Piecing Together the Distribution Puzzle
If distribution means getting books into the hands of sellers, circulators or readers, then a true profile of the distribution business would cast a wide net, beginning at the binding line and continuing through to the ‘long tail’ of online portals, used bookstores and curbside pushcarts.
However, if distribution, from the publisher’s view, means getting books to generate sales revenue, we can overlook all of the aftermarket, recirculation and reselling channels and focus solely on reaching stores, libraries, online and catalog warehouses and—increasingly, thanks to the Internet—direct marketing from the publisher to the consumer.
In the article “Deconstructing Distribution,” in Book Business’ May issue, I presented a profile of the industry, quantifying the number of publishers at various sales-revenue levels. I also estimated the overall revenue share of outsourced distribution (e.g., sales and fulfillment) and wholesaling as intermediaries for publishers. (See the “Correction and a Closer Look” box at right.)
But, other important questions to explore are: How significant is the reach of wholesalers and master distributors as gatekeepers to the market and to the revenue streams of the U.S. publishing industry? What other choices are available to publishers? What factors should publishers consider when choosing to reach their market through these gateways?
According to the Book Industry Study Group’s (BISG) “Book Industry Trends 2006” report, retail, libraries and institutional channels account for about 40 percent of industry sales. Using the estimates from my last column, the wholesalers who serve those channels account for about 26 percent of that 40 percent, and master distributors account for about 8 percent to 12 percent (including what, for some, is a commonly accepted overlapping 25 percent of their sales to wholesalers).
These gatekeepers are very important to the estimated 12 percent of 62,815 active publishers with annual revenues of $100,000 to $1 million—as well as to a portion of the estimated 6 percent of publishers with annual revenues of $1 million to $50 million (mainly those closer to the $1 million mark)—that rely on a general trade market and do not have an effective way to reach significant target markets (e.g., fiction, travel, self-help, parenting, etc.).
For most of the 6.5 percent of publishers grossing between $50,000 and $100,000 per year, the two major wholesalers (Ingram and Baker & Taylor) likely would not accept direct accounts (requiring that these publishers work through distributors). And, those at the lower end of that revenue range would need persuasive potential for growth or stability to interest most major distributors. However, if you discuss sales-revenue criteria with distributors, they do make exceptions for smaller publishers, even down to one book, given the circumstance and the promise.
A good example of this was when Curt Matthews, CEO of Independent Publishers Group (IPG), took on a promising single title, “The Covenant with Black America,” in 2006 from Chicago-based Third World Press, stocked the bookstores in three weeks and, over a period of three months, had shipped 300,000 copies (Publishers Weekly, Feb. 19, 2007).
Maryann Bohr, senior vice president at National Book Network (NBN), says NBN takes on promising smaller publishers. When NBN signed New York-based Lake Isle Press (Rachael Ray’s first publisher) many years ago, the company was quite small. Another NBN client, Boulder, Colo.-based Windsor Peak Press, has relatively few titles; however, Bohr says that the publisher is doing very well and has great promise.
Nonetheless, the estimated 75 percent of active publishers generating less than $50,000 annually are not to be overlooked. BISG’s 2005 “Under the Radar” report (from which the foregoing estimates are derived) calculated that this group had published 71.6 percent of the 1.25 million titles printed by publishers with under $50 million in annual revenue.
For these smaller publishers, reaching bookstores and libraries through distributors and wholesalers is not a realistic option. Yet, several—including Biblio, a division of NBN with 500 publishers, and IPG’s PMA-sponsored small-publisher distribution program (with 300 publishers)—will represent first-time, one-book and other small publishers that show commitment.
Some distributors serve smaller publishers and are optimistic about this group’s future. Eric Kampmann, founder and president of Midpoint Trade Books, feels the Internet is stimulating interest in reading [by enabling people to come across books related to any topic that they may never have found elsewhere]. He not only is optimistic about the future for new and small publishers, but is building his business around them, with close to 325 in tow so far. He sees this as “a period of enormous opportunity.”
Distributors, wholesalers and their markets
According to the 2006 BISG study, “Used Book Sales: A study of the behavior, structure, size and growth of the U.S. used-book market,” there are 6,100 independent bookstores and 2,282 chain stores in the United States that sell new books. Master distributors are the face of the publishers reaching these outlets. They contract for exclusive licenses to sell a publisher’s list—or an agreed portion of it—to bookstore and wholesale channels, libraries, and gift and specialty stores. Not all distributors sell to gift and specialty stores, and publishers can and do (especially niche publishers) retain the right to handle these sales themselves.
