The battle for books

Last month saw the closure of the Shanghai Book Mall's store on Huaihai Road. It was a move that shocked thousands of people. While it has been increasingly difficult for bookshops to make ends meet and hundreds of shops have closed because of the competition from the Internet and e-books, few expected to see a State-owned bookshop fold, especially a famous one in the center of Shanghai.

The Shanghai Book Mall opened more than 30 years ago and offered customers a choice of more than 100,000 books. It was part of the Xinhua Bookstore chain - China's most famous bookstore brand - which has shops all over the country. After the Huaihai Road shop was closed the parent company, Shanghai Xinhua Media Co Ltd, announced it would be changing its business model to avert the decline in profits and would shortly open another bookstore on Huaihai Road. It also announced plans to build a new center in Jing'an district which would incorporate bookstores, shopping malls and cinemas, the Oriental Morning Post reported.

"Bookstores, including State-owned ones, have been under huge pressure to survive in recent years with the mushrooming of online retailers and the changing habits of readers," Kan Ninghui, the deputy director general of the Shanghai Municipal Press and Publication Bureau, told a press conference on Tuesday. The administration promised 15 million yuan ($2.38 million) annually to subsidize more than 6,000 book retail outlets in its 12th Five-Year Plan (2011-2015). Five million yuan of this fund will be used to support selected bookstores.

Sample shops

"Online retailers offer lower prices and convenient delivery services and they are turning bookstores into sample shops. People are going to traditional bookstores to look for books, but they go to online bookstores to buy books," Kan said.

Xue Zhichao is a good example of the new book shopper. Aged in his 70s, a retired senior engineer who lives in Xuhui district, Xue loves reading and buys books every month. But few of his books come from traditional bookstores, though his home is very close to a State-owned store. "Sure you feel better buying a book from a traditional store. The atmosphere is great, you can see the quality of the paper and the printing, but the prices are so much higher compared with those from online stores," he said.

From 2008, the sales of books from online retailers have been increasing 100 percent each year, and their market share has grown to 35 percent from an initial 5 percent. The market share will reach 80 percent within a decade, prominent publisher Lu Jinbo recently told the China Business News.

The general manager of the Shanghai Book Mall, Shen Yongyao, said that the very low prices charged by online retailers had given customers the impression that there were big profits in the book sales industry.

One older customer recently created a row in a shop when he demanded a discount after buying books worth just 200 yuan. He insisted he was only buying from the store because he trusted traditional State-owned bookstores but he believed they were making large profits because he could buy books much more cheaply online.

Shen said the Shanghai Book Mall only made a profit when it sold textbooks for primary and middle school students. In China Xinhua bookstores are the only stores authorized to sell textbooks. "But for the Xinhua stores in Shanghai business is not as good as in other cities. Fewer children go to primary schools because of the lower birth rate and Xinhua bookstores here are not exempted from tax," Shen said. "The profit from textbook sales just makes up for the losses incurred in selling other types of books. Nowadays its profits largely come from non-book sales of items like software and stationery."

Insiders said that even though the Xinhua bookstores were a famous brand and a symbol of China's book industry, the stores had been forced to restructure from 2005.

In 2005, the Shanghai Book Mall on Huaihai Road was renovated and its commercial space increased to 1,500 square meters. It offered 100,000 books, audio and video products, making it one of the largest bookstores in Shanghai. But in a few years, sales declined and the commercial space was reduced as it leased out its first and second floors.

Tough all over

Things are also tight at Bookuu Book Mall on Yishan Road - a subsidiary of a Zhejiang Xinhua bookstore group. "Though we are not in deficit, our profits have been cut by half in the past year," said marketing manager Zhu Bing.

Unlike the local Xinhua bookstores, Shanghai Bookuu is not allowed to sell school textbooks. It focuses on selling reference books for primary and middle school students. Compared with private bookstores, it enjoys subsidies and more staff.

Shanghai Bookuu talks to publishers and schools to discover the reference books that will be needed every year. As well as working with schools, it also talks to nearby universities and businesses. Zhu said the store had received nearly 1 million yuan from the Xuhui distric government when it was expanding.

