If you haven’t read the first installment of Life After Returns, please do so before reading this. It is right below this post and this one will make a ton more sense if you do.
I am patterning this series of articles after the wonderful History Channel series Life After People. It is my opinion only, trying to figure out what might happen if suddenly, one instant, all returns in publishing just stopped. It’s a huge topic and the deeper I got into it, the more I realized I’m only going to be able to scratch the surface. But it’s fun trying and I got a ton of great comments, both by e-mail and under the first installment. Thanks everyone.
So picking up where the last installment left off, it’s now one month after that fateful moment when all returns in publishing stopped.
Life After Returns: One Month
Today, under normal circumstances, one month in publishing is a very short time, but at one month after the returns system suddenly stopped, the business earthquakes caused by the event are knocking down old systems everywhere.
On the publisher’s side, they have managed to put into place new discount schedules for bookstores, large chains, and the big discount box stores, not counting the new discount schedules for the three major distributors and direct sale middlemen such as Ingrams and Baker and Taylor.
The biggest problem at one month that publishers will be facing is the slashing of print runs. All books and printing schedules will have been completely revamped with the big web presses as the publishers scramble to fill the printing time they have bought years ahead.
If two books don’t have to be printed and then destroyed to sell one, publishers don’t need to print as many to start with. The huge web presses that are used to print most books are scheduled a long ways out and that time, down to the second, is very expensive. The publishers have to fill it with something or lose the money. Publishers will be sliding books ahead in their schedules and starting to push authors to get books in early. Those giant web presses don’t wait for anything and the time was all contracted out way ahead. And it is very, very expensive time.
For independent bookstores at one month, all kinds of things are happening.
Now, today, even with returns, bookstores can order books non-returnable, and get a higher discount and maybe a deal off of freight charges. I talked with two different bookstore owners this past week and both told me they seldom used that option at the moment. They also told me that returns do cost them, as I knew. Returns cost them the employee time to pull and destroy the books and send the covers or the hardbacks back to the distributor or publisher. They also get maybe a 1% difference in discount from a returned book from the price they originally paid. And they have to pay the shipping to have the stripped covers sent back. Minor costs, but nothing like they will be facing without returns. Both bookstore owners sort of went white at the idea of returns suddenly stopping across the board.
I asked them how long it would take for them to set up discount tables for books. Both said by the end of the first week they would have discount tables started and by the end of the first month it would be taking a larger percentage of their floor space.
Bookstores, until they could really get a feel for it, and get their cash flow under control, would be slashing orders as well. At one month it would be their cash flow that would be hurting them the most. Often bookstores floated a large percentage of the costs of ordering the new books with the credits they got from returns. That credit would suddenly stop, so every bookstore owner would be sweating cash flow to even get some new books into their stores.
So, as two of the bookstore owners told me, they would be ordering more on special orders and directly from Baker and Taylor in small batches, and watching their inventory very, very closely to keep as many books as possible off of the discount tables.
In the larger chains, at one month all ordering from discount only publishers would have stopped and those companies would be basically out of business. There would be a scramble at the national level to adjust order levels and much more attention paid to what was selling and where in the country it was selling. The major bookstore chains corporate stock will have dropped on the markets, but at one month that should have leveled and investors would be playing a waiting game to see how it all worked out.
Middle-men distributors such as Ingrams and Baker and Taylor will be adjusting and passing along the extra discounts they are getting from publishers, and special ordering of books will be helping their business as more bookstores and the chains pull back and cause customers to special order books more. They should float right through the sudden vanishing of returns just fine, maybe even getting stronger.
Of course, the old system of having four books sitting on a shelf to get customers to buy two will have to be rethought. Publishers need to get their books out into the market to have customers know they are there, so higher discount schedules will help bookstores cover their losses to discount tables.
Where books will be hurt the worst is mass market paperbacks on racks in such places like Safeway. Over the past few decades the number of pockets and space books take up in stores like Safeway has been shrinking, but without returns, more than likely publishers are going to have to come up with an entirely new way to get those big stores to even take the books. More than likely all books sent into a store chain like Safeway would be lost leaders, given to the store for free or very deep discount to promote an author’s book sales elsewhere.
From the writers side, at one month most of the panic will have been exchanged for the next thing on Facebook or Twitter and word will be passing that editors are starting to buy again as they rush to fill holes in publishing schedules caused by the moving up of books to fill printing holes. Writers who turn in books early or on time and who are fast will be getting even more work at this point as this adjustment is made. Royalty statements coming out at this point will surprise many writers because of the lack of reserve against returns. This will be a sudden windfall for a bunch of writers who were caught in the middle of this.
At one month the biggest crisis going on will be in the magazine publishing industry.
