Monday, April 07, 2008

Taking A Look At Bookstore Returns

I've been thinking about my post yesterday on Bob Miller and his new HarperCollins' imprint.

When the Associated Press released the story on Thursday, they opened with this line: "In an ever-uncertain market for publishers, HarperCollins is looking to resolve two of the industry's major concerns: High author advances and the high rate of returned books."

Today we'll start with the second concern, returned books. Tomorrow we'll talk about advances.

I've said before that the "returns" system is antiquated, expensive and inefficient. Estimates are that between 30% and 40% of books shipped to bookstores are later returned for credit. The shipping and pulping costs incurred by publishers are considerable. So why did the practice start, and why are publishers and booksellers still using it?

According to a footnote in a scholarly article by Peter Givler titled "University Press Publishing in the United States":

The practice of allowing bookstores to return unsold stock for credit began during the Great Depression as publishers sought ways to gain store shelf space for their books; it’s a practice that publishers frequently deplore, but as long as there is competition for shelf space it is likely to continue.

According to an article by agent Richard Curtis, the system worked well when returns hovered around the 10% mark, "[b]ut after World War II, for many and complex reasons, the return rate began to rise, occasioning Alfred Knopf’s classic remark, 'Gone today, here tomorrow'."

Putting aside the question of shelf space for the moment, the practice continues because bookstores--already under assault from multiple fronts--cannot afford to take on more risk.

In the last twenty years, several developments have created increased pressure on bookstores. These include:

  • The growth of "big box" discount stores that carry a limited number of best-selling titles, but discount them deeply. Both independent and chain bookstores have had their margins cut drastically by being forced to offer--if not match--larger discounts.
  • The growth of the Internet has made it much easier for readers to locate and buy used books, cutting into both hardback and paperback new book sales.
  • The convenience, pricing and free shipping of and other online sellers have also diverted sales from bricks-and-mortar bookstores.

While downloadable e-books have not yet made a significant impact on bricks-and-mortar booksellers, the electronic book industry continues its double digit growth.

The major advantage the "returns" system offers publishers is that it makes bookstores more willing to stock new or unknown authors. Without the guarantee that they could return any unsold stock, booksellers would probably confine their purchases to the "sure thing" sales: books by best-selling authors or on explosive subjects.

So, how and why does Bob Miller think he can get around this system?

I'm guessing the answer is POD technology.

Print-on-demand is not synonymous with self-publishing. Print-on-demand means exactly that; a book is not printed until there is a demand (read here, a paying customer) for the book. It is a technology made possible by digitization.

For those of you who may have missed my post of Friday here, Ingram's Lightning Source has signed a "strategic agreement" with On Demand Books, owner of the Espresso Book Machine.

Lightning Source is a POD operation with headquarters in LaVergne, Tennessee. Its website says its average print run is 1.8 books. I'm guessing Ingram's interest in On Demand Books signals an intention to grow horizontally, meaning to put Espresso Book Machines in locations around the country.

Ingram already has a Direct-to-Home fulfillment program through which it can ship books to bookstores or their customers. They "provide the obscure and hard-to-find titles that would be costly and cumbersome for a bookseller to keep in stock."

Let's speculate. What if Miller cut back on the size of his print runs, shipping fewer books to stores but at a deeper wholesale discount and with the promise that--if needed--HarperCollins (or its POD partner) could ship additional copies directly to the store or, if the customer pre-paid for the book, directly to the customer?

I'm guessing that Miller would save enough by eliminating the printing, shipping, return shipping and pulping of those extra unsold books that he could afford to offer a better discount rate, which might entice the stores to try buying books without the guarantee of a return. After all, with the Internet, many independent stores and chains now have websites themselves. They could offer the unsold books for sale online.

Eliminating the returns system is only a step on a longer journey.

As the Espresso Book Machine becomes cheaper and more available (or as similar devices are developed), I'm guessing they will begin to appear in bookstores around the country. (Are you listening, George Jones?) Then what the bookstore will be buying from the publisher is access to digital files of copyrighted titles, not the physical books themselves.

The times, they are a-changin'.


JaxPop said...

If I ran things the way the publishing world works, I'd be broke. Carrying heavy inventories was proven to be a poor method of business years ago - it ties up resources. In my business we determine in advance (planning & scheduling) what we'll need & order it for delivery when we want/need it. Returns, when even permitted, usually require 30 to 50% restocking fees. No room for too many screw ups! I can't wait to see your post about author advances.

Maya Reynolds said...

Hi, Jax: You're right. The publishing industry is still following the same practices they did during the Depression era.