Bookoff, Amazon, and the Japanese Retail Bookselling Industry

Case: Bookoff, Amazon, and the Japanese Retail Bookselling Industry

Although the retail bookselling industry has a large market in Japan, its profitability and scale of sales are relatively low. According to the case study, the Japanese book market has shrunk – industry sales have dropped by 20% over the last decade. Many new entrants of the Japanese retail bookselling industry weren't successful due to Japan's industry dynamics. However, Bookoff and Amazon Japan, two new entrants, managed to establish themselves with significant success. In this paper we will focus on the company Bookoff and their successful company strategy.

Japanese are enthusiastic readers; reading is part of their culture. Despite the fact that population of Japan is only half that of the US, Japanese retail bookselling industry is "as large as the US bookselling industry on a per-capita basis as of 2008" (Peng, p.387). Japan has approximately 17,000 retail book stores, which are mostly characterized by large number of relatively small stores. One could compare retail book stores in Japan to gas stations in the US- there is always one close to you. With the efficient public transportation network in Japan, most Japanese use public transportation for commuting to school, work, or basically everywhere. Reading during transportation became a common phenomenon. With all being said, Japan bookselling industry still has low profitability and small scales. Why?

In 1980, "the Saihan system" was introduced in Japan- a government regulatory law which allows publishers to set fix pricings on new books, music, and newspaper in the bookselling industry. 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.

Another government regulatory system called the Itaku Hanbai Seido ("Consignment Sale System") also plays an important role in shaping the industry dynamics. The system allows retailers to return unsold books free of charge to the publishers (Peng 2009, p. 388). Most bookstores therefore carry a larger inventory than what would normally be considered efficient. With many publications being returned, publishers and wholesalers turn to larger retailers for higher profits (lower return rate due to larger sale volumes). Such system favors larger retailers over small book stores. Hence, the Japanese bookselling industry has a small scale.

Besides Government regulation, the technological environment in Japan also reshaped the Japanese retail bookselling industry. Japan is one of the most technology-advanced countries, and such advancement has brought threats of substitutes to the industry. Emerging substitutes such as e-books and mobile phone novel reader became the new book reading trend. With the rise of the