I’m a big fan of the History Channel program Life After People. During this last workshop, a number of us got into discussions about what would happen in publishing if this thing happened, or that thing suddenly stopped. That conversation got me thinking that it might be fun to try to be a science fiction writer and extrapolate what might happen if some things in publishing suddenly changed.
Now first, understand, this is my opinion, and I welcome discussion and responses. And I could use ideas for topics in this general line of thinking about publishing. I have three or four already, including Life After Agents. I’m going to start with returns first. This might take me a few posts to cover as comments come in, so stay with me.
Also please remember I’m going to slant this from the writer perspective, giving that area the biggest attention. I’m not going to even try to get into how these changes might happen. Just as the History Channel does, I’m going to assume it suddenly happened and go from there.
So, generally following the format of the History Channel series, let me just jump in.
Life After Returns: 1 Hour.
Besides some cheering in publishing houses and a lot of mis-information being spread by writers who don’t understand returns, I doubt in one hour much would change. Some bookstore owners would suddenly be panicked and some publishers after a short amount of cheering would also be calling emergency meetings, but in one hour, not much else would be happening.
A little bit about returns. In the book publishing industry, the bookstore owners are in a rare and wonderful position of having to take no responsibility for their own inventory. This burden is held completely by the publishers. The bookstores can get between a 40% and 55% or more discount off the cover price and take no risk other than their own overhead. If the product doesn’t sell, they simply send it back for full credit.
How did such a really silly idea start? Back in the Depression, publishers stepped in to help bookstores stay open by offering this full return on some books. This allowed many bookstores of the day to remain open and selling the publisher’s books, so during the Depression it was a win/win situation for the industry.
During the Depression, all stores were owned by independent booksellers, and they ordered pretty much directly from each publisher through a sales representative of the publisher. Pulp magazines and comics had their own methods of getting into the corner stores and drug stores and never really got into this mess until later. Paperbacks as we know them did not exist when this started.
As the years went by, because the bookstores had grown to expect it, the publishers kept offering these full returns on some lines and books they wanted to promote until by the 1960s or so it was standard practice that almost all books were fully returnable for full credit.
Now, if you are starting to ask what happens to these books when they are returned, you are asking a good question. Paperbacks have their covers stripped by the bookstore and the covers sent back for the credit and the books trashed. Hardbacks are sent back and sometimes trashed by the publisher, sometimes sold again, depending on a number of factors.
A paperback can have returns of between 30% and 60% and still be successful. That means that if a publisher needs to sell 20,000 copies of a mass market book for it to break even, they have to print and ship at least 40,000 copies. 20,000 copies sell, 20,000 copies end up in landfills or recycled paper bins. A fantastically wasteful way to do business, especially in this new world of saving energy.
And there are a ton of hidden costs. Every book that is destroyed has to be shipped to the bookstore which costs gas and oil and energy, every book that is destroyed has to be printed, which takes energy and costs, and the paper created, and we all know that paper production is one of the most wasteful of all energy industries. Add in the boxes created to ship the books and you start getting an idea of how wasteful the returns system really is.
Life After Returns: 1 Day.
Publishers are scrambling, having tons of meetings at all levels. Publishers would have to revamp overnight all their discount schedules to the bookstores. They would be cutting press runs, but at the same time, they would have no idea how much to cut. Publishers, to sell books must still have market penetration, meaning they have to get the books to the shelves and the reader’s hands. For decades this market penetration has been covered by bookstore owners just not really caring how many of any title they order, thus if the publisher really wanted to put a book out, they could with good sales people and good discounts. But without returns, that all changes quickly.
The sales force would also be going nuts at this point and would be in the middle of all the publisher meetings trying to figure new discounts, talking with their bookstore reps and so on.
Writers will be panicked and cheering at the same time. Those of us who have been around long enough to go through a major collapse of the distribution system (1990s) know that this too shall pass, but it will take some time. For beginning writers, they will have a fear that selling will get harder for a time and they would be right.
