Reviving the Literary World: Keiji Okumura's vision for Nippon Shuppan Hanbai Inc.

Japan is known to have a very aging population, with a third of its population being over 65 years old, raising one main issue - the decline in the number of bookstores. Over the last decade, over 4,000 bookstores disappeared from the cities, and this number is still growing. The dilemma now is a domestic and global market slowly but surely shrinking. As a company specializing in the wholesale of books and magazines, how do you adapt to create growth in such a context, and to what extent must you look overseas to create business growth?

The market for publication sales has experienced a continuous decline since 1997, with a particularly significant drop in the last decade, especially affecting magazines. Magazines have traditionally been a major revenue source for publishers and wholesalers, making the decline in this sector a substantial blow to the overall market.

A primary factor behind the diminishing magazine sales is the widespread adoption of digital devices. Since 2008, there has been a noticeable shift across generations as print magazines have increasingly given way to digital alternatives on various devices.

This surge in digital devices has reshaped how content is consumed. What used to be consolidated within a single printed publication is now accessed in a fragmented manner through individual articles spread online. This digital shift is not limited to print; it extends to movies and music, altering how we access and experience them through social media and streaming services.

The emergence of e-commerce giants has slowly permeated the habits and lifestyles of former paperback enthusiasts. Today, a growing number of individuals opt for online subscriptions and digital reading through these platforms, further accelerating the decline of print publications.

When considering both upstream and downstream demographic markets, the middle segment—traditionally a substantial consumer base for magazines and books—is experiencing a decline. This demographic shift and the aforementioned factors are collectively contributing to the ongoing decrease in publication sales. We don't know when it will plateau, but the market has contracted to 1.12 trillion yen.

The general decline in the market for literary materials, particularly books, represents a profound loss and mirrors a larger societal trend of the country’s overall literary culture’s degeneration. It is a serious social issue, impacting the intellectual growth and development of the entire country. Addressing this challenge requires concerted efforts to rejuvenate the market.

To ensure that the sales of books and the literature market will continue to thrive and remain a healthy part of the overall economy, we must involve various players in society. We see movement when we intensify our lobbying efforts and engage the government to put solid policies in place to bolster the market. The government has to play a role in creating a conducive environment for the literary publication market to gain a strong foothold in society. Lobbying hasn't been a strong suit of Japanese corporations, but their recent enhanced efforts are starting to show positive results.

Beyond governmental and corporate involvement, it’s vital to involve educational institutions, academia, and libraries to strongly promote reading as a habit and a larger cornerstone of the Japanese lifestyle, whether in print or digital form.

During my visit to Korea last spring, I was impressed by the collaborative efforts between bookstores, libraries, and publishing companies, which significantly contributed to fostering and fortifying their reading culture.

The number of bookstores nationwide is very worrying, especially in outer-lying prefectures and regions. Among the 1,740 prefectures and municipalities, over 25% (456)  lack bookstores altogether. The absence of a local bookstore deprives residents of the chance to purchase books, engage in the literary world, and have a share in a vibrant reading culture.

Our company is committed to cultivating and spreading the culture of reading. Recognizing the unique needs of each municipality, including cities, villages, or wards, is our first step. Some areas may not necessarily require traditional bookstores, but our goal is to establish accessible spaces where people can acquire books.

We have been working with convenience stores to open bookstores or small stores for showcasing books, which are connected to convenience stores. An example of this endeavor is a store opening in the town hall of Tateyama, Toyama Prefecture, in 2024. Since there is not a single bookstore in Tateyama, this will provide residents with the opportunity to encounter books.

A bookselling space located in a convenience store

Our unmanned or self-service remote bookstores offer an innovative solution. By reducing the need for extensive human resources, these outlets provide a steady stream of revenue. This approach allows us to introduce similar remote bookstore services to municipalities that express a need for a bookstore but may lack the infrastructure and capacity to operate one. This initiative isn't about simply inserting bookstores into locales without consideration. Instead, it serves as an opportunity and tool to ensure widespread access to books nationwide.

Hontasu, staff-free bookstore (Photo by PIPS, courtesy of TANSEISHA Co., Ltd.)

