UK’s Waterstones To Wade Into The E-Reader Market With Kindle Killer?

Waterstones — the leading UK bookseller that was recently bought by Russian billionaire Alexander Mamut — is taking a tip from its U.S. counterpart Barnes & Noble (NYSE: BKS) and launching its own e-reading device. The news, to be revealed by the company’s MD James Daunt in a radio interview today, raises all sorts of questions over whether Waterstones has the size and digital muscle to make such a product work, and whether it will be partnering with other companies already working in this space.

In an interview with the BBC for its “You and Yours” consumer affairs program, Daunt said that the company’s e-reader development was “well down the planning line.”

He says that the device will be launched next spring. That’s a short timescale, considering that from the sounds of it, it’s a project that was initiated, or at least progressed, only after the company was bought by Mamut from HMV (LSE: HMV) earlier this summer for £53 million.

“[An e-reader] requires a certain investment and certain confidence in the future, which we have,” said Daunt, who earlier noted, “Luckily we have an owner who is prepared to invest in it.”

(Its e-commerce director actually discussed the possibility of a Waterstone’s e-reader back in May.)

When contacted directly for a response to this report, a spokesperson for Waterstone’s declined to comment.

Daunt believes that a Waterstones e-reader, tied together with its existing e-book store, could potentially provide Amazon (NSDQ: AMZN) a run for its money.

“We in Waterstone’s need to offer you a digital reader which is at least as good, and preferably substantially better, than that of our internet rival,” he said. “You will have a much better buying experience purchasing your books through us.”

His template? Barnes & Noble and its Nook line of products, which feature not only e-readers but devices that more closely rival the iPad and other tablets: “They have combined [the Nook] with the physical shop,” he noted, praising the concept of being able to use the Nook in the physical stores to increase footfall, and noting that the concept and the products seem to be working.

“[Barnes & Noble] has enormous and increasing market share. They are beating Amazon in their own backyard.” In its last earnings report in August, B&N said it had a 27 percent share of the U.S. e-reader market. At the end of 2010, it was 20 percent, so while it is definitely growing and the number-two to Amazon, it is by no means dominating at this point.

The news of course raises a whole lot of questions. Among them, who might partner with Waterstones for this project, and does the chain — one of the UK’s largest, but still only a UK chain — have enough capital, scale and digital muscle for such a product to succeed?

“Barnes & Noble spent $50-200 million building the Nook reader + ecosystem. All of Waterstones is only worth $50 million. Challenging,” noted Andrew Rhomberg, founder of the “e-book sharing” service Jellybooks in a tweet.

There is the question of whether Waterstones could partner with a provider of an exsiting e-reader — Barnes & Noble itself, or Kobo — or whether it might work one of the many e-reader device makers not tied to any existing store. The short timeframe and costs involved could point to a licensing deal rather than something built from the ground up.

Some of the digital content deals that Waterstones had in place when it was still owned by the media retail giant HMV have been thrown into question since the sale of the chain to Mamut, but Waterstone’s has maintained that the e-book supplier relationships would continue.

But perhaps the company has not really put its best digital foot forward up to now: “It’s one thing to launch an e-reader but another question to launch a rally great e-reader,” noted Benedict Evans, an analyst with Enders Analysis. “Waterstone’s currently has 90,000 titles on its e-book site, so they’ve got a way to go to building up their inventory.” At the moment Apple’s iBookstore has 260,000 titles and Amazon has over 700,000 titles in their UK storefronts.

Up to now, the closest Waterstone’s has come to selling an e-reading device is retailing Sony’s Reader in its stores. It says it sold one million e-books in 2009/2010.