A little bit about magazine publishing. To start off with, seven out of ten magazines you see on a stand are destroyed and credit is given for the return. Sometimes higher. Actually in magazine publishing there are no physical returns. Someone goes in on the pull date on the magazine and takes it off the stands, replacing it with the next issue. The magazines are destroyed and the publisher is told how many were destroyed and how many sold.
Now, if you wonder how much cheating goes on in this system, you are not alone. As a former magazine publisher, I had no doubt more got sold than I got credited for, but could I ever prove it? Nope. It is how the system works.
For the most part, magazines are paid for by ads and all a publisher of a magazine is interested in is how many copies they ship out and have sitting on the stands. That’s the number they tell their advertisers and how they set their ad rates.
Also understand that when you are standing in line at a grocery store, every magazine you see in line has paid the store and the distributor for the spot. The closer to the cash register, the more expensive the spot. In fact, inch-by-inch, those spots are some of the most expensive real estate on the planet. And this is a major source of income for the stores.
The advertisers don’t care how many magazines actually sell, they just care about the placement and how many are shipped and the stores don’t care about how many are sold, they just want their fee for the spot. The suddenly stopping of returns will threaten to destroy this system.
At one month, the magazine publishers are struggling to figure out new discount schedules that stores will accept, and more than likely, many of the top magazines will just be giving their magazines to the stores and paying for the slots just to keep their ad rates up. Stores like Safeway and Walmart will be ahead because of this change. Magazine publishers will be struggling even more than they already are. Many will go out of business in the first month after returns stop.
Smaller magazines who depend on the newsstand sales at one level or another will flat stop appearing on newsstands. Common knowledge is that newsstand sales is where you get new subscribers. Of course, that’s been mostly a myth now for a decade or more, but it will force magazine publishers into new ways of thinking very quickly.
At this point their will be rumblings of the end of books, which will help the e-book market some, but in reality it won’t dent the old system. The sky always seems to be falling for one reason or another and this would just be another reason for the people who shout warnings to run into the streets.
There was some discussions about print-on-demand (POD) books after the last article. Without returns, POD publishing will slow down, actually. It is the returns system that is shoving POD research and publishing at the moment. Without returns, the POD will simply settle into its place and become a small part of the entire industry.
Life After Returns: 6 Months.
Frighteningly enough, life in publishing by six months will have leveled out again. The ID bookstores that could make the quick adjustments in order levels, in cash flow, and in customer retainment will have stayed in business. Numbers of stores will have failed, but the failure rate would be leveled at six months back to normal levels.
Many bookstores would have started to adopt the Powell’s Bookstore model as well. Putting discount books with an author’s new book, selling used books right beside new books, and maybe even starting to expand in size. If you have never been in the city block of books that is Powell’s Bookstore in Portland, Oregon, make a point to do so. One of the systems that Powell’s uses is a bar coded inventory system, where they sell all their books online as well as in their store. Smart ID stores will adjust to this quickly and use the internet for sales a lot more than before, listing their inventory on their own sites and expanding income instead of just churning books through with the old return system.
But just to be clear, the sudden stopping of returns will have caused a percentage of ID stores to go out of business at six months. The specialty science fiction and mystery stores will have mostly survived because of their very nature.
Publishers at six months will have adjusted their big problems of discount schedules, printing schedules with the big web presses, and cash flow with stores failing and not paying. At six months most of this will be through the system.
Publishers selling to bookstores will be ramping up at light speed at six months. That practice is starting now and used to be the normal way of doing business. Without returns, this system becomes possible for publishers to push, especially with online marketing and ID stores being more receptive. More than likely in a few years, many distributor will be lost as this direct-from-publisher system comes back into full force as it was in the first half of last century when the returns system started. What goes around comes around, as the old saying goes.
Writers will have adjusted and will know for the first time in 70 years how many of their books exactly are selling, not just rough estimates with reserves held out for returns. Accounting will be a lot easier, but in new contracts, publishers will be asking the writers to share more of the increased costs of higher discounts. It will be a fight for writers over a few years.
There will be a lot fewer magazines out there, mostly slick, ad-driven ones, while a boom for magazines will be happening on-line as it is now. News stands will look a lot thinner as only specialty magazines will be able to afford to stay alive with ads and subscribers and giving away their magazines to stores as lost leaders.
And the best thing about six months after returns is that paper demand will be way down. Seven out of ten magazines and every other book will no longer be doomed to the landfills and recycle bins.
Life without Returns is a dream for this business at the moment. It can’t be done in any reality because of anti-trust laws and other aspects such as a publisher not wanting to just flat commit corporate suicide by switching completely to non-returns will all the other companies stay full returnable. It has to all switch at once or it never will. Or we have to develop new book delivery systems outside the return system.
Maybe if someone really looked at this returns problem in Congress, they could stop this wasteful practice suddenly and completely. But of course, now I am really dreaming.
Next up: First installment of Life after Agents.