For writers, returns show up as a figure on our royalty statements called “Reserve Against Returns.” On the first royalty statement this number can range from 50% and up. Suddenly this will no longer be the case. If a publisher actually ships and sells 20,000 copies, that’s what will show up. So for writers, on the surface, this is a good thing. A very good thing. One major way writers’ careers are killed is by simply having too many returns. And that often is the fault of a bad cover or bad cover copy or a sales force that dropped the ball and sent out too many copies.
Yes, I said too many copies. A book that ships at 40,000 copies and only has returns of 10,000 copies is a success, selling 30,000 copies. But the same book, shipped at 80,000 copies and returning 50,000 copies is a complete failure at the same 30,000 copy sales. See why anyone who really understands returns from the writer side will be cheering during the first day?
Bookstores on the other hand will be in full-fledged panic, but all but the most experienced bookstore owners won’t really understand the problem coming at them just yet. Why should they? They have never understood a business model that forces full responsibility for purchasing an inventory.
I owned a comic book store at one point back in the late 1970s. Comics were bought non-return and I can tell you that every week I worked hard over that order form for the comics to buy. I knew that if I thought I could sell five copies and I only sold two, I ate the other three. They went into my discount bin a few months later and I would be lucky to get even a part of my money back on them. So I was very careful. Bookstores owners will be forced into this mindset very suddenly.
Life After Returns: One Week
One area of publishing that will be in full blown panic at one week are the discount publishers. These are the companies that print books only for discount tables and discount stores. They will be coming quickly to the understanding that their business is in deep danger by the disappearance of the returns.
When you walk into superstore, all the books you see on the discount tables were printed especially for those tables. With the return system, it is better for the store to destroy the book and return the book for full credit than it is to discount it up front. So entire companies have grown up to fill the shoppers desire to have discount books. I have written a number of books and many short stories for those discount tables, my books never seeing the regular part of the store. And mall discount bookstores are the same way with a large part of their inventories. Not all, but some. Often publishers will print a certain number just for those stores at a deep discount. Authors, check your contracts. You don’t get anything for those books, even though they were printed and sold just like any other store.
So when returns disappear, bookstores will suddenly not need the discount publishers, they will simply move their unsold books to discount tables and cut the price. The discount publishers will soon find themselves out of business.
From the writer perspective, this move the book to a discount table instead of destroying it will be a stunningly good thing. A reader finds one of your discounted books on the front table of a store. You have already been paid for it so it’s no big deal to you. But to the reader, they buy your book cheap, take it home and read it. And if you did your job and they like the book, they will return to the store and buy your new book at full price. Having books on these discount tables, given enough time, will be a boon to writers and careers. With the return system, writers are robbed of this natural way to find new readers. Their books are destroyed instead and taken off of their royalty statement.
At one week, the books caught shipping in the middle of this sudden change will end up with a ton more copies in the warehouses and on discount tables because the numbers of copies had already been printed under the old system. This problem has happened to authors throughout time. Cold War thriller writers one day had careers, then when the Berlin Wall fell, they suddenly didn’t. Books scheduled to ship around 9/11 were completely lost and had huge returns. After 9/11, no one moved for a week or more, thus bookstores had no sales and those books were sent back without any reader getting the chance to buy them. Under the current system, a bookstore inventory, at least the new books and the ones up front, are in a state of constant change. You lose a week of sales due to a world event and all the books that were to be pushed that week are lost and quickly replaced by the books coming in behind them. This has killed many an author’s career.
At one week after returns, editors will pretty much freeze buying until all this settles out. They would be far too busy helping the publisher and sales force figure out real numbers and redo all their book profit and loss statements without returns.
Currently all books before they are bought have a profit and loss statement of one sort or another done for them, far before the writer ever knows the book will be bought. This calculation is an attempt to figure out all the costs of the book, from art to overhead to author costs to shipping costs and warehouse costs and everything. If suddenly a book that the publisher and sales and editor thought would sell 20,000 copies only needed to be figured on that number instead of 40,000 copies, it would make a major difference in all the profit and loss statements of every book. So during this first week editors would be spending a great deal of time trying to get all this done for the 100 plus books they have in different areas of their pipelines. No buying of new books for this week, and more than likely for a month to come. The buying will restart. The lists have to be filled each month.
