Returns remain a problem for the book publishing industry, although changes to the book-selling landscape brought about by Internet retail, e-books and new distribution models seem destined to make the issue loom less large than it did when mega-bookstores ruled the retail roost.
New options for alleviating the returns burden have proven much easier than attempting to alter the old system. Former HarperStudio President Bob Miller (now at Workman Publishing) recently told an audience at the BookNet Canada Technology Forum that, although the now-shuttered Harper Collins imprint was able to work out deals with a number of book-sellers, many top accounts simply were not willing to accept the inventory risk involved in HarperStudio's offer: discounts on titles in exchange for a no-returns agreement.
"We spent a lot of time trying to come up with terms that were attractive and get accounts on board, and we did get a lot of major accounts on board … [but] by the end of the two years, it became a reason not to buy speculative material," Miller said. "It was too often used as a reason not to take a position, and ultimately, we let go of the nonreturnable approach just in the interest of distributing books we believed in as publishers."
Ultimately, HarperStudio's desire to innovate in distribution ran up against the desire to aggressively court and develop unproven talent—and the latter won. The lesson here might be that, while everyone would like to see returns go away, the gains from changing the system often do not trump the risks involved or the greater benefits seen from prioritizing innovation in other areas.
While Harper Collins has, for now, abandoned its no-returns experiment ("… it was a very complicated program to establish, and we learned a lot," comments company spokesperson Eric Crum), other publishers continue to tinker with various no- or limited-return arrangements.
No Risk, No Returns
"I do think that the tolerance for returns in the book business favors small presses such as mine, at least those who do want to maximize trade sales," says Steve Carlson, publisher, Upper Access Inc. "We don't have big, blockbuster titles. … Therefore, our new titles are never a sure bet for a book-seller. A bookstore buyer is a lot more likely to take a chance on one of my titles if he or she knows that unsold copies can be returned."
Still, Carlson enjoys the options afforded by cultivating a variety of distribution channels. Though percentages fluctuate, trade currently makes up only one-fifth of his book sales (Upper Access releases two to three new books per year, along with updated editions of existing titles), as he has been able to build a business in direct sales, and at author events and nontraditional retail outlets—none of which require that he accept returns.
"Many small presses have given up on the full traditional trade pipeline," he says. "After all, anybody can deal directly with Amazon, and become sort of available to libraries and bookstores by getting into the [Baker & Taylor] database, and available for Ingram special orders by printing copies with Lightning Source."
For Frank Gromling, publisher of Ocean Publishing, the goal is not so much to eliminate returns as to strike a balance in terms of a variety of distribution channels and agreements. "If one is going to be in the trade part of the industry, one has to accept returns. Simple fact," he notes. "But, one can, and should, set limits on what size orders are fulfilled. Accepting a large order just because it is large doesn't make any sense. The questions have to be asked: 'What is this order going to be for? Will it support a major promotional campaign that is generating increased orders, or is it someone's thoughtless, over-ambitious ordering process?'"
Gromling contracts with distributor Independent Publishers Group (IPG), whose sales and fulfillment services allow the publisher to bypass returns processing, accounting/inventory adjustments and reselling damaged books through Amazon or its own website—an onerous process for a small operation. "It's where I am after beating my head against the wall for way too long," he says.
Streamlining the Process
For larger publishers, the focus is likely to be on building efficiencies into an in-house returns process. The main challenges center around the sheer volume of returns, what to do with books once they come in and how to identify how much credit to give the customer, says Brad Jacobson, a consultant with distribution software provider IBS Bookmaster.
As any publisher knows, the headaches go beyond merely having to credit returns, as books tend to come back in a variety of conditions. The number originally sold and amount paid may or may not be easy to track, and in some cases, publishers will inadvertently accept books that they never even sold to the customer, Jacobson says.
