Lesson #3 – DISTRIBUTORS

Bookstores buy books from wholesalers and distributors. The major difference is that a wholesaler is publisher’s customer (wholesalers buy books from a publisher) and a distributor is a publisher’s employee (distributors sell their services to a publisher).

A distributor handles all of the après-production elements of getting a book onto a store’s shelves. Publishers agree to funnel all of their sales, warehousing, shipping, and billing through the distributor. They do this work for a percentage of the billing generated by the sale of the publisher’s books.

Like publishers, distributors sell a book to a wholesaler or bookstore at a discount of the retail price. That discount is usually between 45 and 55 percent.

So, if bookstores get about the same terms and about the same schedule, why do they go to a distributor instead of directly to the publisher? Some bookstores (especially bookstore chains) are not interested in setting up new, small, or regional publishers in their ordering and accounting systems for just a few books. They rightly weigh the benefits of a publisher’s book against the time and trouble necessary to order it, and if the balance does not come out in the book’s favor, they skip it. How do new and small publishers avoid this terrible fate? They sign exclusive agreements with a distributor.

A distributor’s cut varies from 25 to 35 percent of the net billing of each book. Just about every distributor has additional monthly fees, and most require an initial deposit for new clients.

Before you balk, keep in mind that it is very difficult, expensive, and time consuming to handle your own warehousing, purchase shipping materials, and learn how to ship exactly how each store wishes their shipments to arrive … and everyone is different. (It’s a little joke they like to play on publishers. I am convinced that bookstore owners get together every two years to devise slightly altered yet completely incomprehensible trafficking instructions.) Then comes the billing, monthly statements, handling claims for books damaged in transit, taking in returns, and reconciling the amount due with what the bookstore believes is due.

After that, consider the money and time it takes to tell the country’s thousands of buyers about your books. The sales reps working for distributors have long-standing relationships with the book buyers in your hometown, across the country, and in the major chains. You would not be able to start a fledgling relationship on your own with these buyers. What an experienced sales rep can often do with a phone call, you could rarely accomplish with six months and a great deal of research, e-mails, flyers, catalogs, paperwork, and free samples.

Back to the math!

A book priced at retail is $16.95

A distributor sells it to a wholesaler for $7.63 (55% discount)

The distributor will charge the publisher on average $2.15 to handle that order.

Shipping and other fees will cost about $1.30 cents a book (give or take)

The publisher gets $4.18 for the book from the distributor 6 months later when the payment comes in.

After the productions costs of $3.25 are taken into consideration, the end profit is about .93 cents a book.

(AND the distributor does most of the work)

So there you have it.  Math by an English Major for Publishers. Let me know if you have any questions!