.
‘You go to these local high streets in deprived areas and it is catastrophic,’ says Daunt, who regularly travels around the country and sees Britain’s boarded-up high streets first hand.
The collapse of House of Fraser, Toys R Us and Maplin may have finally jolted the ‘London-centric world’ to wake up to the crisis, he says. But he adds that problems run deep. ‘What’s been driven out already are independent retailers – all the little ‘mom and pop’ shops. The hardware shop in Barrow-inFurness that was making ten grand a year until business rates wiped out profits.
‘Places for little old ladies to have a natter in; the pillars of society in these small towns but now they’re gone and all you have left is a hole on the high street and a boarded-up shop.’
He says global firms cut prices to the bone by ignoring the need for profits as they rapaciously lure in shoppers. Or else they use intercompany payments to artificially wipe out their UK profits – all of which leaves little or no tax to pay for roads, schools and hospitals.
Meanwhile, UK firms shoulder the burden of corporation tax and billions extra in property taxes even as their markets are swept away.
‘For God’s sake, why are we allowing small independent shops, particularly in marginal retail locations, to be taxed in this grotesquely unfair way? What does that mean for jobs in that place? For locals who are tied there because that’s where their mother lives, their families? Or are caring for family members and need a part-time job – what do they do?
‘I accept the Government needs money, so go after the ones who are playing a tax game. I think it’s ridiculous that Caffè Nero doesn’t pay any tax. Starbucks, Amazon and all the others – it’s about redressing the balance,’ he says.
Last weekend in The Mail on Sunday, Tesco chief executive Dave Lewis demanded a 2 per cent online goods tax. Daunt says that sounds ‘reasonable’.
But, unlike Lewis – who wants a £1.25billion tax break handed to retailers – he suggests a blanket business rates cut for shops in vibrant towns would only prompt ‘the sodding landlord to turn up and ask for more rent’.
He explains: ‘If you fail as a chain it’s because there was something else going on – you were badly run or you have had a private equity owner who shoved a whole load of debt in there at some point.’
The Chancellor should keep the cash ‘to spend on the NHS and schools’.
Daunt, who was 47 when he first took the job running Waterstones – then owned by Russian businessman Alexander Mamut who remains a shareholder – suggests he was having a ‘midlife crisis’ at the time.
In April, the chain was bought for a sum rumoured to be £200 million by hedge fund Elliott which is throwing its might behind future growth. ‘We’ve been through the process of understanding what our purpose is – which is counter to Amazon – and it works,’ he says. The shops are about discovering books while novels aimed at teenagers and children are flying.
What’s more, because an estimated 500 independent book stores have closed since his arrival and in the face of Amazon’s onslaught, there are opportunities for a revitalised Waterstones.
‘I’ve got a long, long list of places – there are about 150 where I’d like to be. Places that used to have a bookshop but now don’t. We’re going back in, putting in a nice friendly shop.
‘I have a very clear view of what a good bookshop should be. As we become stronger we can make the shops better and have a more engaged, career-driven cadre of booksellers.’
Christmas also looks promising with Michelle Obama’s biography in the pipeline and a new JK Rowling release – ‘she’s our patron saint’. He piles through books in preparation – often reading only the first chapter – to spot potential bestsellers.
‘I don’t need to read the new Sebastian Faulks or Ian McEwan, because the reviews will do that for me. I read Max Porter – a tiny slip of a book with an utterly compelling twist – and Andrew Miller. Those are the books that make you go “Holy moley”.’ But he adds: ‘I’m not proud. So if Fifty Shades Of Grey comes around again tomorrow I’ll be delighted. Personally, I don’t invest it with any huge merit but I don’t begrudge anyone the pleasure of reading it.’
But, unlike many retailers, there is a higher purpose. ‘We do have an agenda which I don’t think we should be shy of – to try to bring learning, enquiry, education, compassion, all of those good and positive things.
‘You know, we don’t sell nasty books, we are very much a part of our communities and we try to encourage reading.’
But it won’t be plain sailing. Every business is planning for the potential consequences of ‘a Corbyn government or Brexit – a soft or a hard Brexit’.
‘You have to plan for it. Just the practical consequences. All our printing is done abroad.
‘There are Lithuanians who work nine months of the year in Germany and they come to us for six weeks before Christmas to operate 80ft forklift trucks. It’s a highly skilled job.
‘Am I really going to go down to the job centre in Derby and find those people?
‘We have significant issues and it’s difficult to think of a company that is less impacted than us.
‘Thank God I’m not a farmer needing to have my Brussels sprouts picked.’
These shops were once the pillars of society...now they are boarded-up. It is catastrophic
We do have an agenda: to try to bring learning, enquiry, education, the positive things