Jacobson recommends establishing preset "rules" to cut the steps necessary to process returns. As each book is scanned upon arriving in the warehouse, Bookmaster's system will recommend what action to take based on the condition of the book and other product-specific criteria. Rules can also be set up to govern the time frame for returns (typically up to 12 months), order of return (usually a "first in, first out" rule whereby customers are credited using the price of the oldest invoice within the allowable returns window) and percentage of books sold that can be returned.
"Time-based rules are more common than percentage-based or product-type [rules]," he says. "Also, [the system] can be configured to not allow returns of out-of-print products ... [as well] as products purchased as 'firm sale.'"
Some publishers require pre-authorized returns, whereby the bookstore must contact the publisher to confirm a ship date. "The user can key all this in, print a returns authorization and send that to the customer. The customer can then include that paperwork in the box with the books. When the box arrives, the publisher confirms that the paperwork matches the contents of the box. If it does, then the books can be automatically received and processed without the need to scan each book," Jacobson says.
"Publishers also have the option of rejecting and returning books that were not pre-authorized or that violate the returns rules," he adds. "In that case, Bookmaster makes this process seamless by instructing the user, as the book is scanned, that it should be returned to the customer. A shipping label is then produced so it can happen immediately—no warehouse clutter."
Front-End Work
Steve Mettee, founder of Quill Driver Books and blogger for TheWriteThought.com, recommends publishers concentrate more on the front, rather than the back, end when looking to minimize returns.
"Review large orders," he says. "Then, when appropriate, ask retail or wholesale buyers to modify them downward. Sell books into markets that don't have returns. These markets don't have to be retailers—schools, libraries, businesses for premium use, and nonprofits for fundraising come to mind."
Mettee does some work in book wholesaling through American West Books (AWB; owned by his son, Josh), which will often test a book before bringing it out nationwide. "If it does well in, say, five stores, AWB will then expand it to perhaps 50. If it continues to do well, it may then go national. Independent publishers can ask their sales reps to do the same with any of the chains," he says.
"Still," Mettee says, "publishers have to ask themselves if zero or very low returns is the goal they should be aiming for. A company that is experiencing zero credit losses is likely leaving a lot of profitable business to its competitors."
A publisher experiencing zero-percent to 5-percent returns may be sacrificing opportunities to sell books, Mettee believes, as business profits from additional sales gained through looser credit can, up to a point, exceed credit losses. The trick is to figure out that point. "So what is the magic number?" he asks. "It'll be different with each house, but shooting for 10-[percent] to 15-percent [maximum returns] might be a starting point."
Carlson agrees that complete elimination of returns might not be a desirable goal, at least as the system currently works. It's harder to get reviews and publicity if books are not in the traditional distribution pipeline, he notes, and some authors will not sign contracts if their books do not appear in traditional bookstores. There is also the prospect of missing sales if stores are reluctant to order as many as they might need.
"Because I publish so few titles, my goal is to sell as many as I can of each," Carlson says. "Without an active push to the trade, I would, obviously, lose a reasonable number of sales. If somebody goes to a bookstore to buy a book on maintaining and renovating a house, I want my book on the subject to be in stock, since otherwise I'd lose the sale to a competing title."
The rise of Amazon and increasing options for non-trade distribution make this less of an issue with each passing year. For Gromling, aggressive marketing to the non-trade world is a key component of his strategy for reducing returns. "It's simple," he says. "No returns, reasonable order levels, and a better discount to the buyer for participating."
Such was the agreement worked out by HarperStudio with Borders, whereby the bookstore chain received a 10-percent to 15-percent discount in exchange for a no-returns agreement—which still turned into a drag on orders when the retailer was unwilling to take a risk.
"So I haven't figured that one out," Miller told the assembled crowd at BookNet Canada. "I leave it to you supply chain experts to do it, and clearly just-in-time [printing] and data will be more of what the solution is about than just non-returnable/returnable. We have to get a lot more sophisticated in a hurry. I will gladly buy a drink for anyone who has the solution to that problem. I spent two years trying to solve it and haven't yet."
