Choice Logistics: steady growth
Having already made itself at home in the printing industry, Taiwan's Choice Group is another company looking for new ways of doing business.
Of the three links in the publishing chain-content, distribution, and printing-it was printing that was the first to benefit from the easing of restrictions. In 1994, Choice Lithograph entered the mainland market by setting up a wholly-owned subsidiary there. Since then they have survived a variety of onslaughts, from the imposition of restrictions on wholly foreign-owned ventures by Beijing in 1995, through the 2000 abolition of the preferential exemption from levies on importing printing plant and equipment, to the strengthening of provincial-level publishing houses. In spite of all this, their business continues to go from strength to strength. In 2001, in collaboration with Shanghai Century Group they established Choice Logistics, in which the Choice Group holds a 30% stake, and thus moved into the area of publishing logistics. At the start of this year, they were preparing to expand further into eastern China, to try and dominate the purchasing business, and persuading various small and mid-sized printers, bitter rivals, to integrate under the Choice umbrella-mergers which came at no cost to Choice itself.
However, Choice's main task is the construction of book and magazine centers nationwide; vital logistical centers like those of Hunan Publishing House and the Beijing Institute of Light Industry are entirely built on the work of Choice, from hardware construction to software and human resource management, all on a solid base of Taiwanese know-how. With a solid distribution system being the thing most lacking in the mainland publishing industry, Choice's know-how has attracted the interest of the mainland's local companies, and has led to numerous talks. "Although you couldn't really say that the number of contracts actually signed is huge, we're setting ourselves up for the future as a kind of consultant, helping integrate and strengthen each individual client according to their respective distribution weaknesses," says Choice Group vice-chairman Jimmy Cheng. Choice also plan to set up a new arm, providing specialist help to Taiwanese publishers through their in-depth knowledge of the particular political and commercial environment of the mainland.
Exporting Traditional Chinese books
Compared to the mainland-industry-based approach used by Infotopia and Choice Logistics, the sale to the mainland by Linking Books of books returned to publishers by bookstores in Taiwan seems to be a particularly cautious approach.
Now that publishers in Taiwan have no restrictions on their work, over the past few years they have put out massive numbers of books, and the stores have had to limit the shelf life of their stock, so a great proportion of books are returned to the distributors fairly quickly. Although the major publishing houses occasionally hold returned-book fairs, the books can still sit in the warehouses for lengthy periods, and the pressure on these warehouses is a major headache for the industry. Thus, Linking Books saw a market in the eastern areas of China of 40-50,000 Taiwanese businesspeople, and with the cooperation of Tienlung Books, the NT$69 book chain, it collected up returned books to sell in the mainland.
"The price we gave to the local bookstores for these batches of 'discount' books was RMB10 (about NT$45), and the bookstores sold them for RMB19.90 (about NT$90). The sellers of regular (non-returned) books then were forced to lower their prices, which were anything from 10 to 20% more expensive than in Taiwan. Now each month we're making an average of NT$300,000-400,000, which we're very proud of," says Linking Publishing's assistant general manager Wang Cheng-hui. "Not only have exports of Traditional Chinese books to the mainland allowed us to reduce stock in the warehouses, they've also served as a 'dress rehearsal' in the mainland market. It's let them get to grips with the wholesale and retail process there and get a feel for the tastes of their new readers."
The $69 books and returned books are largely ones that are unmarketable in Taiwan, but now sell in huge numbers in mainland China. Some are concerned that this will destroy the reputation for quality of the Taiwanese publishing industry, but Wang believes that the strength and quality of the industry is beyond question, and the impact this will have on the publishers will be minimal.
Difficulty vs. opportunity
The mainland is a massive country, and the distance between urban areas is huge. Profits from distribution and retailing of books and magazines are small, even though the 'planned economy' is gradually being dismantled, and soon it will be far too difficult to set up a wide-ranging logistics and shipping network. Because of this, some publishers are choosing not to sell through bookstores, instead looking for an alternative way, facing their own technological difficulties on the way.
Germany's Bertelsmann group is trying to open a new path through Internet ordering, hoping to build their own sales network independent of the inherently flawed system of the mainland, and already membership of their book club is in excess of 3 million. But as Choice Group vice-chairman Jimmy Cheng points out, the mainland is very different to other countries, and as an online operator, new mechanisms for payment, delivery, and return of books need to be set up where the infrastructure and consumer climate are ready to accept them.
"In several communities around the mainland there are many people using the same house number, so aside from the postal service, it's difficult for outsiders to develop a presence. This is on top of the fact that we can't use the catalog ordering system employed by the convenience stores, since convenience stores themselves are few and far between here," says Cheng. "There are also problems like the fact that Internet access and credit cards aren't particularly widespread, and setting up customer service stations in all the various areas is a laborious process-all these factors are testing the structure and viability of our mail and Internet ordering systems."
But as they say, every cloud has a silver lining. It's still a pioneering time for logistical systems; if someone can establish a low-cost system, the potential for growth will be boundless-another reason why so many foreign companies are lining up to invest.
The companies have little to do with consumers in the various remote towns and villages across the mainland, meaning a book that sells rapidly in the cities can often take years to make it to rural areas. This is largely so because it is in the interests of the monopolistic state-owned delivery channels and the provincial publishing houses-readers in the rural areas of the mainland can often only read the crudely made books published by local publishing houses. If any business is able to benefit the company involved in it, while simultaneously giving the company the image of being a patron of the nation's education and culture, businessmen will be more than happy to jump in on it. Publishing and distribution is most certainly the industry that can do all that.
With the relaxing of restrictions on the publishing market, mainland China has already taken one step along the path to self-improvement. What happens now? We'll have to wait and see.