Why Bertelsmann failed in China

In mid-June, media transnational Bertelsmann AG announced that it would close all of its 36 bookstores across China (called Beijing 21st Century Book), by the end of July. Then at the end of June, the company further announced that it was closing down its book club business in China, administered under its Direct Group arm. Bertelsmann introduced the book club system to China in 1997 (according to the People’s Daily), whereby customers pay a flat fee for membership and discounts, and had eventually built up to a membership of 1.5 million. Despite this impressive number, the business was growing stagnant.

Why did Bertelsmann’s China business fail? Some people say it has to do with the prevalence of pirated books here. But obviously, people who hold this view have not caught on to the state of the book market in China nowadays.

I first got to know about Bertelsmann’s book club back during the 1990s from the monthly advertisements they put in “Readers” magazine. One of my classmates joined and would receive their catalog by mail every three months. Back then I was impressed by this new method of buying books by post, but more impressed by its strict requirement that it every member must buy at least one book each quarter or else a “recommended” book would be delivered instead that the member must pay for.

Several years later, the internet became more and more popular, and people started shopping online, including, of course, books. The first time I shopped for books online, I remembered Bertelsmann and visited its website. I was disappointed to find their selection much smaller than Dangdang or Joyo; moreover, the Chinese sites had more attractive discounts. Not long after that, I happened to go to Bertelsmann’s bookstore at the metro stop near me and couldn’t find any good books. After that, I pretty much stopped considering Bertelsmann altogether when shopping for books.

Bertelsmann continued opening bookstores around the country without realizing how greatly the internet would influence people’s shopping habits. People buy books on Dangdang and Joyo for its wide selection, low discounts, fast delivery, its payment-upon-receipt system, and freedom from any membership requirements like having to buy a book each month. Bertelsmann, by contrast, not only had a limited choice of books and poorer discounts, but it added another requirement last year that its platinum members had to spend RMB 299 per year or else be bumped down to a lower level. An understandable amendment, since the book club’s overhead is high, but nobody wants to be forced to spend money.

On top of all this, Bertelsmann book recommendations weren’t very good. Initially, I thought the recommendations in their catalogs were good. But in recent years, what they “recommend” in their shops and catalogs were too lowbrow – romance stories or pop stories about young people, written by young writers without any substantive thoughts and writing skills. The fans of these kinds of books are mostly students without any regular income, while the white-collar workers who are willing to spend money on books would consider them childish and cheesy.

The book club business is suffering in the US as well as China. Apparently Bertelsmann China is not the only business to get its local market wrong.

Claire Li