The way retail works in the book industry is unique.
Unique how? What’s “normal”?
Most retailers/shop owners in other sectors purchase their products from distributors at a wholesale price, and sell that merchandise at a price that ensures the retailer can make a profit to ensure their business remains sustainable and profitable. Any merchandise that doesn’t sell through the retailer’s regular operations is often subsequently sold to liquidators or is written off and destroyed.
Okay, so how is the book sector different?
The book industry, however, works a little differently, for the most part. Most book retailers accept books from distributors on consignment. This means the publisher does not receive payment for the books when the books arrive at the shop.
When does a publisher receive payment for the books?
Depending on the terms of the contract the publisher has with the retailer and/or distributor they work with, a “standard” term for remitting payment is 90-120 days after the sale of the book.
What happens to books that don’t sell?
Most book retailers will require a 40% “commission”, or wholesale discount from a book’s cover price, in order to stock the book. Some retailers (particularly big box shops) require up to 55% wholesale discount. Industry standard with privately owned bookshops is around the 40% range, provided publishers are willing to accept returns – or any books that don’t sell within a proscribed time frame.
Some publishers do not accept returns, and in these cases, retailers tend to accept fewer books from the distributor (it can be the difference between a retailer accepting five copies of a title if there are to be no returns, and fifty copies if a publisher accepts returns).
Publishers will have a contractual agreement with retailers (sometimes these agreements are negotiated through or with a distributor) that outlines:
- what price the retailer will pay the publisher for each title the retailer accepts (generally, this price will be between 40% and 55% of the retail, or ‘cover price’ of the title)
- how long the retailer has to remit payment for books they have sold
- when any unsold books must be returned to the publisher (and in what condition)
- any additional marketing for featured titles (whether a book should be featured on an end cap or other in-store marketing services for which a publisher has to pay, for example)
Once you’ve published your book, the hard work begins. How do you get the books out of your garage or basement and into retail outlets, libraries, schools, and specialty shops? This process is distribution, and it’s not easy, especially for small or indie publishers. There are a few terms to grok that will help: Wholesale Distribution, Trade Distribution, Print on Demand, Consignment and Self-Distribution. Let’s start with the easy one:
Consignment and Self-Distribution: a publisher who delivers their books directly to a retailer is doing self-distribution. each retailer who accepts consignment and self-distributed books will have slightly different terms, but in general, look for the terms related to what the timeframe is for consignment sales and when payment is remitted.
Trade Distribution: this kind of distribution may have different monikers depending on region and the type of publishing you do. In general, a trade distributor is a business that charges a fee to accept books from publishers and ensure they are delivered to wholesalers and retailers. Many distribution agreements of this type are exclusive (which is to say, if you hire XYZ company for distribution, you cannot also hire ABC company). Distributors usually have a sales team as well, and perform the dual function of marketing and fulfillment – they will be able to provide new titles before the print date (3-6 months) to retailers and wholesalers.
Wholesale Distribution: usually more of a passive kind of “distribution”; wholesale distributors work on a large scale and may include books from hundreds of publishers to supply large chain bookshops and libraries. Examples of book wholesalers are Ingram, Baker & Taylor, and Follett. Many wholesalers will handle sales directly to retailers, which means a publisher working with them will not need to set up an individual vendor account with the retailer. Wholesalers usually require 50% – 55% wholesale discount on the retail price of the book and greater numbers of copies.
Print on Demand (POD): some publishers are moving to a print on demand model of distribution, where books are only printed when they are ordered (or in very small numbers), directly from PDF or the designer’s files. Most print on demand books are primarily available for purchase from websites, although publishers may have small numbers of consignment titles available through self-distributed retail agreements. This cuts down on the need for a large front-end investment for printing, however the tradeoff often comes in book quality and the limitations of POD production (availability of/accuracy of colours for covers; available trim sizes; paper stock, etc).
Do I even need a distributor?
The short answer is no, but it helps. Some retailers do not want to work directly with publishers and require a distributor handle marketing and fulfillment. Some retailers have preferred distributors. Libraries generally prefer to order through library wholesalers.
Finding a distributor can be challenging and costly. In the Canadian market, there are only a handful of distributors, and few of them work with self-publishers (although that is starting to change, and is usually reliant on the strength of your titles and your books’ sales history).