Returnable Books Are Good For The Publishing Industry

This week, Borders announced that they will purchase books from HarperStudio on a nonreturnable basis. HarperStudio is an experimental imprint of HarperCollins that is trying to change the traditional big trade model by cutting back on author advances and returns from booksellers. I'm in favor of giving authors the option of trading off lower advances for higher royalties and I tried talking McGraw-Hill into giving me a higher royalty in return for no advance when I was writing for them, without luck. But the idea of ending bookseller book returns by selling on a nonreturnable basis is wishful thinking on the part of all parties involved. Bookstores and publishers are businesses that need to make profits to survive. The main profit drivers for large publishers are bestsellers and evergreen titles. The main profit center for bookstore chains may actually be cooperative advertising dollars from large publishers, but their main retailing activity is pushing those same bestsellers and evergreen titles.

Large publishers fantasize that bookstores will continue to give a most of their titles a chance on the shelves if they increase the trade discount to bookstores from 48% or 50% on a returnable basis to 58% or 60% (or more) on a nonreturnable basis. While a large bookstore chain may be willing to experiment with a nonreturnable list from a small imprint, it would be suicidal for them to gamble on a large number of nonreturnable titles. The majority of books in the large superstores function primarily as wallpaper, to make a warehouse sized store look and feel like a bookstore. Most of the new titles coming into a superstore get a few months on the shelves, don't sell well, and are returned to the publisher for credit towards a new batch of titles. Currently, bookstore chains can sell the small number of nonreturnable books they stock at bargain prices when they fail to move, taking a small loss. If the majority of the books in a superstore were there on a nonreturnable basis, the store couldn't stand selling them at a loss. Those books would simply remain on the shelves year after year, filling their wallpaper role and eliminating the chance for all but the most heavily promoted new titles from the trades to ever get in the door. Eventually, the bookstore chains would all come to resemble airport booksellers, with a stock of fast moving bestsellers, crossword puzzle books and timeless classics they could afford to sit on.

Bookstore owners, the large chains in particular, fantasize that they can add 20% to their gross margins by purchasing nonreturnable books. Of course, these profits only materialize if they can sell most of the books they purchase for their usual price. The only way bookstores can hope to achieve this is to cut way back on titles that aren't proven sellers, or at least backed by huge promotional budgets. Instead of a superstore chain cycling through tens of thousands of new releases in the course of a year, they will only gamble on a few thousand new titles. I predict that Barnes&Noble, the chain that has proven itself the most business savvy, would continue to increase the number of books they publish in house under a nonreturnable paradigm, until half the books in every Barnes&Nobles store are out-of-copyright classics, how-to, self help and reference books, published by Barnes&Noble and kept on the shelves until they sell.

Small publishers are likewise deceiving themselves. The small publishers who count on distributors to handle their books are currently giving up a 60% to 70% (or more) discount on returnable basis, since the distributor takes a cut. If the distributor was forced to sell to bookstores at a nonreturnable discount of 58% to 65%, the publishers would be selling books to the distributor at a 70% to 80% discount off the cover, and I'll bet the publishers still couldn't expect to get paid promptly because the distributors are always cash poor. Imagine being a small publisher with frontlist titles priced around $20 and having to sell them for between $4 and $6. Most would go out of business, and that doesn't even get into the original problem that bookstores will be less willing to try new books from a distributor if they can't get credit at the distributor for returns.

Small bookstores may have it hardest of them all. The whole business model of returnable books was created back in the Great Depression because bookstores didn't have the capital to purchase new books and publishers had to choose between stopping the presses and basically providing the books on consignment. Times are harder for small bookstores today than at any other period since the returnable model was introduced. The only small bookstores that could afford to take a chance on new titles other than bestsellers and specialty titles are those that are run as hobby stores by retired professionals or trust fund babies.

So let's set the record straight. Returnable books are good for everybody. They allow bookstore chains to stock a real variety of books, and they allow trade publishers to offer a chance in the sun to far more authors than would be otherwise possible. Returnable books allow small publishers to make a living on books sold through distribution, and they allow small bookstore owners to follow their instincts and order the titles they think their customers will come to love, rather than stocking nothing but sure things. Returnable books are even good for self publishers like myself, whose books would never have been given a chance on bookstore shelves at a short discount if the bookstores didn't know they could return them. Returnable books are even good for printers, who would lose as much as 30% of their business it weren't for the print and pulp model. Returnable books are what differentiate the publishing business from the grocery business.

The only loser in the returnable book business model is the environment, with the extra trucking books back and forth that goes on, and the paper production process. But trees grown for pulp are a renewable resource, and as soon as the trucking companies are all driving George Jetson trucks, the last objection to book returns will be put to rest.