[60thAnni] User research vital to Koreas largest online bookstore

YES24 CEO Kim Jin-soo, 48, an expert in cognitive science, holds an iPad featuring the website of Korea’s largest and fastest online book retailer during an interview with The Korea Times at his office in Yeouido, Seoul.

/ Korea Times photo by Shim Hyun-cheol

Yes24 CEO stresses 'implicitly personalized services'

This is the first in a series of interviews with pioneering leaders whose innovative ideas and relentless spirit, coupled with exceptional expertise, have led to unique accomplishments in various fields. — ED.

By Cho Jin-seo

At 48, Kim Jin-soo looks and speaks like a much younger man. It’s probably because he has had a career in a young industry, or because he has practiced Tai Chi for the past two decades.

“I used to have a weak stomach. My doctor recommended Tai Chi, saying that medicine cannot solve the fundamental problems of the body,” he said in an interview with The Korea Times Tuesday.

If Tai Chi is his solution for the body, then psychology is a solution for his business. Kim is the CEO of Yes24, the largest and the fastest online bookseller in Korea. He has pioneered the use of cognitive science in business, studying the psychology of Internet users in designing web services such as search engines, shopping and blogging.

“These days, it seems to me that everything is going back to psychology,” he says, stressing the need for scientific research into the behavior of consumers, and more importantly, that of employees.

Kim states that one may look no further than the recent financial crisis to see why psychology is not a thing of the past. Fancy economics theories spectacularly failed during the recent financial crisis; complex mathematical models of financial derivatives, which had won several Nobel prizes, were found to be useless in predicting or preventing the market collapse and the loss of tens of millions of jobs.

Pioneer in user research

Therefore, on the rise is behavioral economics, which recognizes social, personal and emotional factors in economic decisions. “So is in the field of marketing, and in all other business-related studies” he says.

For him, this is a long due change. Before joining Yes24 in September 2009, he had been the CEO of Yahoo Korea, an internet search and portal firm. There, he was interested in studying the behavior of internet shoppers, about how they navigate the pages, select goods and place orders.

So what he is doing at Yes24 is setting up a laboratory to study consumer behavior regarding books and their reading habits. The industry jargon for this is “user research lab” or simply “UR.”

Compared to Yahoo, Yes24 is more like a traditional brick-and-mortar business, with goods being carried in and out by truckloads. So it is a challenge for Kim who has little experience in this. But he likes it all the more.

“The reason why I came to this company is that here I can really make things happen, I can move around things and do it in my own way.”

For him, innovation doesn’t have to be rocket science. There are enough rocket scientists out there already but most of them end up inventing things people don’t use. So, the innovation for him is to make things relevant to people’s lives.

‘Implicitly personalized’ services

At Yes24, the best way for that is to provide “implicitly personalized” services to customers. This means that the customer should be able to like a product or service without knowing that it is customized for him or her. To do that, firms need to know what the customers themselves don’t know about themselves.

He recalls how he started adopting UR into business. Upon arriving at Yahoo in late 2000, he asked to talk to the top people in the United States. “I flew to the U.S. and met this high-ranking person at headquarters. I told him that I needed a lab for user research. He told me that he needed some data to support my request. So I gave him that. Then he allowed me to set up the lab and hire researchers who will work with me.”

The Yahoo Korea UR Lab was the first of its kind in South Korea. It was a time when few people in the IT industry had ever heard of the term.

“Yahoo listened to Kim, probably because it was a foreign company. At that time, few Korean firms understood the importance of user interface,” says Lee Ju-hwan, a professor of cognitive science at the Korean-German Institute of Technology. Nowadays, thanks to efforts from people like Kim, most big Internet and consumer electronics companies such as NHN, Samsung and LG all have UR labs. There, they design mobile phones, web sites and TVs that are easy and convenient to use.

“The industry’s demand for cognitive science researchers is very high these days,” Lee says.

Apparently, Kim’s 2009 appointment as CEO of Yes24 is one result of such high demand. The firm is owned by Hansae, a clothing manufacturer that supplies to firms such as Nike, GAP and Abercrombie & Fitch. The firm’s managers are mostly experts in logistics but needed help with the online business. “In my interview, the chairman told me that he didn’t want an MBA as CEO of Yes24. He said he wanted an Internet expert. So here I am.”

Here, he has found some interesting things. First of all, he sees that the Yes24 customers can be separated into two completely different groups. While some customers have a clear “target” of what to buy, others just navigate through pages until they find something that catches their eye. So, the goal of Yes24 should be to “implicitly personalize” its services for each of the two groups of users.

For example, users in the first group may want to place orders as soon as possible with as little hassle, while second group visitors may want to read more book reviews, see photos, and probably read the first few pages of it before hitting the “buy” button.

“But the most difficult thing is to persuade our own employees,” Kim says. “Since we have been the market leader for over 10 years and have been doing very well, people don’t understand that we need to change. Providing motivation is always the most important and the most difficult part of management.”

