Lin Weiyi loves books. He just can't get enough of them. That is why he has been ecstatic about the mushrooming, in recent years, of bookstores in Beijing.

The 40-year-old government official no longer has to rely on State-owned Xinhua Bookstore for his reading needs. Now, he has more choices than ever to buy books either in large bookstores, private bookshops, small stalls or online libraries.

And the new entities' services are better.

"I still remember, when I was a school student, only Xinhua Bookstore was available and, when a new book was published, we even queued during the night to buy a copy," recalls the bookworm.

"It's really nice ... all you need to do is just make a phone call. The bookstore will send the book to your home."

China's book retail market is entering a period of fierce competition.

Private and overseas booksellers, with reader friendly services and convenient chains of bookstores and suppliers, are increasingly stealing market share away from Xinhua Bookstore, which had monopolized the sector since 1949.

An increasing number of mergers and acquisitions are expected, given the fact the Chinese Government lifted all restrictions on overseas book retailers and distributors last December. The move was in accordance with China's commitments to the World Trade Organization (WTO).

China joined the global trade bloc late in 2001.

New players

Overseas players, who climbed aboard the China bandwagon early, are showing a strong interest in expanding to the nation's second-tier cities. These players have already established their footholds in several Chinese metropolises including Beijing, Shanghai and Guangzhou.

Official statistics indicate 15 overseas book distribution firms have entered the Chinese mainland. A majority of those firms are retailers, either via chains or the Internet.

They have enhanced efforts to acquire local booksellers to expand their sales networks throughout China since the sector's opening.

Germany-based Bertelsmann, one of the world's top four publishing house, is the front-running firm in the market.

Last year, Bertelsmann acquired a 40-per-cent stake of Beijing-based 21book, a private book retailer, to establish a joint venture - 21st Century Book Chain - to promote small member chain stores in China.

Bertelsmann Book Club and Bol.com.cn, two units of Bertelsmann, are active in both China's off-line and online book retailing segments.

The book club has become the largest joint venture book club in China. It serves 1.5 million members across China.

Last year, Amazon.com, the world's largest online book seller, purchased 100 per cent of joyo.com, China's leading shopping website, for US$75 million.

The latter has a sales network that reaches many medium-sized cities in China.

Sources from amazon.com hinted more acquisitions and mergers are being considered, especially given the promising future of China's bookselling segment.

Hong Kong Union Publication Group, the special administrative region's top Chinese-language publishing house, invested 30 million yuan (US$3.61 million) to establish a solely funded book-distribution subsidiary in Guangdong Province earlier this year.

Some overseas investors have expressed interest in acquiring a stake in Xinhua Bookstore. Tom.com, the Hong Kong-based multimedia firm reportedly is eager to purchase stakes in Xinhua's bookstores in several provinces to create, via partnership, a logistics and distribution network.

Sing Wang, chief executive officer of Tom.com, which is listed on Hong Kong's stock exchange, told a forum last year the investment could range between 400 million yuan (US$48.31 million) and 900 million yuan (US$108.69 million), depending on the scope of the business.

Compared with overseas investors, China's private entrepreneurs have secured their footholds in the lucrative market.

Statistics from the General Administration of Press and Publication indicate sales of books by privately owned bookstores account for at least 40 per cent of all non-academic books sold in China.

China's book-distribution sector is currently worth 70 billion yuan (US$8.43 billion). Private book wholesalers control more than half of the market.

Statistics indicate there are more than 5,000 private book retailers and wholesalers in China. Of those, 30 have annual sales in excess of 100 million yuan (US$12.05 million) each.

They are stepping up their efforts to grab greater share of the market.

Xishu Book House, China's top private bookseller, is seeking to expand, via franchising, into residential communities.

Xishu plans to co-operate with domestic and foreign partners to establish more large bookstores, says Tu Yuyan, the company's vice-president.

He did not elaborate.

Xishu has more than 560 franchised stores nationwide, and an online book club. The firm has outlets in China's major cities, and in about 60 per cent of the second-tier cities.

Making adjustment

Amid the influx of multinational book distributors and the growing number of private domestic players, Xinhua Bookstore, long the dominant book distributor and retailer in the Chinese mainland, is trying to transform itself into a market-oriented firm.

Xinhua Bookstore Head Office (XBHO), a subsidiary of Xinhua Publication Distribution Group Co (XPDG), plans to attract foreign and domestic private investment in an effort to transform itself into a joint-stock company.

The head office used to be the sole distributor of books and audio-visual products to nearly 5,000 bookstores across China.

"Since the market's liberalization, we have had to transform ourselves from a State-owned unit into a market-oriented enterprise," Liu Guohui, XBHO's general manager, told China Business Weekly.

Xinhua is more interested in forming strategic alliances with foreign firms, given their rich experiences and abundant capital, Liu added.

"In contrast, domestic investors are rookies. They entered the market no more than 10 years ago," Liu said.

Xinhua's provincial-level bookstores are also speeding up their restructuring. Stores in Sichuan, Zhejiang, Liaoning, Guangdong, Jiangsu and Fujian provinces are either in the process of, or have finished, ownership reform.

Those bookstores, and the one in Shanghai, have been restructured from wholly State-owned enterprises to State-controlled shareholding companies.

XPDG plans to establish distribution centres in six areas of China, to cover the country, within five years, says Zhang Yashan, the firm's office director.

The firm plans to open at least 1,000 outlets and 20 large at least 3,000 square metres each bookstores.

"The distribution network will serve more than 15,000 bookstores in five years, and, by then, the group's annual revenues will likely reach 3 billion yuan (US$360 million)," says Zhang.

Future trend

Yu Guoming, vice-president of Renmin University of China's School of Journalism and Communication, suggests foreigners will not play a key role in China's book distribution sector, at least in the short term.

"Books are a special type of commodity, with their prices set by the publication houses rather than the sales agencies. In other words, prices are determined by the producers rather then the wholesalers or retailers," Yu said.

"Moreover, it will be difficult to break the long-term relationships between the publication houses and the local book wholesalers, as the publishers may not have enough confidence in the foreigners' ability to operate in the local wholesale market.

"Also, overseas book distribution enterprises will have to spend a certain period of time to realize localization."

Furthermore, foreigners are likely to sell books through chains, franchises and/or online. Those sales methods account for no more than 10 per cent of China's book retailing market, indicates a survey conducted by the journalism and communications school.

Xinhua Bookstore is not likely to lose its dominant position any time soon, given its gigantic business scale and nationwide sales network.

"To maintain its lead, the overall reform of the State-owned giant is inevitable, and should be urgent," says Yu.

"And the private firms should sharpen their competitive edges."

Timeline:

A history of the opening and liberalization of China's book retailing and distribution sector:

From 1949 to 1999, State-owned Xinhua Bookstore was the major retailer and distributor of books in China.

In the 1980s, the market was opened to a few domestic companies, on a trial basis.

In 1999, private businesses were given permission to retail and distribute books.

In 2002, overseas firms were allowed to retail books, but there were restrictions, such as location, shareholding and scale.

In December 2004, the restrictions on overseas and private book retailers and distributors were removed.

(China Daily 03/21/2005 page9)