Some Business Decisions…

I received a question last night about our decision to use digital printing (print-on-demand) and to not accept returns. Specifically, the person asking the question noted that “Stating that books will not be available in bookstores harkens to the limitations of self-publishing”. I had planned to blog about some of my business decisions anyway, so this seemed like as good a time as any.

First, some information about how books and other products are sold. For most products sold in retail outlets, stores purchase goods at a discount but must absorb the cost of any stock which ultimately is not sold. In general, returns are only allowed for damaged merchandise. This is how books used to be sold. During the depression, because publishers were not in a position to sell books they agreed to sell books on consignment to bookstores as a way to keep bookstores in business. This is the current model for selling books. In a sense, bookstores get the best of both worlds – they get a 40% discount off the list price for carrying an item with no risk because they can return any unsold books. In this model it’s the publisher who assumes all of the risk. In his book “Publishing for Profit” (discussed in this blog), Thomas Woll dedicates an entire chapter to the economics of accepting returns and points out that this is the single biggest risk (and challenge) currently facing publishers.

This risk for publishers has consequences. First, it is often difficult for small publishers to absorb large numbers of returns and many go out of business (for example, see this article). In fact, one major bookstore chain is being sued by an independent publisher for the practice of excessive returns (see this article for details).

The two biggest risks in publishing are cost of goods (printing) and returns. Printing too many books results in a publisher sitting on inventory they can not sell, preventing them from investing that money in other projects. One way to contain printing costs is by only printing books when they are ordered ( this is called print-on-demand). There is a misconception that books that are printed using digital POD technology are never returnable. In fact, the printing method has nothing to do with whether a book is returnable or not – whether a book is returnable, along with the discount given to bookstores, is decided by the publisher. We decided that our books would not be returnable because of the risk associated with returns.

By minimizing the risks associated with returns and printing costs, as a company we can take risks in other areas:

  • We can publish short story and poetry collections, which do not have large sales volumes and thus are usually not produced by larger publishers.
  • We can take the risk of publishing unknown authors.

The decision not to accept returns will result in our books not being carried in most “brick-and-mortar” bookstores. Thus, the question becomes how might a book fare which is sold through online channels only? Foner Books has published some sales figures for the major book retailers from 2009. In 2009, total sales by the major book retailers were $13.483 billion dollars. Amazon and BN.com accounted for $6.533 billion, or 48.5% of sales. More important, while Barnes and Noble’s and Borders sales decreased over the previous years (-5% and –15%, respectively), Amazon’s and BN.com’s sales increased over that time (+11% and +24%, respectively). This trend is predicted to continue, suggesting that over time “brick-and-mortar” bookstore sales will become less important for overall book sales.

Our books are currently available at several online bookstores in addition to Amazon and BN.com. But as many self-publishers find, merely having a book available is not sufficient for it to be successful. It is essential to get the word out that the book is available and to get people talking about it. We have a marketing strategy for doing this that we have begun to implement for our short story collections. I plan on discussing this strategy in a future blog. We also plan on making all of our offerings available as eBooks, which as a book market currently has the highest rate of growth.

A successful business is one that understands the risks associated with their business and that works to minimize those risks when possible. While we understand that not having our books sold in “brick-and-mortar” bookstores is also a risk, we feel it is one worth taking to minimize the bigger risks currently facing publishers.

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