Saturday, 28 May 2011

The Tipping Point


Waterstones will hopefully have a new dawn and flourish on the high street but so much needs to be done to redress many of the inherent issues plaguing the industry from over-ordering through to distribution and needless third party handling of stock, which lead to delay, add to cost and reduce profits for stores, authors and publishers. eBooks are still a part of the equation and a very important part which allows both authors and publishers freedom to cut out some of the factors which have seen physical book stores placed under threat.

Publishers want to support book stores but elements of the current business model need to change. Yesterday I received a potential order by a major high street chain for 500 copies of a book at a 60% discount. This book will be ordered through a third party distributor (let's say Gardners) who will take anywhere between 20 and 30% for doing nothing more than acting as a middleman, delaying the order to fulfilment process, adding to the handling and potential damage of stock. Of course if the store placing the order continues with this process they will want to ensure they make a profit on the order, if our normal wholesale rate applied this would leave the chain with little profit to make the venture worthwhile. Hence the top line addition of a further 30+%. These books are given to the chain on a sale or return basis. Here is the dilemma. Each book sells at £7.99 rrp, we use POD and have a high print cost per unit, say £3. £7.99 -60% = £3.20. Leaving us 20pence per copy to design, promote, pay royalties, pay ourselves and any other extraneous costs and still run the risk of having returns which we have to then pay back and decide what to do with the returned stock. We can opt for a larger print run to reduce print costs but this will not be a significant reduction for a relatively small run of 500.

If the chain orders direct from our printer/distributor and has the books shipped direct they can save the middleman distribution costs increase their own profit line through increased wholesale discount % and make the order profitable for us. Will they? The answer is probably no. So, for a small publisher such as Caffeine Nights we potentially lose the opportunity see one of our titles in stores across the country at a sustainable level.

eBooks simply do not press these problems. So who will win out, eBooks or physical books? If this current business model is not changed the answer is sadly very, very simple and inevitable.

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