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Mainland Bookstores Look to Diversify to Counter Digital Challengers

Boosted by government support, many of China's bookstores are now adopting innovative new business models and tactically extending their ranges in order to remain viable and profitable in today's radically changed retail landscape.

Photo: Dedicated reader reclining zone: The 1200bookshop in North Tianhe.
Dedicated reader reclining zone: The 1200bookshop in North Tianhe.
Photo: Dedicated reader reclining zone: The 1200bookshop in North Tianhe.
Dedicated reader reclining zone: The 1200bookshop in North Tianhe.

Amid the ubiquity of e-books, mobile phones and tablet PCs, coupled with the convenience and discount incentives of online bookstores, more and more of the mainland's physical bookstores are facing business hardship and even closure. According to data from the All-China Federation of Industry and Commerce's Booksellers and Publishers Chamber, the number of physical bookstores in China has almost halved over the past 10 years.

In the face of these difficulties, the Ministry of Finance and the State Administration of Taxation issued a joint circular in December 2013 relating to extending the value-added tax (VAT) and business tax preferential policies for businesses engaged in publishing and selling certain publications. This included books, newspapers and periodicals and exempted book wholesalers and retailers from paying VAT until 31 December 2017.

This policy bolstered many bookstores, buying them time to readjust their business strategy and try a number of different approaches in order to secure their own niche. A number of bookstores in Guangzhou, for instance, have now diversified their business operations into food and beverages, stationery, toys, sporting goods, photographic appliances, as well as computers and mobile phones. Some are now open around-the-clock, offering free accommodation for backpackers, while others organise regular meet-the-writer events in order to attract readers.

Diversification: Beyond Books

Dubbed China's first 'book city', the Guangzhou Book-selling Center Company was established in 1994. A large-scale retail enterprise, the bookstore ranks second in annual turnover terms among the mainland's large-scale book cities. It has now transformed its business model from simply selling books into being a one-stop complex offering creative products, as well as cultural experiences and services.

Photo: The Guangzhou Book Center.
The Guangzhou Book Center.
Photo: The Guangzhou Book Center.
The Guangzhou Book Center.

The Center was closed and extensively renovated in September 2014, reopening in February 2015 with a new look and a redesigned layout. Liang Xiaoshan, the store's Deputy All-Media Marketing Manager, said the shop recorded between 50,000 on 100,000 daily visitors when it reopened during the Chinese New Year holidays in February. This represented year-on-year growth of 20-30%.

In March, the traditional low season, the bookstore registered around 25,000 daily visitors, representing a 10% growth over the pre-renovation period. From June onwards, up to the summer holiday peak season this year, the bookstore saw 50,000 to 60,000 daily visitors. During the seven-day National Day holidays, 40,000 to 50,000 daily visitors were recorded in the first three days, and 25,000 during the last four days.

Unsurprisingly, a number of the independent bookstores in Guangzhou are also diversifying their business operations. The 1200bookshop, frequently touted as one of the city's chicest bookstores, now offers specialist coffees, as well as unique ancillary products, including mobile phone cases, pendants and plants.

The company's first store opened in Guangzhou in July 2014. According to Liu Erxi, its owner, drinks now constitute a major source of income for the store, with peripheral products also making a considerable contribution. In light of its expansion to new sites, it has now turned to bulk production of its peripheral products in order to boost overall profitability.

Photo: Inside the Fang Suo Commune.
Inside the Fang Suo Commune.
Photo: Inside the Fang Suo Commune.
Inside the Fang Suo Commune.
Photo: The Commune’s green plants and living book zone.
The Commune's green plants and living book zone.
Photo: The Commune’s green plants and living book zone.
The Commune's green plants and living book zone.

Established in Guangzhou in November 2011, the Fang Suo Commune employs Stanley Wong, the renowned Hong Kong designer and artist, as its arts consultant. According to the bookstore's Manager, Fang Suo does not only sell books, but also organises crossover seminars relating to movies, literature, arts and architecture. These have included talks hosted by the Taiwanese writer Pai Hsien-yung, mainland film director Jia Zhangke, and the National Geographic photographer, Michael Yamashita.

In addition, customers have a choice of more than 2,000 items of home products across 60-plus brands, including tableware, handmade household items, as well as stationery and gifts. They can also enjoy coffees from the US, South America, Africa and Asia, while also purchasing from the Exception fashion line.

Product Differentiation

In today's highly competitive market, many book retailers have turned to product differentiation in order to attract customers. The 1200bookshop, for instance, focusses on "business" during daytime and "feelings" at night. Liu said his store's strengths lie in its 24-hour operation and its provision of free accommodation for backpackers for up to three days.

Among these backpackers are students with very low travelling budgets, business travellers in transit through Guangzhou and concertgoers unable to return home after midnight. There are also a substantial number of people needing to catch early public transport the following morning.