The roster of these service providers is not extensive—but their influence on the delivery of printed books to willing readers is great. Independent publishers accounted for an estimated 50 percent or more of new titles reaching the market, based on Bowker’s 2004 and 2005 reports that independent publishers published 195,000 and 172,000 new titles, respectively, as well as the BISG “Under The Radar” survey.
The principle distributors serving the general trade market for independent publishers are the Perseus Book Group, including Consortium and Publishers Group West (see the story on p. 8 about changes at Perseus), NBN (including Biblio), Midpoint Trade, IPG (including Paul & Co.), Ingram Publisher Services, Book Clearing House (an Ingram distributor), SCB Distributors, FaithWorks, Diamond and Small Press Distribution.
Wholesalers serving the bookstore trade include Ingram, Baker & Taylor, Bookazine, Brodart, Sunbelt Publications and Book Distribution Center.
Distributors serving the library market are Quality Books and Unique Books. Wholesalers that specialize in the library market—in addition to Baker & Taylor (including YBP Library Services, a Baker & Taylor Co.) and Ingram (including Coutts Information Services)—include Blackwell Publishing, Brodart, Eastern Book Company, Emery-Pratt, Follett and Midwest Library Service.
According to Market Data Retrieval (a Dunn & Bradstreet Co.), the library marketplace includes 16,582 public libraries, 6,700 college libraries, and libraries at 113,851 public and private K-12 schools.
Publisher alliances and warehouse and fulfillment services
During the past five years, major trade publishers have expanded their distribution services to other publishers. A number of mid-range publishers with their own sales and fulfillment services have taken on publishers whose lists complement theirs. Publishers providing this service on a significant scale include Random House Inc., Penguin Group (USA), Simon and Schuster, Hachette Book Group USA, W.W. Norton & Co. and St. Martin’s Press.
Many publishers in these alliances use their own sales organizations, but contract backroom and fulfillment services to outside companies.
A generally overlooked, but vital link in the distribution supply chain are the warehousing and fulfillment services that provide inventory maintenance, order fulfillment and shipping services.
Among those providing these services are American International Distribution Corp. (Vermont), Book Clearing House (New York), BookMasters (Ohio), The Intrepid Group (Colorado), Mercedes Distribution Center (Brooklyn, N.Y.), PBD Worldwide Fulfillment Services (Georgia, Pennsylvania), Pathway Book Service (New Hampshire), Publishers Storage and Shipping Corp. (Massachusetts, Michigan), Ware-Pak (Chicago, Ill.), TGI Direct (Michigan) and Whitehurst and Clark Book Fulfillment Inc. (New Jersey).
Fulfillment services are also provided by many book manufacturers, such as Courier Corp., Integrated Book Technology, Maple-Vale Book Manufacturing Group, Sheridan Books Inc., RR Donnelley and Webcom Ltd.
Another option is publisher-provided fulfillment services to other publishers. One major service is provided by the University of Chicago Press for more than 50 academic publishers and university presses at its Chicago distribution center.
Selecting a strategy and choosing a distributor
There are three excellent analyses of how to choose a distribution strategy and a distributor that I would highly recommend:
• Probably the best “how-to” advice on distribution can be found in consultant and author John Kremer’s “1001 Ways to Market Your Books” (6th Edition, Open Horizons, 2006). This book is a must for any publisher mapping a sales and distribution strategy for a new line of books. Kremer also has about the most complete listings of distributors and wholesalers (as well other industry resources) and provides sound pros-and-cons commentaries.
• Dan Poynter’s best-selling “Self-Publishing Manual,” now in its 15th edition (Para Publishing, 2006), provides more compact, useful and complete procedural guidance on how to use distributors and wholesalers, as well as fulfillment houses.
• For a numbers-based, practical analysis of selecting different distribution strategies (outsourcing, self-managed, alliances), you must read consultant Tom Woll’s white paper, “Sales Representation & Distribution Options for Independent Publishers” (PMA, The Independent Book Publishers Assoc., 2000). In it he provides pros and cons, as well as financial examples using generally recognized industry benchmarks and pro forma costs.
