Tuesday

The Secret Loss of a Returned Book

If I was a paranoid person, I might think Barnes & Noble had it out for me. Now in reality, the powers that be at B&N haven't the faintest idea who I am. I am just one or two pages in the NBN catalog -- pretty much indistinguishable from every other publisher in there. And from Barnes & Noble's perspective, they actually probably like me. After all, for the two books I put out in 2010 (Book of Maps & The Necropolis), they purchased nearly the entire print run of each. (In fact for Book of Maps, they originally ordered 3x the print run before I pointed out to NBN how unrealistic that was.) And in any other industry, that would be it. I'd pay my authors their royalties and take my remaining money to the bank.

But this is the book industry, and unlike literally every other industry on the planet, we allow returns.

And this is why I become paranoid about Barnes & Noble's intentions. Because although they bought nearly the whole print run of Book 3 of both The Sacred Books and the The Forgotten Worlds Series, they didn't buy any of 1 or 2. You can probably guess how many casual shoppers randomly buy the third book in a series. And since I know my sales numbers for book 2 (a reasonable forecast of sales for book 3), I can tell returns are going to be somewhere in the 85% range. If I'm lucky.

Large scale returns for me are, to put it bluntly, devastating. It would be cheaper for me to print books and toss them directly into a recycle bin or a bonfire or use them to build furniture than it is for me to sell a book and have it returned. Let's do the math:

Say I have a book that retails for $1.00.

That book sells to a bookstore at a discount that we'll say is 50%. (Discounts to people who buy from NBN vary from 47-60%, but 50 is the easiest number to use.) From there it goes to the store shelves. Yeah! On my end I've gotten $0.50. My distributor takes its cut of (this is not the actual number since I legally can't disclose that but an approximate that again is easier to do the math with) of 20% or $0.10 and my author (again this varies but we'll average for ease) gets 10% of that $0.50 or $0.05. I'm now down to $0.35 which after factoring in the cost of printing the book drops to $0.10. I then spend half of that in marketing, and finally I'm left with 5 cents.

(You may have noticed that the author and publisher make the same amount. This is intentional. Authors are considered an equal partner in each book.)

So far everything is looking good for all involved. The bookstore is getting to sell at a 100% markup, the distributor is getting its cut for its hard working sales force, and the author and I are equally sharing the profits. Great.

But then 90 days pass and the bookstore can return any unsold stock. The bookstore employee pulls the book from the shelf and returns it to NBN. Since they get a full credit, I have to give the bookstore back $0.50 for that book. But wait! I only actually got $0.35 for that book. I had to give $0.10 to my distributor and $0.05 to my author. Well, my author isn't going to get to keep that money. We're partners so if the book doesn't sell, neither of us gets anything. That royalty gets credited back to me. (However, if a royalty check has been paid, the author does not send me money back. That check just acts like another advance that has to be earned out. An author never, ever sends me money except for books that he/she buys directly from me.) However, my distributor keeps the money I paid it.

So, to make a long story short, instead of making 5 cents on that book, I have lost 10. If we were talking about one of my real $16.95 hardcover books instead of this hypothetical book, that would mean that instead of making $0.85 on that book, I've lost $1.70.

Let's extrapolate that out. Pretend my print run was only 100 books, of which a bookstore sells 15 and returns 85. On the 15 books, I make $12.75. On the returned books, I lose $144.50. That means on that initial 100 book sale, I lost $131.75. In fact in order to break even on sales with returns, no more than 33% of the books can be returned.

The industry average is around 30%. So, for most books, most publishers are breaking even or turning small profits. With a hundred book sale and the industry return rate, I could make $8.50 on my book.

However, I will not be getting the industry average. My return rate is going to be much higher guaranteeing me a loss. And even if I do eventually sell all of those books again and never receive another return, I will still never recoup all of those return expenses unless I print more books at the same print rate. After all, it takes two books' sales to recoup the loss of one return. And since I had printed what I had projected would be the lifetime sales for those two books, there will be no other print runs. By buying my entire print run and then returning most of it, Barnes & Noble has guaranteed that those two books will never be profitable (or even break even) for me.

See. They totally have it out for me.*

*All right. I know Barnes & Noble doesn't have it out for me. They had no way of knowing what my print run was or that they'd bought it out or what the returns on the book would be. I doubt anyone ran sales numbers on the previous books, so the buyer and my NBN sales rep would have just placed an order for the amount they normally order for new midlist books. (The same size order they would have placed with say Harper or Random.) The fact is, I hadn't expected B&N to pick up these book for nation-wide store shelves when they hadn't picked up the first 2. I had figured it would just carry them online and in a few regional markets. The fact that they are now starting to pick up my books more consistently means that I have made adjustments to this and to advance marketing practices. They won't catch me by surprise like this again. However, it is much more fun to play paranoid than to admit I wasn't prepared for a chain pick-up.

5 comments:

Anonymous said...

Wow. Simultaneously sucks AND seems like good info for the future. (Also, as an author, it is nice to see the publisher's take and their risk. I've been thinking about it from the author side: this is the only industry I know where you regularly do the work first with the hope of getting paid.) After all that frightful math, glad you're still publishing...

Anonymous said...

Taking returns into account, why then aren't retailers required to make up the difference for the discount that they get based on their order numbers? Or at least pay their own return shipping costs. I think this would make the most sense for both involved.

This would force retailers to only order what they can realistically think they can sell (instead of what they hope they can), and publishers don't have to pulp (and lose money they've already spent) on as many books that are returned.

Ideally, returns would go the way of the dodo, but that seems unlikely (at least in the near future for paper books).

Natalie Aguirre said...

This is so interesting. What do you do with the returns?

The Buried Editor said...

Currently, my returns get restocked (for a fee I didn't include in my accounting here because it works out to something like 3 cents a book or .2%) and then they can theoretically be sold again. For Book of Knowledge for example I've watched on my accounting screen the book be sold to one retailer, returned, sold again, returned, ad nauseum.

And retailers aren't left entirely unscathed by the return system. I discuss them tomorrow.

Anne Francis said...

How do the electronic books fit into making money on book sales? I notice your David Michael Slater books don't have a Kindle edition, for example.