Can Tax Exemption Save Bookstores?
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On January 11， Wednes- day， the Tsinghua Pavilion of Laoy Book Salon located outside the Fourth Ring of Beijing， turned out to be more boisterous than before.
The bookstore which covers 130 square meters is more like a study room of a friend. A reader was sitting in a corridor while indulging himself in a book. Several young girls were receiving training in an office； a readers’ meeting of a folk magazine was held in another room. The bookstore’s boss Zhao Shanjun spared no efforts in keeping everything within the bookstore in order.
In spite of his busy state， he was still inspired by the news that his bookstore， as well as other bookstores in China， was given a tax exemption recently.
According to The Notice about the Continuation of Preferential Policy of ValueAdded Tax and Operating Tax in Cultural Industry， the book retailers are to be exempted from the value-added tax in the wholesale and retail of books from January 1， 2014 to December 31， 2017. This means that the bookstores， no matter they are state-owned or privateowned， online or physical， can enjoy the special treatment that used to be exclu- sive to Xinhua Bookstore.
This highly debated news has rung a bell for the physical bookstores. In these years， the physical bookstores were severely attacked by the online bookshops and e-books. Every year there are physical bookstores brought down to their knees. Therefore， when the Notice came out， many people wonder： is the spring for physical bookstore coming？
At the end of 2013， Dragon Media Ads Culture Bookstore， which had been there for 18 years， officially came to its end. This bookstore， which “died” in an office building， used to be the biggest and most influential professional bookstore of ads. It once had six direct-sale stores in six different cities of China.
Xu Mingzhi was the founder of this bookstore. When asked what closed his bookstore， he spent a lot of time organizing and speaking out the answer.“First I am too exhausted to carry it on. Secondly， it is indeed unprofitable at all. We might have several days in a row without a reader coming. Third， the e-reading and digital contents have made publishing house stop publishing the professional books about ads.”After so many years in the industry of physical bookstore， Xu Mingzhi believes that “death” is the only option for many physical bookstores.
For the new tax exemption， Xu Mingzhi listed an example. If a bookstore purchases a book with 60 yuan and sells it with 80 yuan， it needs to pay for the value-added tax， which is 20 times 13%. Now the government cut the 13% off.
But there are more methods to count how much tax a bookstore can avoid. to pay
“Not all bookstores can enjoy such a big discount，” Xu Mingzhi said. “The current law treats bookstores differently based on their size. Some bookstores are small in size and low in operating revenue which is not higher than 800 thousand yuan annually. In comparison， there are general taxpayers whose annual operating revenue is higher than 800 thousand yuan. These general taxpayers need to pay 13% value-added tax while the small bookstores need pay the operating tax accounting for 4% of its operating revenue.”
Therefore， sizes and revenues determine the benefits bookstores can have.
“Easy-to-Read Cave”， a community bookstore opened in 2006， was founded by Qiu Xiaoshi and his wife Ruan Cong. Quoting Qiu XIaoci’s word， the book only has one keeper Ruan Cong in the past seven years.
“She has been there alone for seven years. We never recruit other booksellers. I do not know whether this is an unprecedented case in the bookstore industry，” Qiu Xiaoshi said. Since their bookstore is small in size and revenue， the tax-exemption policy almost has no influence over it.
The “No Bookstore” located in Xiamen also faces the same problem. The small size of the bookstore deprived it of the quality to pay the value-added tax and thus the tax exemption policy.
Zeng Gaoxing， owner of “No Bookstore”， said： “In the past ten years， a lot of bookstores in Xiamen collapsed. The tax exemption cannot help us， but it will bring a lot of assistance to big chain bookstores， as they can spare more working capital to provide better services for readers.
But an anonymous worker for a private publishing house said that the tax exemption cannot save most physical bookstores from their tough situation. Nobody wants to see the death of physical bookstores， but tax exemption is not enough to rescue them.
No Earnings from Selling Books
“Most of my books are bought in a wholesale market. If the reader has a particular demand for one book， I will order it from online，” said Zhao Shanjun. His bookstore is a long-time purchaser of online books， because “they are cheap”.
“Generally speaking， the retail industry will have high profits in the terminal，” said Zhao. “But the book retail is notorious for its low profitability in the terminal. There are a lot of available channels to import books. We usually turn to the private wholesalers， who can provide 30%-35% discount in price for us. If we work with publishing houses， we can get 40%-50% discount. But unfortunately， publishing houses are not willing to work with small book vendors like us.”
