Deconstructing Distribution
When the strategy of using commission reps or an in-house sales force is adopted, the publisher will need to have a warehousing and fulfillment operation to support them. For the publisher undertaking its own distribution, the cost of warehousing and fulfillment is typically expected to run 8 percent to 10 percent of sales.
To keep costs down to this percentage, the publisher needs to be doing enough business to afford the basic overhead of leasing or owning the warehouse space even when there is no activity. The alternative is to engage a warehousing and fulfillment service, of which there are a number serving the publishing industry (for a starter list see www.BookPublishingSoftware.com/book-fulfillment.htm).
Consultant and publisher Howard Fisher (www.TheFisherCompany.com) suggests that a publisher needs to be doing at least $10 million to $12 million in sales before it should consider operating its own warehouse.
Outsourced distribution
Eric Miller, president, and Paul Williams, executive director, the National Association of Independent Publishers Representatives (NAIPR.com), suggest that publishers must clear several important hurdles before they can work effectively with independent reps, primarily:
1. Sufficient scale so that national and independent booksellers will carry their accounts. This generally means at least $100,000 a year of business with wholesalers and chains.
2. Sufficient sales volume potential and financial credibility, so that sales reps and booksellers can count on continuing sales, cash flow and returns handling.
Fisher cautions that publishers undertaking their own selling operations need to ask themselves:
1. Do I have enough presence with the chain stores to be a direct account?
2. Am I willing to spend time and money on an electronic ordering system?
3. Can I set up and maintain the accounting and reporting systems required?
4. Do I have a satisfactory relationship with a fulfillment house?
The results: Sales revenue by sales/distribution source
Eugene G. Schwartz is editor at large for ForeWord Reviews, an industry observer and an occasional columnist for Book Business magazine. In an earlier career, he was in the printing business and held production management positions at Random House, Prentice-Hall/Goodyear and CRM Books/Psychology Today. A former PMA (IBPA) board member, he has headed his own publishing consultancy, Consortium House. He is also Co-Founder of Worthy Shorts Inc., a development stage online private press and publication service for professionals as well as an online back office publication service for publishers and associations. He is on the Publishing Business Conference and Expo Advisory Board.
