MPH scaling down in size

MPH Bookstores Sdn Bhd has scaled down its 36,000sq ft store in the Mid-Valley Mega Mall to 15,000 sq ft, in a move that speaks volumes about the changing business model faced by book distributors.

Unlike a decade or so ago when miles and miles of book shelves were the way to go, technology, which has given rise to the online business model, has become a feature that cannot be ignored, says its chief operating officer Donald Kee.

In Malaysia, it started with buying tickets online, a trend initiated by airline companies. Because the tickets were cheap, it encouraged even those who do not like to shop online.

That growing confidence has, according to Kee, filtered down to the book business.

But that does not mean the physical book stores are no longer important. On the contrary, Kee says 85% of the book business is derived from the retail sites.

“The online business will not take over the retail business in such a short time,” he says.

“It is not true that the book business is going through a bad time. It is just that some of the big names, large though it may be, did not transform itself. We at MPH are right now going through a period of transformation. The move to a smaller area of 15,000 sq ft does not necessarily mean a bad thing. It just shows business is constantly changing and growing in different directions.” he says.

Last year, Borders in the United States closed down. In Singapore, book distributors Page One Group also announced its closure this year, citing losses and heavy rentals.

“When Amazon came on the scene about 15 years ago, we noticed that it is something we need to worry about. People buying online will affect the retail business.”

In the United States, Borders partnered with Amazon, which resulted in the business going to Amazon and Borders relegated to being just a showroom for its online partner.

Kee says MPH started its online business 12 years ago. But the timing was no good. The dotcom crash of 2001 came and there was not much returns from the e-commerce site. Although the site was functioning, it was never promoted.

“The business model then was we did not want to cannablise on the physical retail outlets. Unlike before when we just filled shelves with books, starting this month, MPH will be moving aggressively in three directions the physical retail business, online business and e-books business.”

Kee says the changing faces of the book distribution business is “inevitable and unavoidable”.

“We noticed three to four years ago that sales on the e-commerce site was going double digit. It means that there are more people who want the books to be delivered to them.

“As more customers buy online, our retail sales will be affected so instead of having one cannibalising on the other, we have decided the strategise our business. Physical books on the shelves means money.”

Because there is the perception that online shopping is cheaper due to less overheads, the company is offering discounts of up to 30% with online purchases and bargain books at between RM5 and RM10 a copy.

“We offer whatever we have in the warehouse cheaper than what is offered in the outlets and if the purchase exceeds RM180, delivery is free,” he says. It currently has a warehouse of about 6,000 sq ft in Petaling Jaya. Warehouse rental is about a tenth of renting a physical shop. The online business will therefore help to bring down overheads.

“This year, there are plans to open three new outlets. The Shah Alam Setia Alam outlet will be about 4,000sq ft, while the KL Sentral site at the NU Sentral Mall will be 19,000sq ft, about half the size of its 1 Utama new wing outlet,” Kee says. There are plans to have a third with negotiations still underway. There are plans to move into other states.

MPH will also work on e-books where eletronic books are downloaded into computers and other gadgets like mobile phones, tablets and e-readers.

MPH's move into e-books is also unavoidable. Although e-books have not yet overtaken the physical book sales, it has overtaken the hard-cover book business.

“It makes sense to buy e-books as it solves the storage issue. It is also cheaper,” Kee says. The company is also selling e-readers, a gadget for reading e-books, which, according to Kee, provides a better read than reading from the laptop or a tablet as back-lighting is considerably reduced.

Font size can also be adjusted on the e-reader, which is being sold for about RM500.

The company is owned by Syed Mokhtar Al-Bukhary, who acquired the company in 2002, through Jalinan Inspirasi Sdn Bhd. This was the first time MPH became a wholly Malaysian-owned company.