ABDVol.30 No.1
The Current State and Issues of Korean Book Distribution System

Won-Keun Baek


Recent Situation

Despite its small language community and market, Korea publishes 6% of the worldwide circulation of publication and ranks 7th in the world's publishing market. It is estimated that the Korean publishing market accounted for sales of 1,888 billion won in 1998. This numerical value does not include reference books and magazine market on an international scale.
 Blunders in foreign exchange management resulted in the IMF having to step in at the end of 1997, and a national economic crisis. And then a series of big wholesale bookstores' bankruptcies followed because of weak distribution structure, the weakened purchasing power of readers, the decrease in book sales, and the management crisis and restructuring of publishing companies. All these revealed that the Korean publishing industry was on shaky ground.
 At the end of 1998, the number of Korean publishing companies was 13,822 and the market was dominated by a few companies that publish reference books and study materials. In spite of economic recession in 1998, when the IMF intervention affected the whole country, the number of new publication categories increased 10%, compared to the previous year, recording 36,960 titles. However, the circulation of publication decreased by 10.3%, compared to the previous year and the average circulation of publications per title also decreased 18.4%, reflecting recession in the publishing industry. Therefore, it is estimated that the size of the Korean publishing market decreased about 8%, compared to the previous year.

Book Distribution Channels in Korea

Besides the distribution system, such as the entrusted sales on the promise of returns and the maintenance of the fixed price system, the characteristics of Korea's publishing distribution lie in that the channels of distribution are different depending on the publication areas and size of bookstores. 75% of the publishing companies are concentrated in Seoul and in the case of general books, the publishing companies and large bookstores in Seoul and nearby vicinities make direct transactions, while other small bookstores make transactions through wholesalers. The bulk transactions of reference books or magazines are supplied to 5,000 small bookstores and special sales events through approximately 1,000 sole agencies, the fractionalized regional sales network that distributes nationwide the circulation of certain publishing companies.
 There are few large chain bookstores in Korea. Publishing distribution routes make use of distribution agencies, and direct transactions among medium-large sized bookstores are dominant. At the beginning of 1998 publishing distribution broke down as a result of the bankruptcy of the highest ranking distribution agencies.

Influence of IMF System

Since the end of 1997, when IMF intervened, the biggest trial that the Korean publishing industry has experienced has been the series of bankruptcies of wholesale bookstores for general books. Bankruptcies of about 70 wholesalers for general books led to "big confusion in the distribution system", to the tune of 100 billion won, and had direct ripple effects on publishers. In order to revive the publishing industry which is the focal point of our knowledge industry, the association, related organizations, and the government cooperated and established a fund to support the improvement of the book distribution system and publication of good books and at the same time, the industry made efforts to increase the purchase of books for public libraries and excellent academic books. As a result of all these efforts, it seems that the industry has stabilized this year but it is estimated that structural transformation still needs to be carried out. Therefore, wholesale distributors have been reorganized into a publishers' co-op, which is a public wholesale centre, Korean publishing distribution, Songin Books, Hakwon Books, Dongkuk publishers' house, and Sejong publishing distribution. Also influential wholesale bookstores for general books have organized the Korean Publishers Society, with approximately 300 members, raising an objection to the counterplan that the representative Korea Publishing Association introduced against "big confusion in the distribution system". And they are taking the lead in framing a "standard contract", for the improvement of book distribution and operation of Internet bookstores.

Problems in the Book Distribution System

Up to now, the series of bankruptcies of wholesale bookstores in the Korean book environment has been taken as a matter of course.
 There are several reasons that the Korean book distributors are growing weak. One of them is limitation in the growth potential of distributors due to the "economy of scale", since the distribution channels are polarized depending on the publishing areas and the bookstore types and the transactions overlap. In terms of capital, the ratio of owned capital is low and there are too many small wholesale stores with small capital, resulting in excessive competition and lack of specialization.
 Other reasons are: unstable and unreliable retailers; transactions on consignment basis on part of wholesalers, and sales on commission, presupposing unlimited returns; backward transaction practices, such as issuing long-term private bills or bills accepted before date; and environmental factors, such as lack of public libraries and insufficient purchase of collection of books.
 In order to resolve these problems, the publishing industry tries various measures that demand high priority, such as the enhancement of distribution system productivity through mergers & acquisitions and big deals between distributors, the specialization of distributors, and informationization of distributors. The delicate structure of the book distribution system became chronic, but after IMF intervention it is time to do their best to renovate the structure.
 There are some basic problems to solve in book distribution. Modernization and informationization of distribution and improvement of dealing are necessary, as are construction of infrastructure in book distribution and strengthening of industrial competitiveness to cope with the current information society.

Bookstores and Publication on Internet

Since 1997 Internet bookstores have begun businesses, and recently Samsung Corporation, Korea's leading company, joined hands with Amazon com. Inc. Currently Internet bookstores take up 3% of total book sales, by the standard of approximately 40 large-scale bookstores, such as Kyobo, Chongro, and Youngpoong. Considering that the e-commerce (cyber market) is not in full swing yet, the Internet book sales relatively achieved its operational basis.
 The Internet publication (digital book publication) apart from some genres, such as cartoons, chivalry novels, and novels of which contents can be downloaded in files through PC communications, has not been fully activated. As a result, all the conditions for profitability are not established yet and the cyber market has not been set up. Also, service of publishers for Internet sales is still poor and the existing purchasing patterns of books are fixed.
Also, educational system of PC communication and Internet education are laying the foundation for growth.

Prospects

In January 1999, Korea's publishing market was opened wide to foreign capital. Although the foreign companies haven't yet launched business on a grand scale, the Korean publishing business is trying to take advantage of this opening of the cultural market as the turning point to globalizing the industry and exporting our culture.
 Now, in the midst of structural transformation, Korea's publishing businesses are facing various big changes, such as the coming of the coexistence of paper books and electronic books, dwindling book reading culture in the video age, the polarization of readers' demand, extensive modernization of publishing distribution system, and the new rules of digital copyrights.
 So far, the book distribution industry has stabilized the crisis without any innovation in the structure. These controls and processing are always insecure. It is time for reform by publishers and related organizations, productive discussion and continuous cooperative effort most of all. Publishers are in the middle of big rapid changes in publishing methods, such as on-line publishing and electronic publication, distribution of publishing contents using Internet bookstore or information network and visual media or increase of non-reading people, etc. Unfortunately Korean publishing is not solving the problems inherent in these changes. First Korean publishers must cooperate to encourage the publishing culture and ensure their survival. A change in the publishing environment means a change of readers. The core of restructuring depends on establishing a distribution system around the readers

.Statistics of Korean Publishing Industry

  1998 1997 1993
No. of Publishers 13,822 12,759 8,381
No. of Bookstores 4,897 5,170 5,221
No. of Titles 36,960 33,610 26,304
No. of Copies 190,530,000 212,310,000 146,430,000
No. of titles in Magazine 6,396 7,110 6,029
Market size (excluding periodicals & reference books) (in billion won) 1,888 2,397 1,568
Sales of booktoken (in billion won) 76.1 72.2 18.5

(US$1.00=1,210.30won as of 13 July 1999)

Won-Keun Baek
Born in 1967, he majored in Korean literature at Dankook University (Rep. of Korea), research processing at Sophia University (Japan) and publishing at Chungang University (Rep. of Korea). Since 1995, he has been working at Korean Publishing Research Institute as a researcher and Korea Electronic Publishing Association and Korea Electronic Publications Authentication Centre as a manager. He is a member of the Korean Publishing Science Society and The Japan Society of Publishing Studies.