Bertelsmann, the German media group, will close all its Chinese bookstores, underscoring the difficulties that booksellers are facing from fierce online competition and changing reading habits.

The group plans to close all 38 of its bookstore chains by the end of July, but said it will reinvest in the country.

"We have tried many efforts to avoid today's situation, but after a series of strategic evaluation, we have to make the hard decision," the company said in an announcement.

Experts said that the growth of online book stores such as Joyo and Dangdang, coupled with Bertelsmann's business model, which combined a book club with its bookstores, made it difficult for the group to retain customers.

The company said that it struggled to adapt to the changing marketplace, where online bookstores now represent fiercer competition in China.

"We have invested a lot in management and finance in this part of business, but the finance is not satisfying and it cannot develop in a sustainable way," the company said.

Bertelsmann sells books through catalogue delivery, bookstores, and online stores. It brought what is known as the "book club" system to China in 1997, by which it encourages customers to join its book club and gives readers membership discounts.

The method, which at first proved to be popular among white-collar workers and teenagers, lost its appeal as online bookstores began to boom. The group had 1.5 million members in the club, but gradually lost its advantage.

Song Xufei, a human resource worker in Beijing became a member of Bertelsmann's book club 10 years ago. She said she had not purchased a book from the company for a long time.

She said there is limited choice in the bookstore and that they are much more expensive compared with books sold online. "I would turn to Joyo or Dangdang when I buy books," said Song.

"Their products are similar to other companies, and the price they offer is not competitive," she said.

Industry sources say the difficulties that faced the group were not unique and mirrors the troubles that other bookstores in China face.

"The capital flow of bookstores is much slower compared with other retail businesses, and bookstores are in a harder position now since the cost of online selling is much lower," said Li Yafeng, who works at a major publishing house. "Bookstores also lose customers because many people can now read books online."

Despite the change, Bertelsmann said the decision will not influence its long-term commitment to the Chinese market. It said China is one of the three major markets for its global business strategy.

"We will put the investment in the book sector to other sectors of Bertelsmann in China," said the company.

(China Daily June 18, 2008)