Of course, as word of this got out, writers boards would panic, and many would shout that the sky was falling and all publishing was coming to an end. That’s normal for writer’s boards. Writers, after all, are people who make things up for a living, and often these writers don’t know when to stop making stuff up. Long time pros will just be writing their next books knowing that a system without returns will be a lot better for everyone.
Next installment in Life After Returns coming soon.
The problem of returns and careful ordering by the bookstores becomes moot with the advent of the Espresso Book Machine. Want a book? Print it at the POS. Bookstores can have thousands of titles printed, 1 copy each, for display. A customer wants a book, print it on the spot. This requires a brand new model–bookstores can print any book with an e-file. No returns, no need to have a huge inventory (they can even display e-copies rather than actual printed ones), no staff to shelve, strip or ship those pesky books.
http://www.youtube.com/watch?v=JMFh5axDKWU
Just one way around selling physical copies without returns.
Great idea for a series of articles!
Wow, it’s really kind of staggering how complicated the publishing industry is. And this is just one facet of it. It almost makes me wonder what it is I’m trying to get myself into.
Bob, I agree completely, and have been watching machines like this for fifteen years as their price point came down and the speed came up. Problem is that they are still too slow. Fantastic for reorders and such, but for those larger print runs, the cost factors are way off still and the speed is too slow. But it is getting closer.
The other side of this problem is who will cover the cost of the machine? The bookstore has no reason to a the moment and one publisher isn’t going to want to share, and thus we’re back in the same mess.
I agree, the best system for a bookstore of the future would be have a display book like a video store and then print each sold book to demand at the counter. We’re not there yet for the vast majority of books published, and for anti-trust and cost reasons, but getting closer by the year.
Cheers,
Dean
Great post, Dean! Can’t wait to read the rest of the series.
Great idea for a series, Dean. Looking forward to future installments.
One thing this got me wondering was, how would a no-return system be brought in?
If the publishers simply say, “no returns after June 20XX” then it’s going to hurt the writers already in print, as stores are likely to try and return EVERYTHING they’re afraid they won’t sell.
If on the other hand, it’s phased in, it seems like a logistic nightmare as returnable and non-returnable books in the same line show up side-by-side on the shelf. The computerized inventory systems in the chains may allow them to handle it more easily, but smaller bookstore might either be confused, or treat a phase-in like a deadline, and return any questionable books before the start-date anyway.
But in either case, the way stores buy books (that is, which books they buy, in what quantity) is certainly going to change. It’s going to be interesting (and a bit scary) to see how that shakes out.
Could it foster a return of a back-list, as stores come to depend on those “meat and potatoes” books to pay the rent and keep the lights on while hoping for bigger profits elsewhere?
It also occurs to me that it’s going to change best-sellers. The lists run on velocity, but velocity is going to be harder to come by in a non-return system. Stores will hedge their bets and order lower quantities of anything sort of a sure-fire success, and that could make copies of hot books harder to find just after release.
At the same time, publishers are probably still going to have to PRINT big quantities of those books to quickly handle the hoped-for reorders on those titles. So instead of lots of books going to a bookstore and then being returned to be pulped, we could end up with large quantities of books sitting in a warehouse until they’re eventually pulped.
Which would cancel out some of the advantages of a no-return system. Not all though, as this would mainly apply to best-seller-targeted titles, and the books don’t have to be shipped or handled by stores along the way.
The how of returns being done away with is just not anything I’m going to deal with, just as the History Channel series doesn’t deal with how the humans suddenly vanished.
