A remarkable chain of events had to transpire to make this happen. You spent months or years nurturing a fragile idea and rendering it into words. You managed to get those words in front of an editor, who was moved or excited enough by them to champion your work to more people. A book was designed, art commissioned, a marketing plan devised. A sense of your book was communicated via advertising, catalog, sales rep or simple word of mouth to a bookstore, where the buyer figured there was a reasonable chance a customer might be interested in it.
And then the bookstore bought your book.
Yes, that’s right. The bookstore didn’t borrow your book or receive it on consignment. They bought it. They paid money to your publisher to have a copy or two on hand, on the chance they could resell it to someone walking in off the street.
Like I said, it’s miraculous.
It’s also a risk for the bookstore, who put up their own money on a bet they could move your book. But what if no customer completes this chain of miracles and actually buys it?
Let me tell you what happens, and how it bit me in the ass.
Deciding to self-publish
In 2015 as I was preparing to self-publish my memoir, The Accidental Terrorist: Confessions of a Reluctant Missionary, I put myself through a crash course on the business end of the industry. Self-publishing was not my first choice, but after years of trying to sell my book to traditional publishers, and much soul-searching by me and my agent both, I realized it might be the best option I had left.
I believed in my book deeply. If someone picked it up in a store and started leafing through it, I did not want to give them a single reason to suspect it wasn’t the product of a traditional publishing process. This meant a lot of work on my part, not to mention a significant investment in editorial guidance, production software, and more.
It also meant getting my book into stores in the first place. That process alone could fill a couple of essays, but it boiled down to finding a printer and a distributor. To keep my start-up costs as low as possible, I chose a print-on-demand solution from Lightning Source, a division of the book distributor Ingram Content Group.
The supply chain
In traditional publishing, a publisher will, through a distributor, take orders from bookstores for its upcoming titles. It will hire a printing company to produce enough books to fill those orders, and the distributor will make sure those books are delivered to the stores. In this model, the publisher pays all the costs of printing the book up front.
With all my other production costs, I could not afford to place a large print order in advance. Lightning Source was a good solution for me because it combines printing and distribution under one roof. When orders come in for the book, Lightning Source prints only as many copies as are needed and delivers them directly to the stores.
As the publisher in this scenario, I don’t need to keep any inventory on hand. This is good for me and my bottom line, since I’m not paying money to print books that might never end up in a store.
But.
Discounts and returns
This is where my interests as a publisher begin to collide with the interests of the bookstore. What incentive does the bookstore have to pay for a copy of my book without being sure someone will buy it from them?
If it’s a hot book everyone’s talking about, no problem. Chances are good someone will come in looking for it. Chances are good, in fact, that many someones will come in looking for it.
But if it’s not a hot title, the bookstore is taking much more of a risk. Publishers do two things to make this risk more palatable to the bookstore:
- The publisher sells the book to the store at a discount — usually 55% off the cover price, and rarely less than 40%. The bookstore can then sell the book at the full cover price or even offer it on sale and still make a profit.
- The publisher allows the bookstore to return unsold books for a full refund. This theoretically reduces the bookstore’s risk to zero, since if they can’t sell the book, they can get their money back.
This is great for the bookstore but not so great for the publisher, since the publisher needs to keep enough cash on hand to repay the bookstore if necessary. Also, it’s easy for the publisher to get stuck with a bunch of returned books they paid to have printed but that never sold.
But we were talking earlier about print-on-demand. You would think print-on-demand reduces the risk on the publisher’s end, since they’re not paying in advance to print some possibly excessive number of books.
It does — but only to a point. I’ll get back to that in a bit.
Setting a price
When adding my book to the Ingram catalog, my job was to work out an optimal retail price. This was not a straightforward task.
Ingram is the largest wholesale book distributor in the world. When your book is listed in their catalog, it can be ordered by just about any bookstore or library anywhere. One important factor in whether it will be or not is, of course, the price. Too high and no one will want to buy it. Too low and you won’t make any money even if they do.
Unboxing the hardcover edition of my memoir. (Photo by William Shunn.)
The wholesale price of your book — what the bookstore pays the publisher — must be higher than the cost of printing your book. The hardcover edition of my memoir, for instance, is a 448-page book with a full-color matte-finish dust jacket. The print cost is $13.37 per unit (though this would be lower if I were printing in bulk). So, my wholesale price had to be higher than $13.37 in order for me to make any profit.
After playing around with various numbers, I settled on a retail price of $27.95. This was roughly comparable to similar hardcovers coming out at the time, and I was afraid to go much higher for fear of turning off potential buyers.
The problem with this price was, at the standard 55% discount, bookstores would pay only $12.58 per unit — less than the cost of printing. Though I knew it would probably hurt me with some retailers, I gritted my teeth and set the discount at 40%, the low end of the generally accepted range. This would make the wholesale price $16.77. I would reap a hefty profit of $3.40 per unit, and the bookstore would still stand to make $11.18 at the cash register. I hoped that would be enough to convince a few stores to take a chance on my book.
