June 19 – June 26, 2008 Edition

Bertelsmann Shuts
Chinese Retail
Bookstore Chain

HONG KONG/6/16/08–Bertelsmann AG, which owns Random House in the USA, will shut down its Beijing 21st Century Book Store chain by July 31, ending a 12 year effort to expand into the lucrative Chinese bookselling market, according to Forbes USA and Yahoo Finance News. About 200 employees in 36 stories throughout 18 Chinese cities will be laid off. The media giant did not say whether the moves will affect its Chinese book club, with 1.5 million members, or its online book retailing site.

Bertelsmann has been revamping its Direct Group division and had reached out to the high growth Chinese market partly to offset losses in the US. It was Bertelsmann that first took advantage of the burgeoning Chinese market, opening China’s first book club. However, now competitors inside China have successfully cut into its business there.

Chinese competitors copied Bertelsmann’s business model, and raced ahead of the media giant, setting up, which added celebrity endorsements from writers and developed relationships with powerful state-owned publishers that have helped finance the site.

The copycat site made its book club membership free, quickly growing its online club to equal Bertelsmann’s membership.

Bertelsmann also was plagued by high administrative costs, piracy, and entrenched state monopolies in publishing.