To be honest, I see no way publishers can kill this system without a brand new delivery system like Bob suggested above. Between trucking union contracts and anti-trust laws, no publisher dares go out on the leading edge of this. All publishers would have to move at once and that’s not possible under current laws, at least not without some outside force such as Congress stepping in for the sake of greening. Publisher’s have wanted to kill this for some time. For logical reasons, they just haven’t been able to.
I agree that if this suddenly happened, there would be many changes, and some of them I’m going to get into in the next installment, including where I think publishers would turn at first, and bookstores would turn at first. However, to answer your last paragraph, I don’t see the publishers moving to overprinting except in case of mistake, and even then they could discount the books out as they do now. So the end of returns would be the end of destroying every other book produced.
Next installment coming soon to talk about some of these very things. You are just ahead of me.
Cheers
Dean
Thanks, Dean.
Yeah, I see how that discussion doesn’t fit the series, but now at least we’ve touched on it in the comments now.
Discounting at the wholesale level? The mind rebels at the strangeness (and yet logic) of it.
The publishing business is SO damned strange and out-of-touch with everything else.
For example. How many other businesses print the prices on the products any more? All I can think of are periodicals and some snack foods, and even those are now routinely sold at discount.
Bucking returns (if it could be done, which as you said, is problematic) might result in a lot of normalizing of other business practices in the industry. Or not.
Great topic, Dean! Thanks.
This returns system is something that has fascinated me for some time. I worked in a bookstore and we didn’t have that. South African bookstore, firstly, and secondly the largest part of our initial inventory was used books. Gradually, we added more and more new books. A large part of that was remaindered stock, the “overstocks” that a local distributor bought en masse from overseas contacts and we got at terrific prices.
It worked out well all over, really. But one thing I remember very, very well was how every time we bought books — whether used, or overstock or new — we sat and worked the available budgets and potential to move the stock. The second thing I remember very, very well was just how fast a perennial selling author can plummet to zero sales for a year and a previous nobody rockets to bestsellerdom from nowhere.
Bit if an art, book buying.
Our branches steadily improved every year, though, because ultimately we took the time to learn what our customers wanted and they learned to trust us when taking a chance on unknown authors.
But that trust is fragile and in general we turned down consignment stock, or books offered on a returns system, because we didn’t know what the hell we were getting either.
Returns is a fascinating system, but so terribly flawed.
Interesting post, please keep them coming.
David, thanks for the comments. In reality even with this return system a lot of ID bookstore owners do a system as you described. They focus on the wants of their customers and mostly buy books non-return staying very close to the line as I did in my comic book store with the new comics every week. They used to be the majority of stores in this country, now are about one third, but again growing in numbers thankfully. Specialty stores in science fiction and mystery tend to really be this way.
Thanks again for the comments. New installment coming soon. Just have one more bookstore owner to talk to so I can confirm one fact.
Cheers
Dean
Dean, thanks (as always) for exposing another mystery of the publishing biz.
I never did get how returns worked.
I would also add that all of us aspirants dream of there some day being a [b]Life After Rejection Slips,[/b] though apparently even for many pros, this is as fantastical as Life After Returns.
Three weeks to Kris’n'Dean! Can’t wait!!
By the way, newspapers have the same deal. When I was a kid and working in my dad’s store we had papers, magazines and books. The newspaper people came around once each week and gave us full credit for all the unsold papers.
That doesn’t make much sense either. And you can see the state that the newspaper business is in.
Brad, no such thing as life after rejections. No matter how much you have sold, you still get rejected. Nature of the beast, just as you as a customer will pick up a book, glance at it, then put it back and not make the decision to buy it. Same thing exactly.
Randy, yup, going to talk about that in the next installment. Magazines and newspapers are even worse than books, and without returns, a bunch of things for them will change very, very suddenly. Stay tuned.
Cheers
Dean
Dean,
the EBM is almost there. It only takes a minute or two to produce the book–Lightning Source just sent out a release so their inventory could be sold via EBM. I missed the exact number but several hundred machines are scattered around the world right now. Somebody’s paying for them (the only one I remember, because it struck me as an interesting location, was at the New Orleans Public Library).