Cover Story: Rethinking a World With No Returns
Returns remain a problem for the book publishing industry, although changes to the book-selling landscape brought about by Internet retail, e-books and new distribution models seem destined to make the issue loom less large than it did when mega-bookstores ruled the retail roost.
New options for alleviating the returns burden have proven much easier than attempting to alter the old system. Former HarperStudio President Bob Miller (now at Workman Publishing) recently told an audience at the BookNet Canada Technology Forum that, although the now-shuttered Harper Collins imprint was able to work out deals with a number of book-sellers, many top accounts simply were not willing to accept the inventory risk involved in HarperStudio's offer: discounts on titles in exchange for a no-returns agreement.
"We spent a lot of time trying to come up with terms that were attractive and get accounts on board, and we did get a lot of major accounts on board … [but] by the end of the two years, it became a reason not to buy speculative material," Miller said. "It was too often used as a reason not to take a position, and ultimately, we let go of the nonreturnable approach just in the interest of distributing books we believed in as publishers."
Ultimately, HarperStudio's desire to innovate in distribution ran up against the desire to aggressively court and develop unproven talent—and the latter won. The lesson here might be that, while everyone would like to see returns go away, the gains from changing the system often do not trump the risks involved or the greater benefits seen from prioritizing innovation in other areas.
While Harper Collins has, for now, abandoned its no-returns experiment ("… it was a very complicated program to establish, and we learned a lot," comments company spokesperson Eric Crum), other publishers continue to tinker with various no- or limited-return arrangements.
No Risk, No Returns
"I do think that the tolerance for returns in the book business favors small presses such as mine, at least those who do want to maximize trade sales," says Steve Carlson, publisher, Upper Access Inc. "We don't have big, blockbuster titles. … Therefore, our new titles are never a sure bet for a book-seller. A bookstore buyer is a lot more likely to take a chance on one of my titles if he or she knows that unsold copies can be returned."
Still, Carlson enjoys the options afforded by cultivating a variety of distribution channels. Though percentages fluctuate, trade currently makes up only one-fifth of his book sales (Upper Access releases two to three new books per year, along with updated editions of existing titles), as he has been able to build a business in direct sales, and at author events and nontraditional retail outlets—none of which require that he accept returns.
"Many small presses have given up on the full traditional trade pipeline," he says. "After all, anybody can deal directly with Amazon, and become sort of available to libraries and bookstores by getting into the [Baker & Taylor] database, and available for Ingram special orders by printing copies with Lightning Source."
For Frank Gromling, publisher of Ocean Publishing, the goal is not so much to eliminate returns as to strike a balance in terms of a variety of distribution channels and agreements. "If one is going to be in the trade part of the industry, one has to accept returns. Simple fact," he notes. "But, one can, and should, set limits on what size orders are fulfilled. Accepting a large order just because it is large doesn't make any sense. The questions have to be asked: 'What is this order going to be for? Will it support a major promotional campaign that is generating increased orders, or is it someone's thoughtless, over-ambitious ordering process?'"
Gromling contracts with distributor Independent Publishers Group (IPG), whose sales and fulfillment services allow the publisher to bypass returns processing, accounting/inventory adjustments and reselling damaged books through Amazon or its own website—an onerous process for a small operation. "It's where I am after beating my head against the wall for way too long," he says.
Streamlining the Process For larger publishers, the focus is likely to be on building efficiencies into an in-house returns process. The main challenges center around the sheer volume of returns, what to do with books once they come in and how to identify how much credit to give the customer, says Brad Jacobson, a consultant with distribution software provider IBS Bookmaster.
As any publisher knows, the headaches go beyond merely having to credit returns, as books tend to come back in a variety of conditions. The number originally sold and amount paid may or may not be easy to track, and in some cases, publishers will inadvertently accept books that they never even sold to the customer, Jacobson says.
