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Behind the Scenes / Distributors fret over Amazon move

The Yomiuri Shimbun

Nippan employees sort books at a distribution center for orders mainly from online book retailers, in Miyoshi, Saitama Prefecture. The center stocks 2.5 million copies of 600,000 titles so that orders can also be filled for specialized books and those with only a few copies published.

By Shinya Machida / Yomiuri Shimbun Staff WriterMajor online shopping company Amazon Japan G.K. is moving to expand its direct dealings with publishers rather than going through wholesale publishing distributors (see below). As brick and mortar bookstores decline and online bookstores grow more prominent, many in the publishing world are expressing concern.

“It’s so sudden. We don’t know the reason,” said a representative of the publishing distributor Nippon Shuppan Hanbai Inc. (Nippan). Amazon notified the distributor of its new business model at the end of April.

Amazon currently imports most publications from Nippan if it has the books in stock. For those it doesn’t have, such as technical or rare books, Amazon has Nippan backorder them from publishers. However, Amazon says it will begin dealing directly with publishers instead of through this backorder system.

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  • The Yomiuri Shimbun

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While books normally reach users in one to three days with normal orders, backordered books take from eight days to two weeks, according to Amazon. The online retailer is looking for a way to get books not usually stocked by distributors to users quickly without going through the distributors.

“If it takes too long to get books through the internet, readers will stop buying them,” a representative of the company said. “We’ve made this decision to make books available when people want them, and to give publishers every opportunity to sell.”

In response, Nippan Senior Managing Director Hirokazu Anzai said at a press conference on May 30, “It’s unfortunate, but all we can do is increase the quantity and quality of our stock.”

Fear and trepidation

But is Amazon’s only goal to improve the circulation of publications?

The company’s actions are spurring various speculations. At an explanatory meeting for publishers regarding the new business model in May, an Amazon representative made the management of a specialty publishing company the following offer:

”If you agree to deal directly with us by the end of June, we’ll raise the publisher’s cut from the usual 60 percent to 65 percent.”

Publication sales are normally divided into 23 percent for bookstores, 8 percent for publishing distributors, and 69 percent for publishers. But some smaller publishers actually get a thinner slice and find Amazon’s proposal to be advantageous, considering various conditions such as when proceeds come in.

Amazon has recently begun dealing directly with several publishing companies, including major companies such as Kadokawa Corp. These direct transactions now account for 30 percent of the total.

Although Amazon will continue doing normal business with Nippan, it may begin strengthening its ties with small and midsize publishers.

“This seems to be a breakthrough to the expansion of direct business,” said the management of another publishing company of the new model.

Diversity may decrease

Online bookstores have fewer unsold books compared to brick and mortar stores and have many advantages such as online rankings leading directly to sales. Even so, many in the publishing world remain wary of the industry giant Amazon because of its “secretiveness.”

Amazon Japan’s domestic publication sales figures have not been publicized. The annual report from the U.S. headquarters only indicated that total sales in Japan, including things like appliances and food, amounted to $10.8 billion (¥1.17 trillion) for 2016, with no detailed breakdown.

When the set price all-you-can-read electronic publication service Kindle Unlimited was launched in Japan last year, there were more users than expected. There was then an uproar from some publishers who said Amazon had arbitrarily withdrawn their offerings.

Japan’s publishing industry is unique for the diversity of its various-sized publishing companies and bookstores. Thanks to the development of publishing distributors, all kinds of books reach actual stores where readers can discover unexpected tomes and actually hold them in their hands. Online bookstores are certainly convenient for easily finding a book one wants to read, but if just one particular company becomes powerful, publishing company’s finances and readers’ book selection may be excessively affected.

“Publishers are becoming more dependent on Amazon for sales,” said Shuppan News Co. representative Yoshiaki Kiyota. “Amazon needs to reveal more information, and publishing professionals need to share their wisdom on how to coexist with physical bookstores.”

Online sales soar amid decrease of independent bookstores

Online bookstore sales are rising every year.

Nippan estimated total publication sales through online bookstores for fiscal 2015 were ¥172.7 billion, an increase of ¥44.2 billion from fiscal 2010 and 9.6 percent of the total.

This situation is in stark contrast with that of physical bookstores. There were once over 20,000 of them across Japan, but in May of this year their number had decreased to 12,526, according to research by arumedia publishing.

There are around 10 main online bookstores in Japan. These include bookstore-linked operations such as the Kinokuniya Web Store and convenience store types such as Seven Net Shopping. Just as with physical bookstores, transactions between publishers and online bookstores often take place through publishing distributors.

Rakuten Inc.’s Rakuten Books is another powerful bookstore run by an online shopping company. This company is affiliated with over 2,000 bookstores around Japan. If one of those stores does not have a certain book, Rakuten Books will order it from Rakuten and deliver it to the store.

“If physical bookstores are not run well, fewer people will read,” a Rakuten official said. “We want to keep helping local bookstores.”

■ Publishing distributors

Companies that buy up books and magazines from publishers, then wholesale them to bookstores. They increase efficiency by arranging the labor intensive process of shipping publications to bookstores. They also act as financial brokers that collect payments for books sold from stores and pay publishers. Nippan and Tohan Corp. are Japan’s two biggest distributors.

(From The Yomiuri Shimbun, June 28, 2017)Speech

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