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Saturday, Jan. 23, 2010
TAKING A CHANCE
Bookoff chief guides firm out of attitude bind
Hiroshi Sato took the helm of Bookoff Corp., the nation's largest secondhand book store chain, in 2007, when the company's corporate survival was in doubt after weekly magazines broke news that the firm had rigged its accounts.
But Sato, as Bookoff president and chief executive officer, managed to overcome the scandal with the support of branch managers and a thorough shift in employees' mind-set, he recalled.
Now with business booming, Bookoff aims to expand its scope by trading in other secondhand items, including clothing, sports equipment and musical instruments.
Sato was working at a Bookoff subsidiary in 2007 when the accounting scandal made headlines in weekly magazines. The company later confirmed that its sales figures had been manipulated on two occasions.
Bookoff said it had found its directly operated stores had inflated sales figures in December 2004 and February 2006 by a total of ¥22.06 million.
The company said its stores had done so under pressure from the head office to exceed the previous years' figures.
The Bookoff founder stepped down to take responsibility for the wrongdoing. The board of directors then appointed Sato to take over because, as the chief of a subsidiary, he was not involved in any wrongdoing.
"Although I had been enjoying a happy life as the president of its subsidiary, a big crisis erupted," Sato recalled. "The company must continue to exist no matter what."
Sato immediately faced critical situations. Due to its manipulation of earnings reports, he was worried that Bookoff might be delisted from the Tokyo Stock Exchange, given its failure to provide correct information to investors.
The company's stock price also plummeted by ¥500 from around ¥2,000 a share in the three months after the scandal broke. Its employees were deeply concerned about what would follow.
Faced with the crisis, Bookoff introduced new ways to manage its excess inventory — unsold books worth ¥600 million to ¥700 million. The change later proved key to its revival.
The company decided to set an inventory standard in each store and area. The plan was, say, to put 120 items on shelves with the intention of selling 100.
When inventory exceeded the standard, Bookoff decided to optimize its entire inventory by sending the excess items to other stores with smaller inventories.
To meet its earnings target, in March 2008 the company also sold items at half price. With the new inventory target and half-price sales, the company's business recovered.
The number of customers at its directly operated outlets has been rising since August 2008.
Sato believes Bookoff's turnaround was also made possible thanks to a new business philosophy it introduced around summer 2008.
With the departure of the founder, company officials were unsure about what direction to take. New ideas aimed at guiding employees through tough times, they said.
"Since we are selling secondhand goods, everything would begin with having (customers) sell their belongings to us," Sato said.
However, as Bookoff grew, Sato noticed employees would ignore customers who were carrying heavy items.
Although the company said it has no data about the correlation between the quality of service and sales, Sato believed employees needed to go back to the basics of customer service.
The company's goal is to make it easy for people who wish to sell items they no longer use and others to buy quality items at affordable prices.
Sato said his employees must not make customers wait, especially when they bring in large items to trade. Employees should immediately stop what they are doing and assist such customers, he said.
Bookoff now has more than 1,000 shops nationwide and some overseas — 14 stores in France, South Korea, Canada and the U.S. The entire workforce is more than 9,000. The company's consolidated net profit rose from ¥517 million in fiscal 2002 to more than ¥1 billion in fiscal 2008.
Sato is expanding the company's overseas operations.
Since opening its first overseas store in Hawaii in 2000, Bookoff has been targeting Japanese expats and students who live there and want to buy Japanese books at affordable prices.
Conscious of that demand, Sato has been opening new types of stores that accept secondhand books written in local languages.
The underlying concept is the same: Bookoff aims to be a resource for people who do not want to simply toss out items of value.
At home, Sato is hoping to open department stores of recycled items that are not limited to books, as he believes the book market, currently worth around ¥2 trillion, has little room to grow.
Sato noted there are many other secondhand items in the home that can be merchandised, including CDs, DVDs, clothing, sporting goods, musical instruments, watches, jewelry and brand goods. The market has the potential to grow as more items are introduced.
Since its opening in November, the Bookoff Super Bazaar store in Nagoya has been selling about twice as much as earlier expected, Sato said, adding he now feels relieved. Sato plans to open another four or five stores of that type annually.
Meanwhile, Sato said Bookoff has been prizing its employees.
Having experienced setbacks, Sato said he has realized people cannot grow without making mistakes. He said people in his company share the culture to "sweat for the sake of others" in training its new workforce.