Mailers Mining the Massive Market of Asia

Dec 01, 2004 10:30 PM  By

In the age of the “global village,” it’s no longer unusual for catalogers to mail beyond their borders. A growing number are taking their multinational business plans one step further and mailing to countries in Asia that, up till now, were considered impenetrable.

Join the club

Gutersloh, Germany-based book marketer Bertelsmann AG, which entered the Asian market in 1997 in Shanghai, finds its book club business model a great way to collect demographic information about consumers in a culture distinct from that of the company’s European management, says Bertelsmann Korea spokesperson Jisun Ryu. When obtaining contact information from prospective members, the company asks culturally revealing questions such as how they prefer to be contacted and what special offers they might be receptive to.

Bertelsmann now has 1.5 million members in its Shanghai club and has since established book club networks in Beijing, Tianjin, Nanjing, Hangzhou, and Guangzhou. The book clubs sell to members through catalogs, the Internet, shops, and in some cases sales agents.

“The clubs are traditionally pioneers for other Bertelsmann activities,” says Ryu. “They help us to understand the individual markets, the consumer behavior, the regulatory aspects, and the competitive environment.”

Since 1999, Bertelsmann has also mailed in South Korea, where its club now has 450,000 members. Catalogs offering 300-400 books are mailed four times a year, says Ryu. While the company usually sells new titles in its catalogs at 10%-50% off, South Korean regulations block booksellers from offering more than 10% off on books during the first year of distribution, so the special offer must be substantially scaled back, Ryu says.

In addition to modifying its promotional strategy, Bertelsmann also adapted its merchandise offering to meet the expectations of South Korean consumers. “We Koreans love ‘eduentertainment’ books,” Ryu explains. “When reading a book, we seek to learn something. I hear from Western people that the purpose of reading is mainly to have fun and to switch off your mind from other things, but here we like books that give us some lessons.” That translates into a greater number of catalog pages allocated to what Ryu calls “self-development” books.

Bertelsmann has also taken the Internet-savvy nature of Korean buyers into consideration. Nearly 50% of South Koreans have online access. As of August, 38% of member sales there were placed through Bertelsmann’s Korean Website.

Credit-card usage in South Korea is also substantially higher than in other Asian and even European countries, says Ryu. Fifty-eight percent of Bertelsmann’s sales in South Korea are paid via credit card, a total that he says “is far higher than for any of our other book clubs.”

Offline, club members in South Korea can shop at one of the company’s book club “centers.” The centers also help Bertelsmann build its mailing list, since there’s virtually no list industry there. “They play a vital role in recruiting new members who love the service and the convenience of our stores,” Ryu says.

Bertelsmann runs ads for the club and centers in Korea’s top three daily newspapers and on Yahoo! Korea. In addition, it will construct temporary Websites for best-sellers. For instance, when The Da Vinci Code, which Bertelsmann published in Korea, became a runaway seller last year, the company launched a site to promote it.

Ryu, who will not disclose overall sales information on Bertelsmann in Asia, says the company’s direct marketing group “has seen Asia as one of its major focuses for expansion since the late 1990s.”

Charles Prescott, vice president, international business development and government affairs for the New York-based trade organization Direct Marketing Association, agrees that the South Korean market has excellent potential for catalogers.

Korean consumers “are highly literate, brand loyal, and they have a lot of money since they bounced off a near depression over the last four years,” Prescott says. “It’s an excellent market for a company that has stamina, and it’s serviceable because payment is not an issue [due to the high degree of credit-card penetration], and mail delivery is reliable.”

Ryu is bullish on China as well, though: “It has a huge growth potential, as there is only a fragmented infrastructure there for buying books today.”

Partnering for success

Framingham, MA-based office supplies cataloger/retailer Staples is also betting on China. In August the company announced plans to enter the $25 billion Chinese office products market through a joint venture with Shanghai-based Internet and catalog delivery company OA365. “The approach is disciplined and incremental with a long-term view for growth in a meaningful way in 5-10 years,” says Staples spokesperson Owen Davis. OA365 is one of the largest office products companies in China, he adds.

The partnership will allow the company to efficiently conduct back-end operations and fulfillment within the country. “This arrangement gives Staples the benefit of local experts as partners and minimizes the risk of taxing the company’s management resources,” Davis says. “More important, we’ll be partnering with an established business that is already profitable and growing at a high-double-digit rate.”

B-to-b marketers, rather than consumer catalogers, are better prospects for entering China right now, comments the DMA’s Prescott. The nearly 350 million people who make up the Chinese middle-class have an average annual income of only $5,000. “There is an increasing amount of disposable income,” Prescott says, “but not to the degree that consumer marketers would expect here.”