How a British Bookstore Chain Turned Profits with Café Culture

When ebook sales soared and physical bookstores closed across the UK, many predicted the end of the printed book. Yet one chain not only survived — it thrived. Waterstones, founded in 1982, had been drowning in debt and losses for years, yet by 2015 it posted its first profits in a decade. What changed?

The short answer: better leadership, local autonomy, smarter inventory, and yes — a bookstore café. Under new management, Waterstones cut losses, gave stores control over their own layout and stock, and added in-house coffee shops. The result? A 4% unsold returns rate (down from 23%) and profitability.

The Rise, Fall, and Rescue of Waterstones

By the early 2010s, Waterstones was in deep trouble. In 2010, it carried £170 million in debt. In 2011, its parent company HMV sold the chain to Russian billionaire Alexander Mamut for just £53 million. Losses continued: £37 million in 2012, £23 million in 2013. But by 2015, it was back in the black.

Enter James Daunt: A New Vision for Book Retail

The turning point came when Mamut appointed James Daunt as CEO. At the time, Daunt ran his own independent bookstore in London. He took over a struggling chain of 280 stores across the UK and parts of Europe. His response wasn’t to copy other retailers — it was to reinvent how bookstores worked from the inside out.

1. Cutting the Fat, Empowering Store Managers

Daunt started with a radical restructuring. He cut half the corporate management team and a third of store staff. More importantly, he gave store managers full control over local operations. They could design window displays, choose featured titles, and — crucially — clear underperforming stock. Categories like dictionaries, technical manuals, and law textbooks were culled. As a result, the rate of unsold books returned to publishers plummeted from 23% to just 4%.

2. Ditching Publisher Demands on Shelf Placement

Previously, the best in-store display spots went to whichever publisher paid the most. That practice earned Waterstones £30 million — but it wasn’t sustainable or customer-focused. Daunt took that power away from publishers and gave it to store managers. Now, each location tailored its featured books based on local demand. A store in a working-class neighbourhood might highlight different titles than one in an affluent area. Discounting policies also varied by location.

Rethinking the Bookstore Experience

Daunt didn’t stop at staffing and stock. He invested heavily in the in-store atmosphere. Waterstones stores got new wooden tables, improved shelf lighting, free Wi-Fi, and renovated storefronts. The goal: a welcoming, well-lit space that encouraged people to stay — and browse longer.

The Café W Effect: Adding Coffee to the Equation

In 2012, Waterstones launched its own branded café, Café W, inside its stores. This move wasn’t just about adding food and drinks. It was about creating a reason for customers to linger — to sit, read, and yes, often buy a book while sipping coffee. The café became a key part of the transformed in-store experience, making the bookstore not just a place to buy books, but a destination.

Why Waterstones Succeeded When Others Failed

Many factors played a role: the slow decline of ebook popularity, a cultural return to print, and changing consumer habits. But those trends affected everyone. What set Waterstones apart was its structural overhaul. Localized decisions, smarter inventory, empowered staff, and an improved physical environment turned browsing into buying. The café added another layer of dwell time and revenue potential.

Frequently Asked Questions

What caused Waterstones’ financial troubles in the early 2010s?

By 2010, Waterstones had £170 million in debt. Losses hit £37 million in 2012 and £23 million in 2013. The chain was struggling with high returns, poor stock choices, and competition from ebooks.

Who was responsible for turning Waterstones around?

James Daunt, appointed CEO in 2011 after the chain was sold to Alexander Mamut. He overhauled management, gave stores autonomy, changed book displays, and introduced Café W.

How did Waterstones reduce its returns to publishers?

By cutting slow-moving stock like legal books and technical manuals, and giving store managers authority to adjust inventory based on local tastes, returns dropped from 23% to 4%.

What changes did Daunt make to book displays?

He removed publisher-paid placement and let store managers curate shelves based on local demand, leading to more relevant and varied book selections in each location.

How did the café contribute to the turnaround?

Café W added a reason for customers to stay longer in-store, improving the overall experience and encouraging book purchases alongside coffee.

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