Xu Zhiming estimated the entire market value of books sold in bookstores in China totaled 70-80 billion yuan. Of them， the textbooks and sup- porting books accounted for 50%-60%. The rest 30-40 billion yuan has at least one third taken by online bookstores. Though the online bookstores have a smaller proportion than physical ones， their number is much smaller than the physical bookstores. Therefore， many bookstores that have no bite in that market are forced to leave.
“Consumers do not care whether you have tax-exemption or not. They only care about the price，” Xu said.
Then， what about the situation for online bookstores？ Xu Zhiming’s current role is the founder of “Fast Schoolbag”， an online bookstore which sells paper books. “Every day we look at Amazon and to see the trend of their book prices. We usually follow their suit and use the same price tags with them，” Xu said. However， he soon found that the book retail cannot earn too much money.
Therefore， “Fast Schoolbag” expanded its business to other commodities. Now， the book retail accounts for 20% of its business. “Fast Schoolbag”has become an all-round online retailer whose business scope covers every field of the daily-use products. “The gross margin of books is as low as 17%. No website can earn money by simply selling books，” Xu Zhiming said. He is right. At least and Amazon， the two biggest online book retailers in China， have a lot of other things sold as well.
What other measures can help bookstores live a better life apart from cutting off the tax？
In Zhao Shanjun’s opinion， getting the bookstore into the shopping malls is good method. “Presently， the shopping malls are seriously homogenized and bookstores can provide some differences for them. Actually， many bookstores have already done this. Operators of shopping malls provide some discounts for bookstores in rent and promotion. This is why a lot of books， especially big ones， to expand their size. But if a dozen of books look the same， they will loose the charm and the favor of shopping malls. Therefore， bookstores should have their own individualities.”
Running Bookstores Is Not Romantic
If the tax exemption can not save the physical bookstores， who can survive the harsh situation at this moment？
Xu Mingzhi thought only three kinds of bookstores could make it. The bookstores with super operating skills， like Halloween Bookstore and Sisyphe Bookstore. The lifestyle bookstores that do not need the revenues from selling books to survive， such as “Easy-toRead Cave”. In Xu Mingzhi’s opinion， there are going to be more and more bookstores of this kind. “Many people are earning money from other fields and only run bookstores out of interest. This is the lifestyle，” he said. The third kind of bookstore is actually one bookstore： Xinhua Bookstore， the largest state-owned chain bookstore with the full support from the government.
But how those non-Xinhua bookstores can sustain their existence since they cannot earn money from selling books？
In Zhao Shanjun’s Laoy Book Salon， the monthly sales from books cannot even suffice the housing rent. But his bookstore uses the membership system and his members are willing to continue their memberships and help recruit new members. Therefore， he can earn enough money to maintain the bookstore.
Different from other bookstores that memberships only mean the access to discounted books， Laoy Book Salon has its own characteristics. For example， readers can borrow books from this bookstore at home， or read them in a special zone inside the bookstore for members. New books， old books， archived books and even unsealed books are available for members.
In addition， the bookstore sets up a committee of book selection to optimize the book structure. The readers can offer their advices to the bookstore owner about which books should be put onto the shelf or which books should be displayed in the highlighted area.
Then， the bookstore can satisfy the special demand of members as much as possible， For example， Zhao Shanjun established a course of teaching traditional Chinese instrument upon a member who is interested in that.
“Easy-to-Read Cave” has its own features as well. Two years ago， its began to throw a reading party named “Reading Neighbors”， moving the bookstores from families to communities.
“This reading party is held monthly featuring an event of reviewing and sharing feelings about reading books. We choose some books to read and publish the list before the event. So， everyone who joins in the party must have read books. They are required to share their feelings at the party and rate the books we choose. Every year we will work out a list with the best books ever read in the party，” said Qiu XIaoshi. This event has generated some influence already. In 2013 it was listed as one of the exemplary reading communities in Beijing.
“No Bookstore” is trying to bring itself closer to young men. “We are trying to build an e-book study room to meet the need of young readers，” Zeng Gaoxing said. “Young men are pursuing individualized reading methods. So we are thinking over the possibility of publishing books exclusive to us. This will require a lot of money， which we can only accumulate the tiny profits we have everyday.”
So， for ordinary bookstores， tax exemption cannot help them. Just like Zhao Shanjun said， “running bookstores is thought to be romantic， but actually there are a lot of difficulties.”
The tax exemption was just initiated and how many benefits it can bring remains unknown. But many bookkeepers are still walking on the path as they did in the time without tax exemption， waiting for the spring to come.