Books are Not Buicks: Advice for Publishers Entering the Chinese Market

By Wen Huang

Last week’s Frankfurt Book Fair offered Western publishers a unique opportunity to interact with their Chinese counterparts first-hand. Given China’s vast market, the potential for growth in publishing is immense, and some Westerners may, not surprisingly, be tempted to take the plunge. So for those about to jump in, Publishing Perspectives surveyed a trio of Chinese publishing executives for their advice on approaching this opportunity.

If real estate investors chant “location, location, location” as their time honored mantra, Chinese publishers tout “culture, culture, culture” as their number one piece of advice for Western publishers eyeing the Chinese market.

Culture is the Key

Unlike, say, manufacturing and selling Volkswagens or Buicks in China, Chinese experts said setting up a publishing enterprise requires total acclimation to the Chinese culture. “For cars, the standards are universal regardless of where they are produced,” said Huang Yuhai, a former executive at Bertelsmann AG in China and founder of the publishing company Shanghai 99 Reader’s Culture Co., Ltd.  “Cars will sell if they are safe, comfortable and snazzy looking.  But it’s a different picture when it comes to cultural products.”

Bai Bing, editor-in-chief of China’s Jieli Publishing House  who has consulted with several publishers from Japan and Korea on their Chinese expansion efforts, emphasized it is important that senior managers speak the language, understand the local culture, and obtain government support for their company.

He pointed out that China’s current regulatory, cultural and marketing environments are vastly different from those in the West. “Publishers can’t just move the business model that worked in the West without any significant modification,” Bai said. “Their executives have to have the proper connections and marketing expertise. Otherwise, you will meet a hard solid wall. Not all good and successful experiences in other places will work in China.”

Bertelsmann’s Failure

Huang concurred, citing Bertelsmann AG as an example of a company that failed to heed this advice. Bertelsmann terminated its book club business in China in 2008, after operating for 13 years in China. The company cited the challenges of retaining customers and high operating costs as reasons for its retreat from the book industry. But Huang believes that there was one additional factor that was left unstated: ”Bertelsmann failed in China because it neglected to localize the book club model it transplanted to China according to the demands of Chinese customers,” Huang said. “Their senior executives were not fully acclimated and they didn’t understand the Chinese culture and market.”

Lu Jinbo, another former Bertelsmann AG executive agrees. Lu heads WanRong Books Ltd., a public-private joint venture (with 40 some employees and 50 writers) that sold over 10 million books earning US$28 million in revenue in 2008. ”Books are cultural products and executives need to know the cultural characteristics of the market,” Lu said. “A book or a concept that might be widely popular in the West could wind up being totally dead in China.”

Seek a Joint Venture

One strategy that all three recommended was to either find a Chinese partner through acquisition or to start a joint venture. “A joint venture will help ease the painful transition,” said Jieli’s Bai. “It’s not just enough to cooperate in copyrights and sell Chinese or Western books in China. A more profitable approach is to engage in a deeper level of cooperation, working with Chinese publishers to formulate strategies and market their Chinese books worldwide,” he said.

Huang agreed. “You have the local executives running the operations and the existing brand has guaranteed you a certain market share,” he said.

The Time is Right

All the executives concurred that now is the right time to pay attention to the country. “The economic reforms in the past 30 years have made it possible for a large number of Chinese to join the ranks of the middle class,” said Lu, adding that middle class people around the world share similar interests and values, “…good education for their children, traveling to Paris for vacation, pursuit of love and the pains of divorce, to name a few.” The end result is that the cultural gap between the East and West is smaller, which means that it is easier than ever before for a publisher to take a chance on China, a proposition that should be all the easier if you learn to adapt to China, rather than try to impose your will on it.