Having ended its 12-year effort to crack China's publishing industry, German media giant Bertelsmann serve as an expensive case study for other multinationals harboring unrealistic dreams for profiting from China's vast market. The potential is there for the taking. But, as the Bertelsmann story illustrates, getting the big things right is insufficient in China; the small, nagging details matter, too.  Bertelsmann announced over the weekend the closing of its 36 bookstores in 18 Chinese cities, all under its Beijing 21st Century Book chain, before the end of July. Employees will receive a layoff package amounting to five months' pay.  Shutting down the bookstore chain in China came as the latest step in Bertelsmann's revamp of its struggling Direct Group book business, which was bleeding cash in the United States. But the failure to make up its losses in a flagging mature market with gains in a fast-growing one like China is revealing.  Bertelsmann did not say whether it will take any action with respect to its relatively successful book club business in China, which has a 1.5 million-strong fee-paying membership, the nation's third-largest, and a valuable database profiling readers' buying habits. Neither did it say what would happen to its online book sale unit.  A combination of missed opportunities and slow reactions at Bertelsmann led to its downfall in China. Its far more nimble Chinese competitors took advantage of an online book market opportunity first spotted and then developed through costly investments by the German publisher 13 years ago.  Bertelsmann cultivated its China business painstakingly, starting small with call centers plus logistics services, before taking the bold move in 1995 to set up Chinas first book club, together with the retailing and distribution of books through the Direct Group. It followed up with the launch of its magazine titles and later its music business, Sony BMG. Finally, it opened its first group head office in China in December last year.  The problem was that its Chinese competitors were racing ahead far faster, and its slow pace of execution, typical of a multinational corporation, meant its plans often were overtaken by the rapid changes taking place in China. A Chinese bookselling company set up in 2004, www.99read.com, has flourished by combining Bertelsmann's business model with endorsements from celebrity local writers; it has also forged ties with powerful state-owned publishing houses that have provided it with equity financing.  The online copycat also took cues from Bertelsmann's success in mixing an online presence with a catalog subscription service to cater to Chinese readers' aversion to making online payments. At the same time, it managed to avoid the high costs that have plagued Bertelsmann's local administration and its printing operations. It also learned from Bertelsmann's detailed approach to researching Chinese tastes but combined this with faster launches of new books in a fast-changing marketplace. By making its book club membership free, 99read.com has quickly built up an online club equal in size to that of Bertelsmann.  Meanwhile, online book sales were also rising rapidly, spurred by price wars between the largest players, Dangdang.com and Amazon (nasdaq: AMZN - news - people )'s Chinese operation, amazon.cn, which was built up from the base of a popular local Web site Amazon acquired.  Bertelsmann, by contrast, was plagued by peculiarly Chinese problems in launching its own titles: piracy and entrenched state monopolies in publishing. Despite its logistics expertise, the quality of its book titles and its good reputation in China, it was forced into a strategic retreat.
The multinational publisher announces it will close its 36 bookstores in Chinese cities; the fate of its online sales and book club in the country yet to be determined.