Incorporated: 1949 as Tokyo Shuppan Hanbai Inc.
Sales: ¥648.6 billion ($5.9 billion) (2005)
NAIC: 424920 Book, Periodical, and Newspaper Merchant Wholesalers
Tohan Corporation is one of Japan's top two wholesale book and magazine distributors; the other is Nippan Shuppan Hanbai, Inc. Together, these companies control more than 90 percent of the total wholesale book distribution market in Japan. While a number of Japanese publishers also distribute their publications directly, the wholesale distribution sector accounts for the overwhelming majority of book sales in the country. Tohan works in partnership with publishers, distributing a full range of books, including the highly popular mangas and other comic books, as well as music CDs, software and similar "new media" products to more than 23,000 retailers throughout Japan. The company has also been an active online seller, participating as a founding shareholder in the E-Shopping! Books joint venture with Softbank and 7-Eleven Japan, as well as cooperating with another Japanese online bookstore, Book 1.
In 2006, the company also launched a mobile telephone-based retail book service. Nonetheless, Japan's bookstores remain the group's core market, and in 2005 the company established a new distribution center, in Okegawa City, Saitama Prefecture. The facility, with a capacity to stock more than 800,000 titles, enables Tohan and its publisher partners to achieve extremely rapid order-delivery turnaround times. Tohan also supports its customers and clients with the publication of an annual CD-ROM-based database providing the bibliographic information for some 600,000 books and other publications. Tohan is led by chairman Hirotada Kohtaki. The company is owned in large part by a group of major Japanese publishers, including Kodansha, Shogakukan, Sheisha, Kadokawa, and others. In the mid-first decade of the 2000s, Tohan's annual revenues topped ¥648 billion ($5.9 billion).
PREWAR BOOK PRICING SYSTEM
Although books had been printed in Japan since the 17th century, the country's modern publishing industry emerged only toward the late 19th century, with the adoption of Western-style printing technologies. Japan's publishing industry quickly evolved into one of the world's most active and most competitive markets. The early part of the 20th century saw a massive surge in the number of publishers and bookstores in Japan. The country's publishing market also developed its own distribution model, which relied heavily on an intermediary layer of third-party wholesalers between the publishing and retailing ends of the spectrum.
The development of the market was encouraged in part by a lack of regulation put into place by the government. Yet by the end of World War I, that same lack of regulation had become a major industry burden. Intense pricing competition, particularly among booksellers, placed the retail market under severe pressure. Sharp drops in profits left many booksellers unable to make payments to their wholesale suppliers, and to the book publishers. As a result, an increasing number of sellers and publishers faced bankruptcy, and the entire industry threatened to collapse.
A solution was found in 1920, when the Japanese government enforced a new pricing system, the Resale Price Maintenance System (RPMS). The pricing system was similar to those found in other countries, such as the United Kingdom's Net Book Agreement, adopted in 1900 between the country's publishers and booksellers. The pricing system created a new, highly cooperative era among the members of the Japanese book industry, producing a high degree of stability in the market. It also encouraged the growth of the retail market, and particularly the development of vast networks of independent and small-scale bookstores. At the same time, the fixed-price system allowed publishers to extend their catalogs to include even noncommercially viable titles. One side effect of the RPMS, however, was the shift to a heavily concentrated wholesale sector, with just a few large-scale distributors emerging to serve on a regional and then a national scale.
Japan's entry into World War II put a temporary end to the wholesale sector. The military government took over the distribution of books and magazines in the country, creating a single distribution monopoly. By the end of the war, the country's distribution infrastructure had largely been destroyed. With the country's surrender, the new government ordered the breakup of the distribution monopoly. While this provided the country with an opportunity to eliminate the wholesale distribution layer from the country's publishing sector, Japan's publishers and booksellers led in the creation of a new wholesale oligopoly in the postwar era.
NEW WHOLESALE MODEL REINVENTS THE INDUSTRY
Both publishers and booksellers recognized that the wholesale layer was of vital importance in maintaining the industry's commitment to maintaining low prices and making books available to the entire population. Indeed, both the publishing and retailing sector were instrumental in creating the new generation of distributors, supporting the formation of nine new wholesalers, including Tokyo Shuppan Hanbai Co. (Tohan) in 1949. These companies were provided with financial and other support from the industry—and, as in the case of Tohan, became part-owners of the wholesalers. In this way, wholesalers, publishers, and retailers were strongly linked together.
The wholesalers in turn developed a new business model based on a high level of cooperation with publisher and bookseller clients. As the wholesale market returned to strong growth into the 1950s, the wholesalers were frequently responsible for aiding the retail sector, often providing credit for booksellers. The consignment model became the most prevalent, with wholesalers delivering books at no cost, and accepting returns on unsold books within four months. At the same time, wholesalers worked closely with the publishing industry. In 1955, for example, Tohan helped introduce new computer technologies into the industry, starting with the development of card-based systems using IBM computers. This cooperation with the industry continued into the next century, with the creation of integrated information-technology networks linking wholesalers systems to both publishers and retailers.
