Monday, March 23, 2009




Not so quick! But given a determined effort it is likely that all the players will someday find that the possibility of adding a significant part of $8 billion to their revenue and profit may be enough to get the process started. It is likely that the old playbook for surviving in difficult times by staff and expense reduction will not work in today’s economic climate (see my article of December 4, 2008 ”The New Recession Playbook“).

Some veterans of the industry trace the introduction of the “sale or return” policy to the Depression instituted as a means to encourage booksellers to buy new titles. In 1950 when I first entered publishing, most trade publishers allowed “exchanges” for books that were “damaged in transit.“ The effect on the industry was minimal. The toxic return policy as it now exists is best described by the colorful publisher Alfred Knopf head of his eponymous company as a “gone today and here tomorrow” program. The percentage of returns to sales determines the profitability of both the publisher and bookseller.

The “elephant in the room” is a very large creature - and attention must be paid. Jeffrey Trachtenberg described the reality in his June 2005 article in the Wall Street Journal. The scene he describes is still happening as he reported it and will continue into 2009 unless the publishers and booksellers get together on a solution. While Trachtenberg describes the Time Warner Book Group (now Hachette) it is typical of all major publishers. This is what he reported:
There are two Time Warner Book Group warehouses on the outskirts of Indianapolis. Although separated by only an eighth of a mile, between them stretches a gulf of disappointment.
One building, dubbed the "happy warehouse" by one publishing executive, is filled with about 60 million hardcover books and paperbacks waiting to be distributed to stores across the U.S. The other is the "sad" warehouse. Piled high are some of the 20 million books returned every year by retailers. Many will be resold at cut-rate prices. Two million to four million will have their spines sliced off before being piled into a recycling machine the size of a Dumpster, chewed up and spat out as bales of paper.
Returns are the dark side of the book world, marking not only failed expectations, but the crippling inefficiencies of an antiquated business. It's a problem that's only getting worse.

Given this nightmare scenario from the publisher vantage point, one would believe that it must be the booksellers who are standing in the way of solving this problem. Not so. Mr. Trachtenberg interviewed the CEO of the largest books store chain and this is what he reported:
Steve Riggio wants Barnes & Noble to start marking down books and selling them on the spot. Customers would relish the bargains, publishers would generate more sales and costs would be cut. He says eliminating returns would "revolutionize the book business and revitalize the book business."
But Mr. Riggio says he can't implement the change by himself, since it's ultimately a decision for publishers. "We'd like to see this practice discontinued," he says. "Any rational business person looking at this practice would think the industry has gone mad."
To bring this story up to date, Bob Miller formerly the CEO at Hyperion and now at Harper Collins announced that in addition to a profit sharing arrangement with authors he proposed a “no return” policy. Sadly, Miller had to retreat from this position in order to launch his first list.

However, in the UK, Penguin an industry leader has now focused attention on developing a new return program for their extraordinary best selling backlist: This is as reported in Publishers Lunch:
Peter Field, Penguin’s Managing Director has said “We intend to speak to everybody we need to about this; it's an important conversation to have. We believe backlist should be firm sale but are attempting to identify a common purpose. I believe there will be different ways to tackle the problem, depending on different customers and regions, rather than a one-size-fits-all policy. We will talk about risk and reward and get the balance right. A common purpose can be found and, if we all manage our logistics better, we will all benefit and retailers will save money on returns."
Is there a hope that the recession will bring some movement to a rational solution of a virus that has infected the book publishing industry for over half a century? If not now, when?

There is a strong economic benefit.

There is new technology that has never existed before so that printing and buying decisions can be rationalized.

Nielsen now tracks the sales of every book and makes the data generally available on sales and returns. These data is available to every publisher, bookseller, and distributor to gauge how much a publisher prints.

Print on Demand technology is now available so publishers can fill in with POD printings where they have underestimated demand.

We are now in an era in which the nation’s attention is focused on environmental issues. No one has yet measured the loss incurred when hundreds of millions of returned books are stripped and fed into dumpsters.

What is missing? Leadership!

The industry voice, PW, reports the facts but fails to crusade. The publishers association with access to the most Washington, D.C. savvy Executive Director, Pat Schroeder holds back fearing an anti trust issue will arise, without seeking advice from the Justice Department. (To be fair, in other instances the publishers have joined together to defeat the illegal copying and recently Google, who sought to abuse “fair use”.) Why not see what help can be obtained from a new Justice Department?

Or a few brave Publishers who are willing, one on one, to work out individual return programs with major chains and independents. Given that about 50% (or more) of most publisher’s sales come from the back list, a new returns program can focus, as a start, on the backlist. And then go on from there.

This recession is a blessing. The financial and insurance industry has been bailed out by the government with multi billion dollar loans. The big 3 auto makers are likely to get more billions. And right behind them, will be millions of home owners. It would not be unseemly for publishers and booksellers to take advantage of what we hope to be a once in a lifetime opportunity for publishers and booksellers to be party to their own
“ bailout “ by working with each other to solve the returns problem.

I have the headline ready:


Martin Levin

1 comment:

  1. One the issue of unlimited returns, the slide show concludes with two options:

    *Offer a non-returnable discount
    *Keep present discount and set up a bonus plan for efficiency

    If part of the problem is the return policy allows retailers to order books that will ultimately be returned with low or no consequences, then it seems a third approach to the options presented would be to implement a return (restocking) fee.

    A restock fee would offset some of the costs incurred by publishers associated with accepting returns. Importantly, it may also encourage retailers to be more circumspect when making the original book order, assuming a retailer has the ability to more carefully tailor orders to the likely amount of sales without negatively impacting the business in other ways.

    I suppose a fee associated with returns would diminish future orders, which sounds like a bad thing. Then again, if the retailers are ordering so many books that a 20% or more are returned unsold it seems like such an outcome is the desired result.