Hontasu, staff-free bookstore (Photo by PIPS, courtesy of TANSEISHA Co., Ltd.)

To solve the issue of the harsh business environment, and rise in logistics costs, and create an environment where bookstores can survive in the future, you also planned and created this Publishing and Circulation Reform to boost your activity. This reform plays on several aspects, such as a transaction system or the supply chain. Could you introduce to us a bit more about the key initiatives of this plan and how successful it has been so far?

The decline in the publication market is intricately tied to a diminishing culture of reading as a daily habit and lifestyle. This manifests in fewer people visiting bookstores, leading to a reduction not only in the number of bookstores but also in the market that sustains them — including our company, wholesalers, and distributors. The diminishing presence of these key players, and decreased revenue sources, contribute to a decline in the overall market.

To break this cycle and instigate a transformation in the market, we’ve identified two major issues that require urgent attention. First, we aim to explore avenues for increasing bookstore revenue, recognizing the critical challenge of bookstores facing bankruptcy. Our focus is on enhancing bookstore management to ensure their businesses are not just operational but thriving. Second, we are addressing the pressing issue of logistics, particularly the substantial rise in logistics costs over the last decade. Our objective is to establish a more sustainable and productive logistics and supply chain management structure.

Our collaborative efforts with various stakeholders within the market are geared toward providing solutions that increase the number of sustainable bookstores. We recognize the significant increase in truck delivery costs and are striving to optimize the logistics structure for greater efficiency.

The traditional Japanese publication distribution system relies on two characteristics: the sale-or-return system and the resale price maintenance system. In our pursuit of change within this system, we are targeting the reduction of returns to boost profit margins. While the typical gross margin of bookstores hovers around 22% to 23%, our goal is to elevate this to 30%. Over the past three years, we have diligently worked toward this objective and achieved a remarkable increase of 27.6%. This represents the average number of those bookstores that have directly benefited from our joint efforts to boost the numbers.

Since October, we have been preparing to strengthen our efforts, leading to a new, bookstore-led distribution reform, by working with 1,000 bookstores, including prominent names such as Kinokuniya, TSUTAYA, and our bookstores within the NIPPAN Group. 

A part of your business also produces items sold at bookstores and convenience stores with brands such as Fonte for fountain and glass pens and Greeful, which focuses on business office supplies. Recently, in July 2023, you acquired GAKKEN STA:FUL CO., LTD., a firm that develops and sells educational toys and stationery goods. What synergies does integrating this company bring to your firm? Are you looking to acquire more firms to strengthen your stationery business, especially overseas?     

In Japan, there has long been a strong tradition of bookstores not only offering books but also selling stationery items. This cultural practice, where individuals often visit bookstores to purchase pens or other stationery, dates back more than half a century and is deeply ingrained.

Around 30 years ago, we embarked on the venture of wholesale and distribution in the stationery business. While the profit margin in the stationery wholesale business was initially limited, we foresaw the growing need to expand both bookstores and stationery stores. This became an integral part of our corporate strategy some years ago, prompting us to meticulously craft a solid business plan to advance the presence of stationery stores and products within our business.

In 2018, we strategically acquired Nakasanst Co., Ltd., a wholesaler and distributor of stationery goods. In 2022, NIPPAN became a primary stationery wholesaler, taking over the direct purchasing function from makers which was primarily handled by Nakasanst Co., Ltd. This strengthened relationships with manufacturers and further promoted the in-store development of stationery and business supplies.

Our partnerships with these stationery makers have enabled us to supply and stock our bookstores, extending our reach to bookstores and supermarkets. We are looking to significantly increase such transactions. It will take time, but it's a strategic move. The expansion of stationery items helps the bookstore evolve into a "place" that stimulates intellectual curiosity and contributes to attracting more customers.

With that in mind, we have launched such original brands as Fonte, Greeful, and Old Resta, and are expanding them. In addition, we also began providing interactive opportunities for consumers to collaborate directly with stationery makers through various events. One noteworthy event, organized by one of our group companies called NIPPAN Segmo, Inc., attracted tens of thousands of attendees during the few days of its duration, proving to be a remarkable success.  In addition to this immediate impact, these events serve as valuable opportunities to enhance our company's brand recognition among consumers and grow the presence of our stationery items.

