VOL.69/2024.04

Sales of key South Korean bookstores

2019.07.08

Today in many countries, online bookstores are a solid part of their publishing distribution networks. Up until the early 1990s, only physical bookstores of varying scale existed and readers' selection of books was based on book displays and how accessible the stores were. However, following the emergence of Amazon in 1995, online bookstores have solidified their position as key sales channels of the publishing industry in countries around the world. That change markedly took place in South Korea compared to other countries.

Currently, the market share of online bookstores in the United States stands at 45 percent, France 20 percent, Germany 18 percent and Japan 15 percent. In South Korea, that number is higher than 50 percent. South Korea is recognized as the country with the highest market share for online bookstores in the world. Analysts see South Korea as an anomaly because a local version of Amazon.com has yet to exist in South Korea and the nation has a government-enforced fixed price policy on books.
After online bookstores first emerged in South Korea in 1997, they grew rapidly due to book discounts, with the fixed price policy largely ignored. Before the current amended version of the fixed price policy was enacted, there was no cap on book price discounts 18 months after a book's initial publication. From late 2014, regulations on book price discounts were strengthened, leading to a temporary decline in sales for online bookstores before they found strong growth again. How was this possible at a time when the publishing industry on the whole was not expanding?
According to the current fixed price policy for books in South Korea, online bookstores are allowed to provide up to a 10 percent discount on books and 5 percent of the book's price in customer loyalty rewards points. However, physical bookstores usually pay around 10 percent more for books from publishers or wholesalers compared to online vendors and are unable to provide the same discounts for customers. This gap in actual sales prices has had a crucial influence on the selection the public makes when buying books. Very few readers will choose to buy books at their neighborhood bookstores when they can get books for up to 15 percent cheaper online. At one point in South Korea, there were 6,000 physical bookstores, but now there are around 2,500 and no matter the size of the bookstore, all of them are experiencing difficulties.

〈Changes in online book sales〉(Unit: 100 mlns of won)

Source: Statistics Korea, Online shopping trends survey (Survey scale expanded as of 2017)

Data from South Korea's Financial Supervisory Service, the nation's financial watchdog, show aggregate sales for all six major bookstore chains stood at 1.8254 trillion won in 2018, up 6.6 percent from 2017. Among those, South Korea's largest bookstore chain Kyobo Book Centre recorded 568.4 billion won worth of sales that year, both online and offline sales combined. Its total sales rose 4.3 percent from a year earlier thanks to the expansion of some of its locations, but the company's operating profit and operating profit ratio both saw declines. Kyobo provides discounts for books on its website, but books at its physical stores are sold at full price. However, the bookstore chain provides a service in which customers can order a book online at a lower price and later visit one of the bookstore's chain locations to receive the book. It is difficult to find other countries with fixed price policies for books where discounts and full price sales co-exist.

Following Kyobo, the second to fourth largest book vendors in South Korea (YES24, Aladin, Interpark) are all companies that focus primarily on online sales. Instead of selling new releases in physical stores, these companies operate used bookstores. Especially, YES24 and Aladin have steadily expanded their offline secondhand bookstores in addition to their online sales. Thanks to this strategy, these companies have been able to offset flagging sales of new releases with sales of secondhand books. Due to government regulation that bars conglomerates from opening stores that sell new releases to protect smaller, regional bookstores, large book vendors have found a way to beef up their returns via secondhand book sales. Large online bookstore chains such as these also have services where members can buy and sell used books among themselves aside from the company's used book offerings. This too is also a characteristic difficult to find in other countries outside South Korea. Increased used book sales can lead to a decline in demand for new releases, and that effect has noticeably taken place in South Korea as used bookstores have flourished in the past several years. In the case of Aladin, secondhand book sales have surely had a positive impact on improving the sales of the online book vendor.
The country's top online bookseller YES24 saw sales at 485.6 billion won in 2018, jumping 10.4 percent from a year earlier. Aladin also saw a 10.1 percent increase in 2018 on-year, with sales at 356.2 billion won. Book sales at online shopping website Interpark soared 19.2 percent to 188.0 billion won in 2018 in annual terms. Aladin's operating profit margins was the best out of all the major bookstore brands last year at 4.7 percent. Aladin is not only one of the country's top three bookstore chains regardless of online and offline sales, but it has also been boosting efforts to expand its secondhand bookstore chain. Meanwhile, operating profit ratios for Kyobo and YES24 both stood at less than 1 percent last year. Youngpoong Bookstore Inc, which had the second largest profit in the country in 2018 for an offline bookstore company saw sales at 144.3 billion won, up 5.7 percent from the previous year. Seoul Mungo (Bandinlunis) trailed with sales at 82.7 billion won last year, recording a 25.1 percent fall.

〈Sales at South Korea's largest online, offline bookstore companies〉

Online bookstores have also been aggressive in selling e-books. Kyobo, YES24 and Interpark have all created their own devices dedicated to e-books. However, in South Korea, e-books are usually original digital content like web novels or webtoons, rather than digital versions of paper books. However, other platforms for these digital publications have made it difficult for bookstores to get ahead in the industry, so bookstores have been resorting to launching monthly subscription services to increase their e-book market shares and are expanding their services to include audiobooks.

Written by Baek Won-keun (President, Books & Society Research Institute)