- Tokyo Shuppan Hanbai (Tohan) is created as one of nine wholesalers for the book publishing industry.
- Tohan adds computerized services for publishers and retailers.
- The TONET information network for retailers is launched.
- Tohan partners with fellow wholesalers Nippan Shuppan and Kinokuniya to launch the Bookpage database.
- The new Super Tonets information network is deployed.
- Tohan joins the E-Shopping Books online joint venture with Softbank and 7-Eleven Japan.
- The company builds a new large-scale distribution facility in Okegawa City, Saitama Prefecture.
- A mobile telephone retail book sales service is launched.
Over the next decades, the distribution market expanded to include more than 40 wholesalers. Most of these, however, were highly specialized in niche markets. In response, the publishing and retailing groups encouraged a number of mergers among the original nine wholesalers, creating just two major, nationally operating wholesalers, Tokyo Shuppan and Nippan Shuppan. By 1990, these two companies accounted for 80 percent of the total wholesale market. Each represented their own pool of publishers, while supplying the more than 30,000 bookstores in operation in the country. The concentration of the wholesale sector enabled the Japanese publishing industry to develop an extremely efficient and highly active publishing and distribution model. By the early 1990s, the country's publishers were producing an average 100 new titles each day, while Tohan and Nippan between them delivered more than six million books per year. The maintenance of the consignment model by the wholesalers enabled the retail sector, where the average store size limited display space to just 8,000 titles, to offer customers a constantly renewed product offering, without the need to invest in expanded storage or display space.
Publishers, too, continued to benefit from the presence of the wholesale sector, as wholesalers established their own distribution facilities. In this way, the publishers were relieved of the expense of developing their own storage and logistics operations. Wholesalers also became responsible for developing computerized database and other information services, supplementing the publishers' association's print-based equivalent to Books in Print.
NEW TECHNOLOGIES FOR THE NEW CENTURY
In addition to database services, Tohan introduced its own information network, TONET, linking the company with its bookstore clients, launched in 1984. In 1986, Tohan launched its own electronic database. This was followed in 1987 with the creation of the Bookpage database service, in collaboration with Nippan and another wholesaler, Kinokuniya. Then, in 1991, Tohan launched the next generation of its TONET service, called Super Tonets. That service expanded to include a wider variety of information services for both retailers and publishers, including database directories for transportation providers, bookbinders, libraries, warehouses, and the like. The new Tonets system also recognized the shift taking place in the Japanese retail sector during this period, with an increasing proportion of sales coming not only from a new generation of larger, suburban-based chain store networks, but also from such diversified retail outlets as supermarkets and convenience stores. The Super Tonets system allowed Tohan to tailor its service to each of these sales channels. The new system represented another example of the level of cooperation that existed among the wholesalers, retailers, and publishers in Japan, with each party working together to maximize sales and minimize book returns.
The ubiquity of Japan's retail booksellers, coupled with the growth of books sales through the supermarket and convenience store chain, had traditionally limited the appeal of book clubs and other mail order book services for the Japanese public. The emergence of the Internet in Japan, and the surge in interest in the new e-commerce market in the late 1990s, forced Tohan to react. In 1999, the company joined with Internet prodigy Softbank, which controlled Yahoo! Japan, and the 7-Eleven Japan convenience store group to launch an online retail site called E-Shopping! Books. Tohan provided the warehousing and logistics for the site, providing door-to-door delivery, as well as drop-off service through the 7-Eleven chain. The creation of the site placed the company in a strong position to resist the entry of new players—including Amazon and Bertelsmann—into Japan's online book market. These efforts helped Tohan, which changed its name to Tohan Corporation in 1994, to boost its market share. By the middle of the first decade of the 2000s, Tohan and Nippan accounted for 90 percent of the total wholesale distribution market.
Yet Tohan remained a strong ally to the publishing industry and the traditional retail sector as well. Into the mid-first decade of the 2000s, the company invested in a number of new initiatives designed to increase the retail sector's competitiveness. In 2005, Tohan built a new distribution center in Okegawa City, in Saitama Prefecture, in order to provide stronger support for the retail circuit. The new facility was among the largest in the country, with space to maintain some 800,000 titles in stock. In this way, the company was able to deliver book orders to retail in just two days, faster than most online book services. Also that year, Tohan launched a new inventory management system providing real-time inventory tracking in order to reduce over-ordering and boost sales performance.
Nonetheless, Tohan itself benefited from the rise of new alternative retail channels in Japan's book industry, while also seizing the opportunity to expand its product range to include music CDs, software, and similar "new media" items. Tohan also continued to explore new sales channels: in 2006, the company launched a new service making retail book sales available to cellular telephones users. By introducing new services to its publisher and retailer clients, as well as adding services for consumers as well, Tohan expected to remain an important partner for the Japanese publishing industry in the new century.
M. L. Cohen
Nippon Shuppan Hanbai, Inc.; Japan Publications Trading Company Ltd.; Chuokeizai-Sha Inc.
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