The Point of No Returns

On his “Publishing 2020” blog, Joe Wikert, general manager of O’Reilly Media’s Technology Exchange Division, mused recently about the long-term viability of the closely watched deal between Borders and HarperStudio, whereby the bookstore chain will purchase HarperStudio titles at a 10-percent to 15-percent discount in exchange for accepting a no-returns agreement. As a result, Wikert wrote, Borders will probably be less aggressive with initial buys and could find itself out of stock in the face of a hit—not a good situation for either party. On the other hand, having to sell all of the books it purchases most likely means Borders will more aggressively market HarperStudio titles—just the sort of incentive lacking in the current system.

“Just like any other part of a business transaction, there’s an equilibrium point that will be reached by both parties,” Wikert wrote. “If HarperStudio decides non-returnability isn’t worth this deep of a discount, they’ll eventually push back. Right now, though, both parties have decided the elimination of returns is worth 10 percent to 15 percent of additional points. I’m anxious to see if everyone is truly happy with that range in the long run.”

HarperStudio President Robert Miller sounds a cautious tone when discussing the potential for expansion of the model. “The slowdown in the economy has made retailers a little more hesitant about inventory risk, and we’ve realized that we need to offer a choice between returnable and non-returnable,” he says. “I’m still hoping that more booksellers will come on board; so far we have a commitment to go non-returnable from Borders.”

According to Miller, HarperStudio was set up as an experimental division, one of its goals being to find ways to reduce returns. The current economy “has made this a harder time to ask booksellers to take on additional risk,” he notes.