(I should clarify here, that $3.40 profit is what the publisher receives in this transaction. In traditional publishing arrangements, the publisher would pay a portion of this amount, probably 10% of the cover price, to the author as a royalty, and would have other costs to cover as well. In my case, since the publisher and the author are the same entity, the entire $3.40 goes into my pocket. As for the bookstore’s $11.18, a portion of that might be owed to a wholesaler, which in some arrangements acts as a middleman between the distributor and the store. Things can get complicated!)
Using similar reasoning, I set the retail price of the trade paperback at $15.95. The print cost of $6.72 and wholesale price of $9.57 would yield me a per-unit profit of $2.85.
Soon enough, publication day was upon me — Tuesday, November 10, 2015. Time to kick back and watch the money roll in. Right?
In rolls the money!
My book didn’t exactly set the world on fire, but it wasn’t a complete dud. My Lightning Source wholesale compensation report from December 1, 2015, indicates I sold 72 hardcovers and 16 trade paperbacks to U.S. retailers through the end of November. This totaled $1,360.56 in raw sales and $290.40 in net publisher compensation. There were a handful of sales in Canada and Great Britain as well. Not a bestseller by any stretch, but nothing to sneeze at either.
This momentum continued unabated through December. In the middle of January I gave a Google Talk in New York City on the topic of self-publishing The Accidental Terrorist. I was particularly excited when I arrived to see that a nearby bookseller, Posman Books, had a table in the small auditorium with at least two dozen copies of my book available for purchase.
Later that month, I found myself in the same part of Manhattan with time to kill, so I popped into Posman Books to do some browsing. I was thrilled when, in the nonfiction section, I spotted a copy of my book. There it was on the shelf! Right there with all the real books!
I remembered the huge stack of copies from my talk at Google, and part of me wondered idly what had become of them all. Had they been sold? Were they stashed somewhere for future restocking? I was curious but managed to put the question out of my mind as I took my own stack of purchases to the cash register. (I can’t walk into a bookstore without buying something.)
As it turned out, my sales numbers for January were not very strong. February and March were worse. Still, by the time April dawned I had sold a total of 217 books through Lightning Source, racking up $661.96 in publisher compensation. For a small, self-published memoir, I figured The Accidental Terrorist wasn’t doing too badly.
Then, at the beginning of May, my report for April arrived.
Paying the piper
At first as I looked over the April numbers, I couldn’t make sense of what I was seeing. My total units sold for the month came to -52. That’s a negative 52. My sales totaled -$877.40. What kind of nightmare joke was this?
Digging through the report, I began to understand what had happened. I had sold another four copies of the book in April, but at the same time 56 copies had been returned by the bookstores that had originally ordered them. These stores were then entitled to a refund of what they had paid. For 33 hardcovers and 23 trade paperbacks, that ran to $885.52.
And I was on the hook for it.
Lightning Source had printed those 56 returnable books, you see. Someone had to pay for them. That someone was the publisher. Me.
Soon after, 56 books arrived at my door, and the charge for $885.52 showed up on my credit card. I was suddenly $215.44 in the hole! The modest profit I had made on 221 copies of my book was obliterated by the return of just 56. I had made an average profit of $3.03 on each book I sold, whereas each return cost me $15.81.
Despite my intellectual understanding of how returns worked, I was shocked and gut-wrenched. It was hard to wrap my head around these numbers. I had let myself forget that, under optimal circumstances, the cost of printing was hidden from me, invisibly squared away before I ever saw my small per-unit profit. I had let myself forget that, in the end, it had always been me who was paying the printer.
Of course, it wasn’t a complete loss. I did have the books themselves, after all, which were not worthless. I could resell them online, or give them away as gifts and promos, which is what I did. But this experience did, unfortunately, force me to rethink my book’s relationship with brick-and-mortar stores.
The point of no return
Realizing how much I stood to lose if this happened again, I logged into Lightning Source and updated my pricing structures. I reduced my wholesale discount to 30% and, more importantly, marked my books as nonreturnable.
I understood this action would deter most bookstores from keeping The Accidental Terrorist in stock. That’s what I was willing to trade to prevent another unpleasant and costly surprise. I didn’t want to do it, but I literally could not afford to take a similar hit. (Even so, it was more than four years before my print sales crept back into the black.)
I love bookstores, especially independent bookstores, and it makes me sad that I may never again have the experience of stumbling across my memoir somewhere on their shelves. It also makes me sad that the publishing ecosystem is set up to leave small publishers so vulnerable to the whims of the marketplace.
But there’s a silver lining. My book is still part of the Ingram catalog. When someone asks me the best way to buy a copy, I tell them to ask their favorite local independent bookstore to special-order it for them. A bookseller may not want to take a chance on stocking a nonreturnable book, but they will almost certainly order it for a customer who asks. It’s the best way I have of looking out for myself while still doing what I can to support independent bookstores.
It’s your call
If you’re producing physical books as a small publisher or a self-publisher or both, the question of whether to list your books as returnable is one to think long and hard about. Do your research and go in with your eyes open about the potential rewards and potential costs of both approaches.
Don’t wait to be faced with a hefty surprise bill, like I did.
Crossposted from Inhuman Swill]]>
