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Toko Gunung Agung, the nation’s only listed book and stationary distributor, is struggling with high operational costs and competitive digital books, but it hopes to boost sales with new shops.

Margins have always been small for Gunung Agung, as the company is known. Although its sales are expected to grow 20 percent this year to Rp 1.8 trillion ($198 million), the company still expects a net loss of Rp 6 billion.

In 2010, when the company’s sales reached Rp 1.5 trillion, its net loss was Rp 6.8 billion.

Praviedya Poernomo, Gunung Agung’s corporate secretary, said the cost of renting space in malls was burdening the company.

“The price to rent a square meter of space in a mall is about Rp 2 million to Rp 3 million, and we need at least 700 square meters,” Praviedya said. “That’s a burden, since margins from selling books aren’t that big.”

With 27 stores in the nation’s major cities, Gunung Agung sells books, newspapers, magazines and stationary. But these days, its products are under threat.

“Our books must compete with digital books,” Praviedya said.

He said the company believed the government should do more to help the book industry, including by creating programs that encouraged reading. He also criticized a government policy that allowed students to download their school textbooks online.

“On the one hand it reduces the cost for students, but what will happen to industries like ours?” he said.

In a bid to boost sales, Gunung Agung plans to build more small shops, or “satellite shops,” which will offer different products in various locations and require just 100 to 200 square meters.

In its expansion, the company hopes to reduce rent costs by sharing the profit with partners, which can own the spaces.

Praviedya said the satellite shops would cater to the tastes of customers in different regions.

For example, while the company’s customers in Pekalongan, Central Java, tended to buy school books and religious books, he said customers in Surabaya tended to buy novels and books about social issues or hobbies.

Two satellite shops, one in Pekalongan and one in Surabaya, are already operational.

Gunung Agung is Indonesia’s second-largest bookstore chain behind the Gramedia Bookstores of the Kompas Gramedia Group, which is not listed.

Gunung Agung’s shares were unchanged on Monday’s closing at Rp 250.