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Math Lessons for Small Presses – Part 2
Lesson #2
WHOLESALERS and how they sell books:
Book wholesalers are companies that buy books from publishers at a deep discount and hold them in their warehouses so that Internet and “brick and mortar” stores can order the books from them. Bookstores like to use wholesalers for a number of reasons: namely speed, convenience, and less financial exposure.
Book Distribution is not easy!
When a bookstore orders a book from a wholesaler, they will usually get their order in twenty-four hours. Next-day service is the standard from the top wholesalers. The discount a store can usually expect to receive off the retail price of the book from a wholesaler is 40 to 45 percent. What the bookstore loses in profit margin, they often make up in convenience and risk reduction. A book ordered from a wholesaler can be combined and shipped with hundreds of other books.
Some stores hire wholesalers to stock, manage, and handle all aspects of their book departments. There are large “big-box” chains that happily hand their title selection and discount negotiations over to a wholesaler that will manage the entire department for them. The same can sometimes be true for libraries. There are many U.S. library systems dependent upon wholesalers for all their new books. People at the chain or library office work with the wholesalers and oversee the choices, but how closely that is managed depends upon each individual situation.
The difference between a wholesaler and a distributor is this: A distributor works FOR the publisher. A publisher hires them to handle the warehousing, shipping, order processing and sales of their book. A wholesaler does not work for a publisher, they are the publisher’s customer. They buy books from the publisher and resell to THEIR customers.
Most wholesalers have the word “distributor” in their name. This is to identify them as companies that distribute books to bookstores and libraries, but they are not the same sort of distributor that you need when B&N sends you a letter telling you to “get a distributor”.
If you want your book to have a chance at a bookstore chain like Barnes & Noble or BooksAMillion, and if you don’t want to hire a distributor, a wholesaler is your next best bet.
The two biggest book wholesalers for the book industry right now are Ingram and Baker & Taylor. You can find their application processes on their websites. Send your books in with the proper paperwork and try to get your titles into at least one of these wholesaler’s warehouses. Ingram and B&T do not usually take small presses, but B&T will sign up a small publisher if they have enough marketing and sales plans to support the book.
Ingram has recently partnered with IBPA and through them, a small press CAN get listed in Ingram’s system. However, only a very small fraction of those books get ordered and stock at Ingram. Only the books with strong demand get stocked, the rest are just listed and Ingram will order a book from the publisher when a store backorders one. (and the kicker? Most bookstores will not back order.)
Remember, if you get an order, you will be selling your books to the wholesaler at a discount of at least 55 percent. They will usually order only as many as they need to fulfill the demand coming in from their customers … stores and libraries. If they are overstocked or books come back from the stores, they will return those books to you for a full refund. (Having fun yet?)
So, back to the math:
A book priced at retail is $16.95
A publisher sells it to a wholesaler for $7.63 (55% discount)
The wholesaler has paid $7.63 for the book.
They then turn around and sell it to the bookstore for $9.83 (40% discount off of the retail)
The wholesaler pays for the overnight shipping and packing materials. The profit for the wholesaler is $2.20
Many of my clients want to know why they have to give so much of the profit to distributors and wholesalers. The short answer is: they don’t. It is possible to convince your local stores to stock your book on consignment or to sell them directly on Amazon yourself. However, the shipping costs, time spent and number of venues that will not take your book often turn out to cost publishers FAR more than a wholesaler’s cut….
Math Lessons for Small Presses
Lesson #1
PUBLISHERS and how they sell books:
If a publisher wants to get their books into a bookstore or library, they will have to sell their book to a store or a wholesaler at a deep discount. That discount is usually between 40 and 55 percent off of the retail price. It can sometimes be 60 percent or more if the store is part of a chain or a wholesaler that has a central warehouse and has extra costs associated with getting the books to THEIR customers.
The book buyer for the wholesaler or store will contact the publisher, place a purchase order for books, and expect to receive them in five to seven days. They expect to be billed for these books, but will usually require at least ninety days to pay.
If you want to become a publisher, here are a few things you should think about. You have to plan and budget carefully. Small presses usually aren’t paid for three to four months or longer. Plan for not getting paid for 6-7 months.
You will have to pay to ship the books to them. They rarely will pay a small press for shipping. If you want to take a stand, I applaud you! But it will cost you some sales.
Now, are you ready for the big hit? Publishers may not even see the money they think they are owed because the books are bought on a returnable basis. Fully returnable. One hundred percent. (Or as we used to say when we were kids: backsies!) After a publisher has shipped a book to a store, the bookstore has the right to ship it right back for any reason.
So, a book priced at retail is $16.95
A publisher sells it to a wholesaler for $7.63 (55% discount)
The publisher then waits sometimes 6 months for the $7.63 or for the book to be returned.
If the book’s printing and design/editorial costs are in line with what they should be, each book should have cost the publisher approximately $ 3.25 per unit to produce.
The shipping and distribution costs of GETTING a $16.95 book to the wholesaler is usually around $3.50 a book. (this factors in calls to stores and wholesalers, sample copies or flyers sent to buyers, shipping of books, materials, returns… it assumes that you are doing everything yourself.
That leaves the publisher .88 cents a unit in profit.
Where does all the rest of the money go? Why does a wholesaler take so much? That leads us to next week’s Lesson #2
Distributors vs. Wholesalers
What is the difference between WHOLESALERS and DISTRIBUTORS?
A Distributor will sell and promote your books to the bookstores and libraries. They will have reps contact the stores and wholesalers who are most likely to want your book and pitch them the merits of your title.
A wholesaler has a warehouse and is a passive company that will purchase books from you, and then resell the books. They do not pitch your books, they wait and handle incoming orders only.
A distributor also has a warehouse. But they are not passive. They will store, pick, ship, invoice and collect on your behalf as well as handle customer service and most likely offer sales and marketing services as well. They are not your customer, they work for you. You give them money in exchange for the services they do for you.
A wholesaler is your customer. They buy books from you. Some of the bigger ones are called Ingram, Baker & Taylor, Bookazine, Brodart, New Leaf and Quality.
Ingram and Baker & Taylor are two of the largest book wholesalers in North America and they have warehouses all over the US. These warehouse hold book and when a retailer (bookstore or library) asks for a book, Ingram or B&T will send it to them. Both Ingram and Baker & Taylor offer distribution services as well, but only to a certain group of publishers and even though they have the word DISTRIBUTION in their names, they are most likely not distributing your books.
When a bookstore asks who your distributor is, you should be using names like NBN, IPG, New Shelves Distribution, Atlas Books or Book Hub. Ingram and B&T are not your distributor, but the bookstores will be happy to know that your book is available at those wholesalers.
D5 Creation