Woll writes, “The primary benefits of using a distributor are its large sales force … and the fact that by using these distributors, publishers can concentrate on … publishing books … and eliminating the time drain spent on performing back-end functions.” Predictable cash-flow management is another key benefit.
However, Woll cautions that it is difficult to maintain profitability without active management and attention to minimizing pp&b (paper, printing and binding) costs, returns and royalties, and maximizing general and special sales. He provides a number of sample P&L (Profit and Loss) statements showing how the distribution cost (ranging widely from 25 percent to 35 percent of net sales) can result in negative contributions to profit.
As an example of how a distributor can bird-dog sell-through to maximize sales, IPG President Mark Suchomel described at last year’s BISG “Making Information Pay” conference how IPG applies Mike Shatzkin’s vendor-managed inventory system (VMI) through Shatzkin’s firm, The Idea Logical Company. VMI shifts the responsibility for choosing what is shipped when and where from the buyer to the seller. It captures “long-tail data,” isolating in-store inventories by title, sales patterns, comparative year-to-year data and so on, and enables IPG to minimize returns and maximize its strategy of building sales and margins by emphasizing a reach to the largest number of accounts as against the largest quantities shipped per account.
Characteristics of indie distributors
In my discussions with distribution executives, all emphasized that they organize sales efforts around their client publishers’ individual needs. The publishers are expected to organize marketing and promotion around their own lists. They will have a specific contact, sometimes for the entire list or sometimes for a specific promotion. Coordination with the distributor to make sure books are in stores where promotions are taking place is a key responsibility of the publisher.
Generally, national accounts such as Barnes & Noble, Borders and Books a Million are handled by full-time, in-house sales reps, as are gift and specialty stores for distributors that target them. The balance of book and library sales is handled regionally by in-house or commission reps.
With the exception of Christian publishing (STL/FaithWorks) and graphic novels (Diamond Comic Distributors), major distributors generally do not focus on any particular book categories, although most agree that selling children’s books benefits from informed attention. This also is true of books for the Hispanic market, for which IPG was the first to introduce a special catalog and sales effort.
Despite the recent Perseus Distribution explosion of growth through acquisition of the former Client Distribution Services, Consortium Book Sales and Distribution, and almost all of Publishers Group West (PGW)—making it the largest U.S. independent distributor in sales volume ($330,000,000 including Perseus imprints), with close to 280 client publishers—the company will maintain three separate sales organizations in order to provide a more manageable focus to its customers.
It is interesting to note that four of the major independent distributors also are owned by publishers who themselves depend on the effectiveness of their distribution services. In addition to The Perseus Books Group and its imprints (Basic Books, Da Capo Press, PublicAffairs, Running Press and others), there are: IPG (owned by Chicago Review Press), with 60 to 70 general trade clients, 30 Hispanic publishers, 100 academic/professional publishers, and 50 British publishers distributed through Trafalgar Square, as well as about 300 in the PMA small press program; NBN (owned by Rowman and Littlefield), with close to 90 publishers, as well as about 500 in Biblio; and Midpoint Trade Books (Beaufort Books), with 325 client publishers.
Ingram Publishing Services (IPS), with close to 60 clients and growing, offers the unique advantage of alliances with Ingram Digital, Lightning Source, and Ingram’s wholesaling operation, which provides useful synergies with its wholesale warehousing efficiencies. Phil Ollila, Ingram’s vice president for publisher services who heads IPS, emphasizes the intangible “culture of service” that he says drives the organization’s energy and the scalability that enables it to take in new clients seamlessly.
Other distributors that service independent and smaller publishers, listed by John Kremer in his aforementioned directory, include: Associated Publishers Group in Nashville (which absorbed much of the business of Atrium Publishing Group in 2000), Book Clearing House (BCH) in New York, Partners Book Distributing in Michigan, Partners West Book Distributing in Washington (combining wholesaling and distribution), Publishers Distributing Company in Los Angeles, SCB Distributors in California, and Small Press Distribution (SPD) in California (a literary, nonprofit organization that is primarily a wholesaler and distributor for 500 independent publishers).
Where do smaller and targeted publishers go?
In his book, “Beyond the Bookstore” (Reed Press, 2004), marketing consultant Brian Jud provides 79 strategies for special sales and niche markets. “There are two places you can sell books,” he quips, “in bookstores or out of bookstores.” And while he respects that “bookstores have historically been the traditional source of books,” and are “still the most likely place people go to buy books,” he quotes Dan Poynter, independent publishing evangelist, as saying, “They are a lousy place to sell books.”