It costs a bundle to start a traditional bookstore. I don’t know what the EBM costs, but it might not be much more, plus the labor cost would be held way down and sq footage could be held to a minimum. I don’t know what the labor cost is on a bookstore, but around 40% is not unusual for a restaurant. I could believe it’s similar since the profit margins look similar (1-2%)
So, it might be printers like Lightning Source who are interested in helping out bookstores put in such machines.
Best
Bob
Bob, I’m with you completely in hoping that machines like the EBM and Docutec (sp?) and others will solve this returns process in some reality. I’ve been pushing the idea since I saw one of them at ABA (now BEA) in Chicago in 1993. And with these machines, the model of USA Today works, printing a book in hundreds of places around the country. But the cost and time factor still has to come down some before this works on the money and the math side. Fingers crossed it does and soon.
Of course, time is the killer for the idea of a bookstore printing books from samples at check-out. Last time I was in a Boarders standing in line to pay for my six books, I timed and counted the number of books that went out the door in the ten minutes it took for me to get through the line and up to a clerk. Counting my ten (actually Kris’s nine and my one), about 130 books went out the door with three clerks in about ten minutes. And I didn’t feel the line was bad.
So if all these books were print to sell, even at 15 seconds per book to produce the final copy (which the machines are not quite down to that speed yet) and ignoring download and look-up time, which would double most of this, it would have taken about 33 minutes for the same transactions that happened in about ten minutes. And there is the problem for that idea. But I think it is a problem that can be solved somehow.
At least I hope it can.
If you back the idea up a step to local or regional distributors and give them numbers of machines in each warehouse to download directly from publishers, the returns problem comes back into play on the bookstore and retail outlet level. And even then, say there is a new Patterson book due out the same week as a new Nora as a new Cussler. Even at fifteen seconds per book to produce a hardback with dust jacket, it’s going to take a massive amount of days and a lot of machines to produce that many books. Don’t even think about what it would have taken to do a Harry Potter book. The scale is just not there yet, but even that problem I think can be solved. It’s just years and years away I’m afraid. Damn.
At least the smaller presses with small runs are jumping in now. That’s a start and this has to start somewhere.
Cheers
Dean
I could see some kind of hybrid publishing model coming into play for the megasellers. An initial print run with current conventional technology (but a smaller run than would now be done) to get sufficient inventory in the stores for the initial rush, followed by printing at point of sale as the demand tapers off.
Of course getting the numbers right on that would be almost as much of a black art as is getting the numbers right on a print run now.
Yet another side of this is the rise of e-book readers like Kindle and how such e-book distribution can completely cut out much of the conventional publishing infrastructure, as JA Konrath has been experimenting with recently.
Oddly enough, just as publishing is considering dropping the returns system, the jewelry industry is discussing implementing one. Fools.
Dean,
WRT the time it takes to check out with book-printing vs. without … I imagine a lot of that could be ameliorated with an easy pay-as-you-go system. Amazon has One-Click ordering because your information is all in their system; no reason Borders et al couldn’t do the same. So you’re meandering around the store and you decide to buy a particular book. Rather than pick up a copy from the shelf and keep browsing, you’d stop by the nearest terminal, log in (either password or barcode scan from a membership card), select the book in question (either by typing or scanning a ‘display copy’ barcode), and queue it for printing. Payment would happen instantly via credit card on a one-off basis.
By the time you were ready to leave, all but perhaps the most recent book selected would be pre-printed and waiting for you at the front. If there was any sort of line then even that last book would have time to finish, making the waiting difference from today’s system negligible.
Seems doable, given the ‘espresso book machine’ technology in the first place. No?
Let’s throw another wrinkle into this model: Scan-Based Trading. Currently a big bone of contention in the magazine distribution biz, that model says that retailers do not pay publishers for the book until that book is passed through the cash register by a consumer. I believe Wal-Mart and other mass merchandisers are moving toward this system for periodicals, and it may be a short time before they try this with books.