Like many other State-owned bookstores, it owns the land and does not pay a high rent, one reason many private bookstores are threatened. But even these advantages have not let it escape the decline in sales and customers.

Shanghai Bookuu opened in 2005 as part of a group expansion. That was its heyday. It was one of the largest comprehensive book malls in the city and customers crowded there. Today there is still a mall but few people go to the bookstore even though it is only two minutes from a metro station. Some people will spend a day at the bookshop browsing and reading but never buying.

The mall's four floors cover 10,000 square meters, but now the first floor has been leased to a bakery, an optometrist's and a sporting goods store.

In 2010, Bookuu opened a sister shop of over 3,000 square meters on Changshou Road, at the junction of Changning, Putuo and Jing'an districts, to increase its public profile. "It is a busy area with many businesses and schools located there, but not many readers come. It is not what we expected. The store has been losing money," Zhu said.　

Specialists suffer

Specialist bookstores are also suffering. "Our sales are much lower than previously. If we did not own the building we would not survive," commented one staff member at Fuzhou Road's famous Shanghai Foreign Language Bookstore.

At the end of the 1970s, specialized foreign language bookstores emerged after the country saw the need to introduce advanced technology data. Universities and scientific research institutions were their mainstay customers and this meant they were not concerned about profits. But now the business has also been hit by online trade. Customers can now easily access foreign language books and information on the Internet. Many foreign language bookstores have expanded the range of books now that their original business is no longer viable.

The Shanghai Foreign Language Bookstore first opened in 1958 and last year opened an online shop on Taobao. Though it has not yet seen big profits the store is hopeful that the venture will be successful.

Shanghai Bookuu also opened an online store in 2006 to offer books to readers in the Yangtze River Delta area. Zhu explained: "We work with logistics companies and deliver to customers in this area. Sure it's a long way from the online retailers like dangdang.com, a major online book retailer that delivers books to the whole country, but we are trying to keep a share of the market in the area." In 2011 Bookuu also set up a Taobao shop.

Website attraction

Last year these two online bookstores brought Bookuu 8 million yuan in sales, but as Zhu admitted, there was not much profit because the prices were low. "We have to give discounts. The prices the online retailers provide are very low, often discounted by 50 or 60 percent with free delivery. They don't make money from selling books, but attract customers to their website where they can buy other goods," Zhu said. Online retailers like dangdang.com and amazon.cn sell a range of products.

The press and publication bureau's Kan warned: "The discounts offered online cannot be so low that they damage the development of the industry. If they focus on the price war, the low profits will force book retailers to shift the losses to publishing houses. It is the writers then who will be damaged in the end. It will become a vicious cycle and will stifle the enthusiasm and creativity of authors."

He said the city would put limits on the price war, but gave no details at the press conference.

Online sales of traditional bookstores are also being hampered by online innovations. Dangdang announced last month that it was designing its own electronic reader which would enable its customers to download books from its website and read them anytime, anywhere, according to a report from the Xinhua News Agency.

360buy.com also has a similar plan and is working with hardware manufacturers. Industry experts are concerned that moves like this will worsen the situation for traditional bookstores.

A plea for protection

It seems that Taiwan's Eslite Bookstore chain, which has shrunk shopping space for books and expanded book-related retail areas, could be a model for bookstores on the mainland.

As State-owned bookstores consider measures to restore their profits, Shanghai Bookuu plans to build a 4D cinema on its second floor to attract more customers.

"Bookstores should be protected. They are a unique part of the city skyline and they are an important part of the city's culture," Kan said. Shanghai plans to develop its cultural industry and bookstores should be a major part of this. The total output value for culture is targeted for 12 percent of the entire municipality budget, according to the 12th Five-Year Plan.

The Shanghai government's 15 million yuan boost for the book trade will be given as funding, rewards and subsidies for interest payments on construction or renovation. Kan said it was not yet known how many bookstores would qualify for assistance and how much the assistance would be worth, but he was sure that some bookstores could be allocated as much as 500, 000 yuan.

"Though this is not a lot, it reflects the determination of the government to look after bookstores," said Shanghai Bookuu's marketing manager Zhu Bing.

Other bookstore managers are looking for a wider range of assistance. The Shanghai Book Mall's Shen hoped bookshops could be granted tax relief.