Niche and special sales markets are reached through direct sales and sales to businesses and institutions. Estimated direct selling to consumers—including Internet sales, mail order and book clubs—according to 2006 BISG data (the “Book Industry Trends 2007” report was not released at press time) totals $5.3 billion, or 14.8 percent of the total $35.8 billion estimated publishers’ book sales.
Another resource is Fern Reiss’ book “The Publishing Game: Bestseller in 30 Days” (Peanut Butter and Jelly Press, 2003), in which she provides a prescription and resource appendices on how to market and sell a book. While the book offers detailed advice on dealing with wholesalers, she advises avoiding distributors. Pitched primarily to self-publishers, she explains how “you can easily do your own distribution and fulfillment … and reap the benefits!”
Marketing and demand-driven publishing online are the major growth and distribution opportunities for small and new publishers. (See Penny C. Sansevieri, “Red Hot Internet Publicity: An Insider’s Guide to Promoting Your Book on the Internet,” Morgan James Publishing, 2007.)
Still as complex as ever
Twenty-five years ago, BISG issued “the first exploration of distribution issues and perceptions in the publishing industry.” The 180-page report, “Book Distribution in the United States,” observed that “distribution is a costly, frustrating and sensitive issue for every segment of the book industry.”
It also found that “wholesalers and jobbers will be the most effective suppliers for traditional books in terms of costs and services, but publishers are expected to ship most new title orders and reorders.”
As an example of this effectiveness, booksellers on the industry panels that contributed to the report provided their estimates of the time elapsed between order placement and receipt of books: Mean turnaround time for backlist orders by booksellers was estimated at 22 days from publishers and seven days (range, two to 20 days) from wholesalers and jobbers.
Of course, we know that in today’s marketplace, wholesalers strive for next-day delivery whenever possible and, as noted in this series, publishers use independent distributors and distribution alliances to achieve efficiencies in servicing direct sales as well as sales through wholesalers.
Yet, despite tremendous advances in technology and logistics, we still could open to the first page of an industry distribution report today and find the same observations that were made 25 years ago.
As President of Random House Publisher Services and former BISG Executive Director Jeff Abraham remarked, managing distribution remains “an intricate choreography of getting all the pieces to work seamlessly together.”
Marketing and demand-driven distribution online have become major growth and sales opportunities for publishers of every size and genre, and I will cover this subject in later columns.
Eugene G. Schwartz is a regular contributor to Book Business. He is a publishing industry analyst, writer and editor-at-large for Foreword Magazine. A former PMA board member, he is president of Consortium House, a management and business consultancy to publishers. He previously was a manufacturing, production and operations executive.
- American International Distribution Corp.
- Associated Publishers Group
- Basic Books
- Blackwell Publishing
- Book Clearing House (BCH)
- Book Distribution Center
- BookMasters Inc.
- Books a Million
- Chicago Review Press
- Client Distribution Service (CDS)
- Courier Corp.
- Coutts Information Services
- Da Capo Press
- Diamond Comic Distributors
- Eastern Book Company
- Hachette Book Group
- Idea Logical Company
- Independent Publishers Group
- Ingram Digital
- Integrated Book Technology
- Lake Isle Press
- Lightning Source Inc.
- Market Data Retrieval
- Midpoint Trade Books
- National Book Network (NBN)
- Partners Book Distributing
- Partners West Book Distributing
- Pathway Book Service
- PBD Worldwide Fulfillment Services
- Penguin Group (USA)
- Perseus Distribution
- Publishers Distributing Company
- Publishers Group West
- Publishers Storage and Shipping Corp.
- Publishers Weekly
- Quality Books Inc.
- Random House Inc.
- RR Donnelley
- Running Press Book Publishers
- SCB Distributors
- Sheridan Book
- Small Press Distribution (SPD)
- Sunbelt Publications
- The Book Industry Study Group
- The Intrepid Group
- The Perseus Books Group
- Third World Press
- Unique Books
- University of Chicago Press
- Ware-Pak Inc.
- Webcom Limited
- Whitehurst & Clark Book Fulfillment Inc.
- Windsor Peak Press
- YBP Library Services