The feelgood factor has returned to the high-street chain, but is stocking the Kindle like inviting a fox into the henhouse?
In just a few years, Waterstones has gone from being the villain of the book world to the plucky underdog.
"When I first worked in publishing everyone hated them, whereas now everyone supports them," says one industry executive.
As hundreds of independent booksellers have shut up shop, publishers are desperate to see a specialised high-street bookseller survive and thrive. But a lot of the goodwill also has to do with James Daunt, Waterstones' managing director, who gave up running his small chain of independent bookshops to turn around the retail giant.
When Daunt arrived just over two years ago – hired by Alexander Mamut, the Russian billionaire who bought the chain from HMV – Waterstones was in trouble. Sales were dropping through the floor, bookselling staff were disillusioned, while the literati despaired that Waterstones stocked more copies of Jordan's autobiography than Tolstoy or Dickens.
For Daunt, Waterstones had simply lost sight of the old-fashioned art of bookselling: finding out what the customer wants. He tore up Waterstones' rigid centralised directives that meant every shop from Aberdeen to Exeter stocked the same books, as well as the "awful" planograms – photographs of a display table that had to be faithfully re-created in every store.
"That makes sense if you are selling shampoo in Boots, as it makes sense to have all the dandruff shampoos next to each other. It doesn't make sense in a bookshop, if you want interesting bookshops."
He also ended the cosy promotional deals that saw publishers handing over £27m a year to get their books in prime locations – putting the latest celebrity memoir smack-bang in the window or including a title in the "cynical" three-for-two offers.
"That was Waterstones' business model," he says. "Now we don't get paid a penny for doing anything; we just do it because we like the books."
It is too soon to say if integrity will pay off. Waterstones reported a £37m loss in its latest accounts, although Daunt was not in charge for the whole period. He is expecting a smaller loss this year, although the chain will have to wait a little longer to swing back into profit – "Next year if we are lucky," Daunt says.
The bottom line might be drenched in red ink, but Daunt is already looking ahead to opening new shops in towns including Lewes and Blackburn. "It is astonishing really how many vibrant places don't have a bookshop."
It is not surprising that Daunt would like to skip ahead to the next chapter. He has just finished a massive reorganisation that has seen 200 of Waterstones' 487 store managers leave the company – "a brutal and awful process" – but the new and remaining managers should find running a Waterstones shop much more fun.
Fun is a word he uses a lot. And it is his ambition to make his bookstores enticing places for customers that prompted him to make his boldest move yet – inviting Amazon to sell its e-readers and tablets in Waterstones shops –a move that has been likened to inviting the fox into the henhouse.
Daunt, who denies he ever called Amazon a "money-making devil", says stocking the Kindle was about giving customers what they want.
He dismisses worries that customers might disappear with their e-readers into the virtual ether – he is convinced only a small minority will abandon paper books altogether. "I have a strong sense we are reaching a sense of equilibrium with e-reading. E-reading works well – really, really well – in particular situations: noticeably when you are travelling, but it has clear deficiencies to the physical book.
"You don't own the thing, effectively you rent it. You can't put it on your shelf … Some people forget what they read on e-readers, because a key element of the personality of the book isn't there."
And it is readers' tactile relationship with the book that makes him optimistic that there is a bright future for shops, where people can squint at the print size and sniff the paper.
The pleasure of discovering something unexpected will keep people coming back into his shops, he thinks, even if they can save money on Amazon – although he insists the savings mostly amount to "pennies".
"Amazon is an astonishingly efficient business. It does what it does ruthlessly well. I've never been frightened of Amazon. I've always respected Amazon for what they do. But I think they do something different."
So far this approach has won him plaudits in the book world. "He has shown there is a future for a dedicated high-street bookseller," says Philip Jones, editor of trade magazine The Bookseller. "Going back two or three years nobody in the trade would have thought that anyone could have pulled it off."
But the story is not over, Jones adds. "What is most needed at Waterstones is investment in shops and staff.
"So long as the owner is able to afford that I think people should applaud it, rather than worry about the actual bottom line."
For now, Daunt has a bigger preoccupation than the bottom line, or even the steely efficiency of Amazon. A more fundamental danger for booksellers, he thinks, is that in a world dominated by tablets and social media, people have less time to read.
When he got up that morning, the light was leaking out from under his 10-year old daughter's bedroom door. "She was up at 6am just to shove her nose in a book. That is the pleasure of reading and we lose that, or forget about that, at our peril."
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