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Bertelsmann Makes Book Clubs Work in Eastern Bloc

Business Week has a fascinating piece on the growth and expansion of Bertelsmann‘s book club arm into Eastern Europe and former Soviet Bloc countries like the Ukraine. In fact, Bertelsmann is enjoying dot-com-like expansion in fast-modernizing Ukraine for its book club, a category that’s a slow- or no-growth proposition in the U.S. and Western Europe. Family Leisure Book Club, whose distribution center is housed at a dilapidated former factory, moved 12 million books last year—everything from cookbooks to local potboilers to Stephen King thrillers-while sales grew 55%, to $50 million. Today, Bertelsmann is Ukraine’s biggest bookseller, with 12% of the market. And the operation enjoys profit margins that are triple the 4% global average for similar Bertelsmann units, which include the Book-of-the-Month Club and Literary Guild in the U.S.

Ukraine is the most spectacular example of Bertelsmann’s success with book clubs in the former Soviet bloc. And it’s proving that with the right mix of marketing and merchandise, there’s money to be made even with low-cost goods. The region has well-educated populations hungry for a good read but relatively few bookstores where they can indulge their passion. As a result, Bertelsmann has also become the biggest book publisher in the Czech Republic and has scored big successes in Poland, Russia, and elsewhere.

So what’s the big secret in Ukraine? Not only keeping prices low (in a country where the average income is $8,000 per year) but nearly half the Family Leisure Club’s 2 million members (in a nation of 47 million) are under 30. That’s because the Bertelsmann club recruits hot young Ukrainian authors and serves as their exclusive distributor, a smart strategy in a country with only about 300 bookstores. “They’re very effective, much more than other publishers,” says Ljubko Deresch, an intense 23-year-old who has published five novels—the latest with Bertelsmann—dealing with youthful disenchantment and pop culture. Says Shpilman: “Our goal is not to be a book club, but an integrated bookseller.”

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