Japan heads on-line to shop for books

Business Asia, Dec 13, 1999

Like most Japanese salarymen, Tatsuya Ueno likes nothing better than forgetting a long day at work by browsing at his favourite bookstore.

What makes the 33-year-old computer company employee different is that he sneaks a peek at the latest titles over the Internet -- at Bunkyodo Co's J-BOOK, one of a pack of new on-line services scrambling for a piece of Japan's US$20 billion market for books and magazines.

"I found more books than I expected," said Ueno, who started looking for leisure reading on-line because he had trouble getting out of the office before closing time at real bookstores. The prospects for on-line book sales in Japan, where the number of Internet users is seen doubling to 20 per cent of the population in two years, have attracted a throng of companies ranging from traditional retailers like Bunkyodo to cybergiants Softbank Corp and Amazon.com Inc.

The numbers certainly make a nice read: the government forecasts business-to-consumer e-commerce will jump to US$29.7 billion by 2003, almost 50 times last year's US$612 million.

Books have already become the fifth best-selling item online in a market consisting largely of neighbourhood bookstores lacking the sophisticated databases common in countries dominated by retail chains. Finding a desired title can sometimes take a few trips and a couple of weeks -- and that's the kind of time the Uenos of Japan don't have.

Bunkyodo, whose chain of almost 200 bookstores is the country's largest, launched its assault on the Internet in August. It joined a battle already being fought by Kinokuniya Co, a 50-store book chain targeting annual online revenue of 12 billion yen, and Yamato Transport Co, a parcel courier whose mail-order book service saw sales jump 70 per cent last year after it began accepting orders over the Internet.

Bunkyodo is trying to win the hearts and minds of Japanese consumers by offering a bigger selection and lower shipping fees than competitors.

What it doesn't offer is discounts on books -- but neither does anyone else.

That's because the retail price of books in Japan is fixed by a 46-year-old regulatory structure erected to protect merchants against "unfair" price competition.

"Price can't be the means for differentiation for Internet book sales in this country," said Societe Generale's Kanamori.

So much for the price-slashing strategy Amazon.com used to cut a swathe through a US market that last year tripled to US$15 billion.

Instead, everybody from e-shopper Ueno to the billionaire founder of Softbank is talking convenience.

Softbank, the Internet investment company that brought Yahoo! Inc to Japan, is entering the country's Internet book market later this month with what chief executive Masayoshi Son has dubbed "a uniquely Japanese brand of e-commerce" for consumers hesitant to do business with a faceless cashier.

Backed by Seven-Eleven Japan Corp, Softbank's e-Shopping Books venture will give buyers the option of picking up and paying for their books at any of the convenience chain's 7700 nationwide stores.

As for Seattle-based Amazon.com, the world's biggest online retailer hasn't announced its plans for Japan, though analysts expect it to set up shop early next year.