Photo: Well-branded: The 1200bookshop.
Well-branded: The 1200bookshop.
Photo: Well-branded: The 1200bookshop.
Well-branded: The 1200bookshop.
Photo: Plants and foliage from the 1200bookshop.
Plants and foliage from the 1200bookshop.
Photo: Plants and foliage from the 1200bookshop.
Plants and foliage from the 1200bookshop.

Unusually, the 1200bookshop does not sell certain categories of book, including martial arts and motivational titles nor those devoted solely to making money and being successful. Such books have been deemed incompatible with the Owner's beliefs and values.

Compared with the more idyllic setting and comparatively restricted space of the 1200bookshop, the Guangzhou Book Center is enormous and has a hugely comprehensive inventory. Every inch of the bookstore is crammed with books. As a result, little seating is available, with readers usually resorting to sitting in the aisles.

Typically, every bookstore has its own unique style. The Fang Suo Commune, for example, opts for special collections in terms of the books it sells. According to the manager, this has seen the bookstore divided into four distinct zones – Taiwan and Hong Kong books, humanities and literature, arts and design, and living and cookery.

The store has tens of thousands of publications from Hong Kong, Macau, Taiwan, and the mainland, as well as very many overseas territories. Each month, its buyers select the most appropriate publications from more than a thousand new titles across a range of subjects, including the humanities, literature, arts and lifestyle.

Photo: Readers relax in the Guangzhou Book Center.
Readers relax in the Guangzhou Book Center.
Photo: Readers relax in the Guangzhou Book Center.
Readers relax in the Guangzhou Book Center.
Photo: The Fang Suo Commune: Divided by discipline.
The Fang Suo Commune: Divided by discipline.
Photo: The Fang Suo Commune: Divided by discipline.
The Fang Suo Commune: Divided by discipline.

Customers also have the option buy limited edition books, many of which are hard to source from other physical bookstores or even from online vendors. In the past, these have included a 1999 first edition Taiwan print of Zhou Lunyou's collection of poems, which had a run of only a few thousand copies. It has also offered the Chinese language version of Codex Seraphinianus, an illustrated encyclopaedia of an imaginary world, published in limited edition of just 3,000 copies.

Location, Location

Site selection, of course, is vital to the success of physical retailers. The Guangzhou branch of the Fang Suo Commune is located at TaiKoo Hui in the very heart of the Tianhe Central Business District, an area that is home to more than 100 well-known brands. It is also well-supported by public transport and, thus, easily accessible to large numbers of consumers.

The management of the 1200bookshop chain have also focussed on choosing good locations. Following its initial launch last year, it has now opened three additional branches – East Tiyu, Wushan and North Tianhe.

Liu said his first store, a 24-hour operation, was set up with a "sentimental" and "playful" concept behind it. After opening more stores, his attention has turned to more to cost/benefit issues, with site selection of considerable importance. In terms of location, Liu believes that any site needs to be accessible by public transport, but still have low rent. Unfortunately, he finds it increasingly difficult to find locations that match both criteria.

Photo: The 1200bookshop: A stacked staircase bookshelf.
The 1200bookshop: A stacked staircase bookshelf.
Photo: The 1200bookshop: A stacked staircase bookshelf.
The 1200bookshop: A stacked staircase bookshelf.
Photo: Promotional gift bags at the 1200bookshop.
Promotional gift bags at the 1200bookshop.
Photo: Promotional gift bags at the 1200bookshop.
Promotional gift bags at the 1200bookshop.

In September 2015, the 1200bookshop announced on Weibo that its Wushan store had been running at a loss since opening a year earlier. Faced with a high rent, a failure to turn a profit in any month, and no likely prospect of improvement, the company closed the store in October.

The Wushan store, despite its remote location, cost Rmb20,000 to rent every month. The site was initially selected due to its proximity to a Liu's old school. Despite the closure of the store, Liu said the brand has now attracted a number of enquiries from shopping malls, many offering rental discounts and a choice of locations for possible new outlets.

Many bookstores with distinct USPs continue to prosper in Guangzhou. The Guangzhou UN Bookstore, for instance, is now the first bookstore on the mainland to be opened by Hong Kong's Sino United Publishing (Holdings) and allows readers to buy popular titles from Hong Kong, Macau and Taiwan. The Xooyo Bookstore, by comparison, is now established as one of Guangdong's leading academic and cultural retailers, with a particular speciality in academic text books. For its part, the Borges Libreria Bookstore sells mostly translated, non-mainstream books, with few best-selling titles found in its collection.

For further information relating to the tax incentives circular (in Chinese), see:
http://szs.mof.gov.cn/zhengwuxinxi/zhengcefabu/201312/t20131231_1031496.html

Xing Bin, Special Correspondent, Guangzhou

Content provided by Picture: HKTDC Research
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