NIPPAN’s original Fonte fountain pens

NIPPAN’s original Greeful stationery

We called the event BUNGU JOSHI HAKU, combining the characters for stationery, women, and exhibition. While stationery is originally targeted at men and women of all ages, we recognize that women often occupy a significant part of the clientele. This event specifically targeted women with a strong interest in stationery, appreciating their creative potential and importance as valued consumers. Harnessing their creativity became an excellent opportunity not only to expand the market but also to increase transactions and overall business.

BUNGU JOSHI HAKU crowded with a large number of stationery lovers

GAKKEN STA:FUL, who used to be one of our suppliers, became a key player in our network. A few years ago, we welcomed Mr. Miyahara, the former CEO of GAKKEN HOLDINGS CO., LTD., to our board of directors. We undertook various projects and business initiatives, gradually strengthening our partnership with the company. GAKKEN STA:FUL excelled in the fields of educational toys and stationery, complementing our increasing presence in the stationery market. Leveraging our network of bookstores, we collaborated to enhance accessibility to their products, including educational toys and stationery. This strategic collaboration is a business we are dedicated to steadily developing and growing. Our goal is to amalgamate the strengths of GAKKEN STA:FUL, particularly their expertise in educational toys & and stationery, with our marketing and sales capabilities.

New Block by GAKKEN STA:FUL

Where would you like to continue your international expansion, and what strategies would you use going forward? Would it be M&A, joint venture, or opening new subsidiaries?

Historically, Japanese publishers predominantly directed their gaze inward, focusing on the domestic market, which accounted for over 99% of the industry's sales. However, as the domestic market began to contract, a necessity emerged for companies to explore international opportunities.

Established in the 1970s, NIPPAN IPS initially specialized in exporting Japanese books and magazines to Asian markets. Recently, an increasing number of publishers have expanded their horizons, considering various ways of selling books, rights, and other related media. Now, we are managing various aspects of the international business endeavors pursued by Japanese publishers.

Our Taiwan office operates as a book importer and wholesaler, facilitating the flow of literature across borders. Meanwhile, our Beijing office engages in the entire spectrum of publishing activities, including translation, editing, and publication.

While Asian markets respect the Japanese culture, Japanese products are still niche in the US and the European markets. Hence, we are placing heightened emphasis on these regions.

The popularity of anime is propelling the visibility of manga, presenting an opportune space for manga products to gain traction in the European and US markets.

The method of our expansion is still open for consideration because we are still trying to find the best way. We may employ M&A or set up our own office. We have to think about every step we take.

What role does partnership play within your business model? Are you searching for this kind of partnership for your international expansion?

The key is localization. Books, inherently tied to language, face the common barrier of translation when introduced to diverse cultures and markets.

A partnership is important in determining the best way to localize publications to English, French, or other languages. The key to our partnership is successfully localizing Japanese products to fit a specific market.

What would you say is your competitive advantage to be the partner of choice for US or European publishers to import their products to Japan? 

TSUTAYA has established a strong presence in Asia, especially in the Chinese market. There isn't an established distribution and logistics channel within the Asian market, so we aim to capitalize on this opportunity by forging partnerships with local companies or establishing our distribution channels. Our presence in China positions us strategically to drive our expansion further into the Asian market.

While major Japanese publishers have independent publication channels for their products overseas, smaller or lesser-known publishers often lack such established channels. We envision playing a pivotal role in creating distribution channels and supporting the international distribution of products for publishers of all sizes, fostering a more inclusive and diverse global literary landscape.

We believe partnerships and network development are crucial in expanding into the US and European markets. It's a great business opportunity we are looking forward to.  

If we were to interview you for a second time on the last day of your presidency, do you have a personal goal or ambition you'd like to achieve for the company in that intervening period?

I have so many goals and dreams. If I were to mention one of them, it would be to enrich the lives and increase the happiness of our employees. Since employees' efforts are indispensable for the company's growth, one of our important goals is to ensure that they can live a secure and prosperous life.