Leader in online book market

Yes24 has been a solid leader in the online book market. Its recipe of success is speed and price. About a quarter of the books it sells, and almost all sold in Seoul, are delivered within the same day _ if you order books in the morning, they will arrive before dinner. If the orders are made in the afternoon, then books arrive the next morning. And surprisingly, the “bullet delivery” service is free. No wonder that the firm’s revenue has been growing year by year, with expected sales of 380 billion won this year.

This super-fast, low-cost delivery is a laudable feat of innovation for Yes24 and the whole logistics industry of Korea. But Kim has further questions. What if customers want more than just fast delivery? What if they don’t want to shop online, or, don’t want to buy paper books anymore?

“People think that the online retailing market is only growing, but that’s not true,” Kim said. “Last year, Internet markets lost market share, while traditional department stores gained revenue. We don’t have room to be naive about the market.”

So what is hindering the growth of the online marketplaces? As for the book sector, Kim says he knows the answer. “It seems to me that the paradigm of books are changing, not just the paradigm of bookstores. If we don’t adjust ourselves, we have no hope.”

Paper is dying _ this is a rather sad pronouncement for this reporter from a traditional, daily newspaper. But this is true to some degree. At Amazon, the U.S. bookseller, the sales of electronic books have already surpassed the sales of hardcover books already this summer.

e-books are still rare in Korea, but this is not because Koreans have a special fondness for paper books, Kim says. Rather, it is a problem of the industry structure. Unlike in North America, there is no dominant e-book platform such as Amazon’s Kindle in the Korean language. Apple plans to sell its iPad in Korea later this year but that too is not enough to create a “critical mass” of sales volume for businesses to get serious on e-books.

Piracy is another matter that discourages book retailers and publishers from investing money in e-books. Yes24 has set up an e-book publishing company called Epub Korea in a joint venture with four other retailers, but sales are still negligible with regard to the sales of paper books. In this environment, pursuing the Amazon model of an e-book is not suitable for Korea.

‘Four-layer of future books’ theory

To Kim’s understanding, there are four layers in the future of books. The bottom layer is traditional paper books, which are “not very bad as a medium of text,” he says.

The second in the bottom tier is what he calls “POD,” or print-on-demand. The third tier is e-books such as Kindle or iPad. The top tier is multi-media books that combine video, audio and text into one.

At Yes24, Kim wants to do the second step first. Print-on-demand refers to the books printed after orders are made. Using latest technologies in small-volume bookmaking, this can be soon introduced at Yes24 on a large scale, he says.

This business model can better serve customers, he says. “We found out that some 4.3 percent of users want to buy books that are out of print. If they can purchase such rare books on our site, then they will order more books. On the other hand, publishers generally do not want to print books in a small number. What we want to do is to link the customers and publishers who are willing to print in small volumes.”

E-books are the next step. Kim says the approach by existing e-book sellers is not appealing to customers. One of the main reasons is the size of the book. A 300-page novel can turn into 3,000 pages when it is resized to fit smartphones. “People are just overwhelmed by such a big number. They get horrified to just think about flipping 3,000 pages with one index finger,” Kim says.

The trick he wants to do is to cut the book into short pieces and sell them separately. This is exactly what the music industry is doing to cope with the digital age. They cut an album by tracks, and sell them on iTunes for $1 each. If people like it, then they may buy the whole album.

“If people read one chapter of a book on a smartphone and find it fun, then they may want to buy a paperbook.” A sound idea, it seems.

The multimedia books, the top tier of his ‘four-layer of future books’ theory, remains a distant opportunity. It is obvious that video and audio features will be a great advantage for educational books, magazines and children’s books. But it is too costly. Kim says he just met a person from an education book publishing company, who estimated that the average cost of an e-book product is about 2 billion won ($1.7 million), and much more than that if one does not own the copyright of the multimedia features.

But still, he cannot rule out the potential of multimedia books. “In the end, it will go in that direction, though we don’t know when that will be,” he says.

Lee, the professor, agrees. “When paper was invented, some people might have doubted its use as a medium of communication. They might have questioned its durability and insisted to continue to use stone tablets or bamboo strips. I sense the situation the book industry is now is similar to that.”

* Special acknowledgement: Professor Lee Ju-hwan of Korean-German Institute of Technology (KGIT) helped with this interview.

Kim Jin-soo: from Yonsei to Yahoo to Yes24
One may find it very odd to see so many Y’s on the resume of Kim Jin-soo.

First, he studied for 14 years at Yonsei University in Yeonhee-dong. Then there was the nine years at Yahoo Korea in Yeoksam-dong where he was CEO for the last two years. Now he works as CEO of Yes24, an online book retailer, located in Yeouido.

Kim, 48, was one of the first Korean researchers in the field of cognitive science. This is an interdisciplinary study encompassing psychology, engineering, sociology and education.

He holds two undergraduate degrees in electrical engineering and education and a master’s in education and a Ph. D in cognitive science. His main interest is human-computer interaction, an inter-disciplinary study on how to make computers work well for people.

Kim joined Yahoo in 2000 as a specialist in HCI. There, he rose to the rank of CEO in 2007. He was part of a dual leadership with managing director Kim James Woo, a Harvard MBA, who took care of sales and the HR side of the company.

Kim and Woo both quit Yahoo in early 2009. Yes24 appointed Kim to CEO in September 2009.