The Case Study of “Bookoff, Amazon Japan, and the Japanese Retail Bookselling Industry”
1 Why is the profitability of large Japanese retail booksellers relatively poor and their scale relatively small?
According to the case, ‘stagnation in sales along with the steady increase of costs over time has reduced the profitability of both large chains and small stores’ (Peng 2009, p. 391). There are several reasons that results in the relatively poor profitability of large Japanese retail booksellers and their small scale.
Firstly, the Saihan system, i.e. Resale Price Maintenance, is the most important factor. The system’s price-fixing policy rules out the price competition (Peng 2009, p. 390), which would be a normal competitive …show more content…
Furthermore, although it is stated in the case that the Japanese readers are ‘voracious’ (Peng 2009, pp. 387), the Japanese readers reading habit has changed recently. Owing to the introduction of Internet, the young Japanese generation leads a trend to read in mobile phones and online, also known as e-books’ reading habit (Peng 2009, p. 390). Therefore, the number of Japanese readers has decreased. It is said that the time that Japanese spend in reading has reduced now to 33 minutes per day (Taylor 1997, p. 18). As is mentioned before, the Japanese readers have to buy undifferentiated commodities from ‘focal firm’ (Peng 2009, p. 37). Thus, there is no doubt that their bargaining power is weak.
Last but not least, the threat of substitutes is high as well, such as e-books, rental books, second-hand books, etc. Some of the substitutes have superior quality and function than traditional books, for particular, lower switching costs to use these substitutes (Peng 2009, p. 37). For example, the mobile phone books are more portable to carry and the price of these e-books is much lower compared with the traditional ones.
Overall, Bookoff and Amazon Japan effectively deal with the opportunities and challenges brought by the five forces. Their strategies enable themselves to be differentiated in the book retailing industry and to gain cost leadership (Peng 2009, p. 45).
From the resources-based view (Porter 2008), Bookoff