Returns are one of the ugliest aspects of the book publishing business. A lot of people don't realize that many (not all) bookstores buy from publishers on a totally returnable basis. It's effectively a consignment relationship and anything that doesn't sell can be sent back to the publisher for full credit. Returns vary by account, genre and title, but rates are anywhere from 10% to 50% or more. So once the trees are killed, the books go from printer to publisher to bookstore and all too frequently, back to publisher.
It's an enormous waste, which is why the recent announcement that Borders is going to buy on a non-returnable basis from HarperStudio is worth noting. In the long run, though, it may be worth nothing.
Why? When accounts buy on a returnable basis they take comfort knowing they won't be stuck with obsolete inventory. As a result, they can be more aggressive with initial buys and avoid out-of-stock situations on a potential hits. A non-returnable buy on that same title is likely to be smaller because the chain buyer doesn't want to risk running into that obsolete inventory situation.
According to the news report, the deal means HarperStudio is giving Borders 10-15% more of a discount than they would in a returnable model. That's a lot of points. It would be interesting to calculate the breakeven level between the two models. If I were the publisher at HaperStudio I'd be sure to track and compare chain and store level orders and sell-thru data for Borders to the same data from the returnable accounts to see whether this pays off.
So if one likely downside is more conservative buys and in-store inventory levels, the upside is more of a commitment to store/chain promotions of HarperStudio titles. After all, Borders will have a have a great incentive to make these books sell through, no matter how many copies they buy!
Just like any other part of a business transaction, there's an equilibrium point that will be reached by both parties. If HarperStudio decides non-returnability isn't worth this deep of a discount they'll eventually push back. Right now, though, both parties have decided the elimination of returns is worth 10-15% of additional points. I'm anxious to see if everyone is truly happy with that range in the long run.
I'm curious about co-op expenditures by HarperStudio on these titles. It's possible (probable?) that the 10-15 point spread is also shifting the burden of promotion costs to Borders. I don't have an expertise with the numbers, but I'm wondering what the true effective discount on these titles would be if you backed out the amount that would have ordinarily been spent on co-op promotions.
There are many questions remaining in this model -- could it work for a large publisher as a whole (rather than for just one imprint that has primarily proven authors)?, but it is a model that is worth following closely.
Posted by: Ann Kingman | December 21, 2008 at 02:13 PM
I agree and think this is worth paying attention to as well.
Maybe now that the economy is in its worse shape since the depression, publishers will finally do more than pay lip service to those ideas that have come and gone, like lower author advances (but bigger royalties), and non-returnable as the norm, rather than the exception.
In response to Ann's comment, given the radical shifts the economy has taken, I would think that the calculus on returns, co-op promotions and the like have changed dramatically.
Posted by: gerry donaghy | December 21, 2008 at 10:11 PM
Maybe, there should be some rethinking of the design process for books. Cradle to Cradle is an excellent book on the process of designing things.
It is about how to design things so there is very little waste. Maybe the publishing industry should take a look at how to make it easier to recycle books and consider designing books that are easier to recycle and reuse.
This might make it a little bit easier to return books. An example of a publisher that recycles a large part of its book is Thomson-Shore.
http://www.thomsonshore.com/environmental_initiatives/recycling.
There is no reason a print on demand system can't incorporate recycled products as well as reconsider the ink, paper, and other materials put into a book.
It may not eliminate returns, but it also might make them easier to handle.
Posted by: Book Calendar | December 22, 2008 at 09:20 AM
I've thought for a long time now that Big NYC Publishing is operating on a broken business model. It will probably require a lot more pain (more layoffs, some house shutdowns, etc.) before they find a model that will work for the future. The same is true for bookstores, both chain and indies.
The nimble will adapt and survive. The rest deserve to perish.
Meanwhile, at the other end of the spectrum, many micro- and self-publishers are doing just fine. Some of us essentially ignore the bookstore market entirely and, somehow, manage to sell books and make money.
Bigger is not always better.
Merry Christmas, Joe!
Walt Shiel, Publisher
Slipdown Mountain Publications LLC
Posted by: Walt Shiel | December 22, 2008 at 09:21 AM