Currently, retailers order books and have to pay for them in a certain amount of time (for example, 30, 60, 90 days, depending on the publisher’s terms). Let’s say I’m a retailer and buy 10 copies of your book and have to pay in 30 days. If I’m savvy, in 20 days I will see how many I’ve sold. I’ve I’ve sold 0, and now the bill is due, I might return them all. If I’ve sold 1 or 2, I might keep 1 or 2 and return the rest. If I’ve sold them all (or most), then I can reorder and get another supply to last the next 30 days. That’s simplistic, of course, but an illustration of how it works. Most retailers don’t do returns on such a frequent basis, so in essence they do pay for the books for a few months before returning. Thus, the publishers have use of customer’s money for a few months before they have to credit it back for returns. (again, this is very simplistic as an illustration).
With Scan-Based trading, it doesn’t really matter how many copies I’ve sold after 20 days, because it is not costing me anything to keep them — I have paid the publisher for the copies that have sold. That puts more onus on the publisher, to promote and market the book, since they are not going to be paid for stock that’s out there. As for me, the retailer, if it hasn’t sold, I’m going to ship it back to replace the stock with something else that will sell more quickly instead of taking up limited shelf space. Now the publisher not only has to deal with returns, but they haven’t had the use of my money. on the other hand, if those books sell more quickly, the publisher gets paid faster.
I look forward to reading the rest of your article.
Ann, right on the money I’m afraid. I didn’t want to mention Scan-Based returns because I was trying to move to a world where returns were gone in my articles. But you are right, that is coming in and coming in fast. It’s just going to make the returns system even worse for both publishers and writers, if that is possible, which I wouldn’t have thought it was until I heard about the scan-based return systems.
This system has got to change, but how is the monster question that has been out there for decades now.
Cheers
Dean
Dean,
This is a great series and I’m really enjoying it. It’s filling in a lot of cracks in my understanding of publishing.
One completely new thing for me here was the stuff on discount publishers. Given the price of books on the discount table and my understanding of the cost of producing books, I’m having trouble seeing how they can make money. I’m assuming this means that there’s something I don’t know about the cost of production in the case of the discounts. Perhaps due to volume? Can you address the costs issue at all? What does it cost a discount publisher to put together say a trade paperback that makes it reasonable for them to sell it at a third of the price of a comparably sized trade paperback from a non-discount publisher? Why is there such a discrepancy?
Kelly,
The cut rate at the discount table comes from a variety of places, not the least of which is the fake original price on the book itself that makes the discount look really high.
Author costs is a big one on many of the books on these discount tables. They are done work for hire or come out of public domain material, so the author costs are next to nothing.
Now understand I’m not talking about deep discounted books that major publishers put out. In an author contract, there is either a deep discount clause or a discount schedule that allows author’s shares to be reduced and/or cut to zero. You see this on all the bestsellers like Paterson, Norah, and so on.
Often the books on bookstore discount tables are major reprints bought from a house for next to nothing. That happens a lot on the large coffee table books and war books. They are older books bought by a discount house for a minor amount.
Production costs are always very, very low on these as well. Very cheap books. Also, shipping costs are cut fantastically since they are usually only shipped to the big stores one warehouse and then the books are piggybacked along with the others to the stores, saving shipping costs.
So with an inflated original fake price making the discount look huge, buyers like those tables.
On the deep discount side, you’re seeing some new things as well. For example, in Safeway stores now you are seeing a deep discount display in places around the stores selling bestsellers. These are printed by the publisher or taken from warehouse stock and deep discounted out and shipped only to one Safeway warehouse. Safeway then just adds them in with the huge truck load already going to the store. No author costs, little shipping costs, book has already paid the New York overhead with the earlier versions so that’s out of the factor. So the publisher makes a little and Safeway makes enough to pay for their floor space to put the display.
Cheers
Dean
I guess I was thinking mostly in terms of pure production costs, and missed the reduction for author costs and the shipping discounts completely. Add those to an even marginally lower production cost and that explains most of what I wanted to know.
Thanks!