The Case Study of “Bookoff, Amazon Japan, and the Japanese Retail Bookselling Industry”
The Case Study of “Bookoff, Amazon Japan, and the Japanese Retail Bookselling Industry”
Una Hu
1 Why is the profitability of large Japanese retail booksellers relatively poor and their scale relatively small?
According to the case, ‘stagnation in sales along with the steady increase of costs over time has reduced the profitability of both large chains and small stores’ (Peng 2009, p. 391). There are several reasons that results in the relatively poor profitability of large Japanese retail booksellers and their small scale.
Firstly, the Saihan system, i.e. Resale Price Maintenance, is the most important factor. The system’s price-fixing policy rules out the price competition (Peng 2009, p. 390), which would be a normal competitive strategy to increase sales in a market that sells undifferentiated products, like books. Also, profitability can be even lower if bookstores choose to do advertisement or promotion campaigns. According to Ken (2009), Japanese readers tend to purchase books based on alluring advertisements and good reviews.
Secondly, the emerging substitutes, e.g. used books, e-books and rental books (Taylor 1997), have reshaped the customers’ reading behavior. More than 80 million dollars in book sales were sold online in Japan, i.e. a 50% rise since 2004 (Peng 2009, p. 390). Hence, it is understandable why the profitability of Japanese retail booksellers is relatively low.
Thirdly, most of the Japanese book retailers are short of unique strategies to differentiate themselves and often copy the cost leaders. Copy alone does not constitute the best practice, but its combination with innovative improvements do (Lok 2010). Thus, generally poor profitability in the Japanese book retailing industry is inevitable.
Lastly, the Consignment Sale System leads to the low requirement on big scaled bookstores. The system allows retailers to return unsold books free of charge to the publishers (Peng 2009, p. 388). Therefore, the retailers have no need to
Una Hu
1 Why is the profitability of large Japanese retail booksellers relatively poor and their scale relatively small?
According to the case, ‘stagnation in sales along with the steady increase of costs over time has reduced the profitability of both large chains and small stores’ (Peng 2009, p. 391). There are several reasons that results in the relatively poor profitability of large Japanese retail booksellers and their small scale.
Firstly, the Saihan system, i.e. Resale Price Maintenance, is the most important factor. The system’s price-fixing policy rules out the price competition (Peng 2009, p. 390), which would be a normal competitive strategy to increase sales in a market that sells undifferentiated products, like books. Also, profitability can be even lower if bookstores choose to do advertisement or promotion campaigns. According to Ken (2009), Japanese readers tend to purchase books based on alluring advertisements and good reviews.
Secondly, the emerging substitutes, e.g. used books, e-books and rental books (Taylor 1997), have reshaped the customers’ reading behavior. More than 80 million dollars in book sales were sold online in Japan, i.e. a 50% rise since 2004 (Peng 2009, p. 390). Hence, it is understandable why the profitability of Japanese retail booksellers is relatively low.
Thirdly, most of the Japanese book retailers are short of unique strategies to differentiate themselves and often copy the cost leaders. Copy alone does not constitute the best practice, but its combination with innovative improvements do (Lok 2010). Thus, generally poor profitability in the Japanese book retailing industry is inevitable.
Lastly, the Consignment Sale System leads to the low requirement on big scaled bookstores. The system allows retailers to return unsold books free of charge to the publishers (Peng 2009, p. 388). Therefore, the retailers have no need to
References: Bamford, J. D. et al 2003, Mastering Alliance Strategy, Jossey-Bass, San Francisco. Higuchi, S. 2007, The Book Market of Japan. Japan Book Publishers Association, Frankfurut. Ken, Y. N. 2009, Book-buying habits in Japan, [Online], Available: http://whatjapanthinks.com/2009/02/27/book-buying-habits-in-japan/ [22 August 2010] Lok, P. 2010, Best Practice & Organizational Capability, lecture notes distributed in the unit Organizational Logistics (TPTM 6115) at The University of Sydney, Newtown on 10 August. McLean, P. 2010, Apple’s iPad big in Japan, [Online], Available: http://www.appleinsider.com/articles/10/05/27/apples_ipad_big_in_japan.html [22 August 2010] Moeran, B. 2010, The field of Japanese Publishing, Working Paper No. 46, Creative Encounters in Business Anthropology, Copenhagen Business School, Copenhagen. Peng, M. W. 2009, Global Strategy, 2nd edn, South-Western Cengage Learning, OH. Porter, M. E. 2008, ‘The five competitive forces that shape strategy’, Harvard Business Review, vol. 86, no. 1, pp. 79-93, [Online] Available: http://opac.library.usyd.edu.au/record=b3509091~S4 [22 August 2010] Taylor, S. 1997, ‘The changing Japanese book market’, Publishers Weekly, vol. 244, no. 25, pp. 16-19, [Online], Available: http://ezproxy.library.usyd.edu.au/login?url=http://proquest.umi.com/pqdweb?did=1972202521&Fmt=7&clientId=16331&RQT=309&VName=PQD [22 August 2010] Wu, Z. 2010, International Entry Strategy, lecture notes distributed in the unit International Business Strategy (IBUS 6001) at The University of Sydney, Camperdown on 2 September.