Jacobson recommends establishing preset "rules" to cut the steps necessary to process returns. As each book is scanned upon arriving in the warehouse, Bookmaster's system will recommend what action to take based on the condition of the book and other product-specific criteria. Rules can also be set up to govern the time frame for returns (typically up to 12 months), order of return (usually a "first in, first out" rule whereby customers are credited using the price of the oldest invoice within the allowable returns window) and percentage of books sold that can be returned.
"Time-based rules are more common than percentage-based or product-type [rules]," he says. "Also, [the system] can be configured to not allow returns of out-of-print products ... [as well] as products purchased as 'firm sale.'"
Some publishers require pre-authorized returns, whereby the bookstore must contact the publisher to confirm a ship date. "The user can key all this in, print a returns authorization and send that to the customer. The customer can then include that paperwork in the box with the books. When the box arrives, the publisher confirms that the paperwork matches the contents of the box. If it does, then the books can be automatically received and processed without the need to scan each book," Jacobson says.
"Publishers also have the option of rejecting and returning books that were not pre-authorized or that violate the returns rules," he adds. "In that case, Bookmaster makes this process seamless by instructing the user, as the book is scanned, that it should be returned to the customer. A shipping label is then produced so it can happen immediately—no warehouse clutter."
Front-End Work
Steve Mettee, founder of Quill Driver Books and blogger for TheWriteThought.com, recommends publishers concentrate more on the front, rather than the back, end when looking to minimize returns.
"Review large orders," he says. "Then, when appropriate, ask retail or wholesale buyers to modify them downward. Sell books into markets that don't have returns. These markets don't have to be retailers—schools, libraries, businesses for premium use, and nonprofits for fundraising come to mind."
Mettee does some work in book wholesaling through American West Books (AWB; owned by his son, Josh), which will often test a book before bringing it out nationwide. "If it does well in, say, five stores, AWB will then expand it to perhaps 50. If it continues to do well, it may then go national. Independent publishers can ask their sales reps to do the same with any of the chains," he says.
"Still," Mettee says, "publishers have to ask themselves if zero or very low returns is the goal they should be aiming for. A company that is experiencing zero credit losses is likely leaving a lot of profitable business to its competitors."
A publisher experiencing zero-percent to 5-percent returns may be sacrificing opportunities to sell books, Mettee believes, as business profits from additional sales gained through looser credit can, up to a point, exceed credit losses. The trick is to figure out that point. "So what is the magic number?" he asks. "It'll be different with each house, but shooting for 10-[percent] to 15-percent [maximum returns] might be a starting point."
Carlson agrees that complete elimination of returns might not be a desirable goal, at least as the system currently works. It's harder to get reviews and publicity if books are not in the traditional distribution pipeline, he notes, and some authors will not sign contracts if their books do not appear in traditional bookstores. There is also the prospect of missing sales if stores are reluctant to order as many as they might need.
"Because I publish so few titles, my goal is to sell as many as I can of each," Carlson says. "Without an active push to the trade, I would, obviously, lose a reasonable number of sales. If somebody goes to a bookstore to buy a book on maintaining and renovating a house, I want my book on the subject to be in stock, since otherwise I'd lose the sale to a competing title."
The rise of Amazon and increasing options for non-trade distribution make this less of an issue with each passing year. For Gromling, aggressive marketing to the non-trade world is a key component of his strategy for reducing returns. "It's simple," he says. "No returns, reasonable order levels, and a better discount to the buyer for participating."
Such was the agreement worked out by HarperStudio with Borders, whereby the bookstore chain received a 10-percent to 15-percent discount in exchange for a no-returns agreement—which still turned into a drag on orders when the retailer was unwilling to take a risk.
"So I haven't figured that one out," Miller told the assembled crowd at BookNet Canada. "I leave it to you supply chain experts to do it, and clearly just-in-time [printing] and data will be more of what the solution is about than just non-returnable/returnable. We have to get a lot more sophisticated in a hurry. I will gladly buy a drink for anyone who has the solution to that problem. I spent two years trying to solve it and haven't yet."