Japan's biggest secondhand book chain, Bookoff Corporation Ltd., has found the globe's economic doldrums to its liking. The group's sales will reach an estimated 71 billion yen in 2010, 17.5 percent higher than in 2008, earning it a spot among Japan's 10 biggest bookstores.

"Its rise and Japan's struggling economy are related," said John Lin, the executive director of Taipei-based Mollie Used Books.

Retail Business with Shortest Supply Chain

Long-standing Japanese regulations on "resale markets" allow foreign and secondhand books to be sold at a discount, unlike new Japanese books, which must be sold for their full list price. The regulations are intended to protect the development of the country's cultural industry, but in today's difficult economic environment, they have left some consumers unable to afford new books, creating an opportunity for secondhand book chain Bookoff.  

Lin says that Japan has traditionally had two kinds of used books shops:  community-based bookstores, and shops specializing in rare or high-value books.

The community bookstores, of which 800 are believed to still operate in Tokyo alone, are generally small, cramped, poorly lit outlets stocking books that have yellowed or been soiled, or are even missing pages. The books are often arranged randomly, with some simply stacked on the floor in piles reaching up to the ceiling.

The more refined used books stores market themselves as being "knowledge-oriented" and specialize in rare publications, offering old books worthy of preservation. This kind of store is a mainstay in Tokyo's biggest book market, Jimbocho, around the intersection of Yasukuni and Hakusan roads.

In the towering century-old Koga bookstore, an out-of-print German-Japanese book on operas, with a list price of 2,000 yen, sells for 3,500 yen. Another thin three-page volume of musical scores from before World War II, sells for 1,500 yen.

Bookoff falls into neither of the two traditional market categories. Instead, it has created a new commercial model for selling used books that puts a premium on speed, emphasizing modern stores and high circulation rather than preserving rare or valuable manuscripts.

The company builds its inventory through the used books people bring to its stores, and it also sends people out into the community to gather old books. A book's value is not judged by the quality of its content, which edition it is, or whether it has won an award. Instead, it is simply judged on whether it is clean and complete. Bookoff pays a fixed price for books that pass muster, and this simple formula means that unlike traditional bookstores, it does not have to spend 10 years cultivating appraisers.

As soon as Bookoff receives used books, its staff cleans and restores them behind the counter in full view of the customers and gets them on store shelves the same day.

"We are the retail business with the shortest supply chain," says Bookoff president and CEO Hiroshi Sato. "If a book is still at the counter the day after we bought it, the person responsible hears about it. But we also have to continuously increase the volume of books we buy, because only then can customers find the books they're looking for."

To increase book turnover, any book that has not been sold after being on a Bookoff store shelf for three months gets put on the 105 yen table, as do books of which there are more than five copies.

Another key to managing a used books store is service. In regular bookstores, publishers provide a steady stream of titles, and the stores are free to focus their services on book-buying consumers and turning over their inventory as quickly as possible.

But, as Sato says, used books stores must also get people to sell their own books if the store is to be permanently stocked. Many people feel intimidated by the prospect of selling used books, especially when having to face indifferent store clerks. Aware of this psychological barrier, Bookoff has put special emphasis on improving its book-buying service.

The Art of Acquiring Books

When it comes to acquiring an inventory of books, the store and its people represent the fine line between victory and defeat.

Bookoff's business model makes it impossible to predict when and where its stores will buy books and in what quantity, so the company cannot apply the typical sales forecasting and product planning methods used by most retailers.

With such a short supply chain in a fast-paced business environment, the "in-store experience" is paramount, and the store manager is the soul of the operation.

This "in-store wisdom" and "team building" are critical to Bookoff's success. How to categorize the books, which categories of books should be given more shelf space, how to design display shelves, how to organize the book categories to suit customers' browsing habits, and how to manage and retain part-time employees, who outnumber full-time employees many times over: these are all issues that store managers must master.

The 40-year-old Sato discovered early on how difficult these decisions can be. Two years after joining the company, he became the store manager at Bookoff's Machida branch in Tokyo. Sato, whose first job experience was with consultant McKinsey & Company, focused solely on becoming a successful store manager, and he spent a lot of energy contemplating new policies. But he did not invite any employees to participate in the process, and many of them eventually quit. After six months, he had to admit failure.

Two years later, he took over as the manager of Bookoff's Nagayama branch. This time, he began working closely with the store employees. Greeting them at 9:30 every morning, he would help them sort the books and man the cash registers throughout the day. The strategy boosted both morale and sales.

Just three years ago, Bookoff was caught in a scandal when many of the stores operated directly by the company inflated their sales figures. The company's founder was forced to step down, and Sato was tapped to take his place. Since then, Bookoff's rise has changed Japan's publishing and reading environment.

If You Can't Beat Them, Join Them

Bookoff has had an impact on the sales of other bookstores. Many best sellers quickly end up on Bookoff store shelves, often at discounts of 20 to 30 percent. "Publishers can't beat (the company), so they work with it," Lin of Mpllie Used Books says.

Because of Bookoff's strength in the market, many publishers have handed over some of their inventory to the retailer to be sold at discounted prices. To them, it has become another viable distribution channel, and some, such as Kudansha Ltd. and Shogakukan Inc., have even bought stakes in the secondhand bookseller.

Some observers have also praised Bookoff for helping to make reading more popular. Author Tatsuro Dekune, the winner one of Japan's most prestigious literature honors, the Naoki Prize, who now runs a used books store in the Tokyo neighborhood of Koenji, says enabling elementary and junior high students to buy a good piece of literature or comic book for 100 yen will help cultivate a future generation of readers.

But critics of Bookoff and its model abound. Some believe that circulating the same book costs authors and cartoonists a large chunk of their royalties. Others go so far as to blame Bookoff for the increasingly rampant theft of books, which critics contend are being stolen to resell to the retailer.

Another concern voiced about Bookoff is that it relies primarily on franchises and does not have a solid foundation. In addition, its operating margins were low to begin with and continue to decline, falling from 7.5 percent three years ago to 4.4 percent today.

Expanding to Other Secondhand Items

Regardless of Bookoff's economic and social impact, its innovative commercial model has helped it open nearly 1,000 stores at home and abroad, and many see it as the symbol of Japan's growing barter economy.

Aside from books, the retailer has aggressively expanded into other related businesses, creating B-Kids, which sells secondhand baby items, and B-Style, which offers secondhand women's clothes and accessories. Last year, it established Bookoff Super Bazaar, selling everything from used golf clubs to secondhand baseball equipment.

"We hope to take the image of 'Bookoff equals books,' and convert it to 'Bookoff equals reuse," says Wataru Suzuki, who has been with Bookoff for 10 years and now runs Super Bazaar. "When surplus household items are sold to Bookoff, that means people can buy whatever they need at our stores."

But Suzuki's ambitions still must confront two major challenges. As Bookoff expands into new fields, how will it recruit talent from those disciplines? And how will it deal with growing competition from virtual distribution channels? These may be the two most important tests awaiting the used books giant in the near future.  

Translated from the Chinese by Luke Sabatier