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Why Are Book Margins Stuck in the 1990s?

15 September 2018

From Publishers Weekly:

During the 25 years that I have been in the book business, the discount and margin given to independent booksellers has not appreciably changed; it remains 43%–47% for trade titles. Even more astounding is the fact that all of the major publishers are within two to three points of each other, essentially not competing.

Since margin is essential to a viable business, one can only surmise that the reason publishers have not helped booksellers stay in business with improved margins is that they are greedy, they don’t care, or they expect bookstores to carry fewer books and make up the difference with higher-margin items such as toys and gifts. Recently, I spoke with a sales manager at one of the major houses and aired my concerns. The response was, “We are talking about it; we know it’s hard.”

. . . .

Like many states, Maine, where our stores are located, passed a mandatory progressive minimum wage bill with no offsetting tax reduction provisions. In eight years, our minimum wage will be over $15 an hour and will continue to climb annually.

. . . .

 With a total cost to employers of over $20 an hour per employee, the book business will not be sustainable without margin support from publishers. Thanks to the practice of prepricing books, we cannot raise prices and can only lower them. The hard math of running a bookstore is that most run on a razor-thin net operating margin of 0%–4%. We need a minimum 50% publisher discount in order to be viable.

Over the 18 years that we have owned Nonesuch Books & Cards, publishers have consolidated, gotten bigger, and become more efficient and much more profitable. Yet none of that improvement has benefited independent booksellers beyond occasional same-as-always stock-offer deals.

. . . .

Everything began to unravel for the industry when publishers made the tragic mistake of not setting reasonable off-price discounting policies for big-box stores in the 1990s, effectively turning books into widgets. This lack of judgment was seized upon by Amazon, which took discounting to the extreme by selling books below its effective operating cost.

. . . .

As more and more consumers have flocked to Amazon due to its predatory pricing, indies are being reduced to showrooms for Amazon and the publishing industry—places where customers can sample books before buying them for less elsewhere.

Link to the rest at Publishers Weekly

Bookstores

27 Comments to “Why Are Book Margins Stuck in the 1990s?”

  1. “As more and more consumers have flocked to Amazon due to its predatory pricing, indies are being reduced to showrooms for Amazon and the publishing industry—places where customers can sample books before buying them for less elsewhere.”

    OK. Got it. ADS out the wazoo in the OP. It’s all Zon’s fault.

    Nothing to see here, folks. Keep moving along.

    • I noticed the ‘predatory’ right off. Did the article use predatory to refer to the publishers’ margins?

      ANd honestly, it’s long overdue that they raise the minimum wage. I’d say the low m.w. is far more abusive than anything Zon could do.

      • The real minimum wage is $0.00.
        And many ex-book store ex-employee’s are receiving that now.

        As near as I can find the mean pay for a Amazon warehouse picker makes $12.75.
        Then there is this, “Amazon part-time employees who work more than 20 hours per week receive benefits, including life and disability insurance, dental and vision insurance with premiums paid in full by Amazon, and funding towards medical insurance.”
        Not many bookstores offer those.

        • To the owners?. Maybe.
          Too many are runs as hobbies and “community centers” than as proper businesses.

  2. Let’s see, this is from ‘Publishers Weekly’, not Bookstores Weekly or Authors Weekly, so we’ll have to watch out for the slant and ADS.

    “Why Are Book Margins Stuck in the 1990s?”

    Because that’s what the market will bear?

    They could always raise the prices on what they sell – oops, but it can already be gotten cheaper elsewhere – publishers love selling at deep discounts to make a buck they don’t need to share with their authors.

    “Since margin is essential to a viable business, one can only surmise that the reason publishers have not helped booksellers stay in business with improved margins is that they are greedy, they don’t care …”

    Why should they? They’re a big gas company selling the same gas to little stations everywhere.

    I remember as a kid (50 some years ago) of gas station attendants pumping your gas and cleaning your windshield when you needed to fill up, but everything’s self service these days (at least where I’m at.)

    Adapt or die, it might be time for some of these places to consider changing or moving on.

    “This lack of judgment was seized upon by Amazon, which took discounting to the extreme by selling books below its effective operating cost.”

    Ah, that old meme, which the DoJ looked into but found nothing wrong. I wish they’d get off that fake news bit.

    “Everything began to unravel for the industry when publishers made the tragic mistake of not setting reasonable off-price discounting policies for big-box stores in the 1990s, effectively turning books into widgets.”

    Which is all they really are if you think about it.

    Buy my widget on Amazon! It’s much more entertaining than the others!
    (disclaimer: if you’re into what I happen to write! 😉 )

    • Actually, he’s only off by one word:

      “This lack of judgment was seized upon by Amazon, which took discounting to the extreme by selling books below its effective operating cost.”

      …needs to say:

      “This lack of judgment was seized upon by Amazon, which took discounting to the extreme by selling books below *my* effective operating cost.”

      ADS sufferers labor under the delusion that their operating cost structure is some law of nature like the speed of light. Just because they can’t be more efficient doesn’t keep others from working more effectively.

      Hmm, I wonder if nobody’s told him the BPHs offer variable discounts based on sales volume? He does seem somewhat uninformed about bookselling…

      Maybe he’s new to the business and won the store in a raffle? 😉

  3. Had to check the date to make sure it was a 2018 piece.
    Yup.
    The guy must’ve been in suspended animation since the 90’s and only gets his info from the NYT. Or Melville House.

    —-
    “Even more astounding is the fact that all of the major publishers are within two to three points of each other, essentially not competing.”
    —-

    What is more than astounding is that the OP seems totally clueless about Manhattan Mafia culture of collusion.

    Dude, of course the margins are the same! So are royalties and advances!

    They also coordinate release dates to make sure their “tentpole” titles don’t overlap and only depress midlister sales.

    They coordinate everything! Why compete when they can collude and squeeze anybody who steps out of line.

    • “Why compete when they can collude and squeeze anybody who steps out of line.”

      And now they can’t beat the indies that refuse to even get in their lines. 😉

  4. “Even more astounding is the fact that all of the major publishers are within two to three points of each other, essentially not competing.”

    A mile from me is an intersection with a gas station on each corner. The per-gallon prices of the four stations are within a dime of one another, which means they’re within about 3 percent of one another.

    Why? Because they’re colluding? No, because they’re competing. Competition keeps prices in a narrow range rather than a broad range. This actually is a Good Thing.

    • Hmm, not quite the same.

      Gasoline prices float with supply and demand, whereas book prices are printed right on the cover and discounting has been decried as “devaluing” books. And they most certainly do not float with supply and demand. Instead, they are returned pulped, to prop up retail pricing. Gas stations don’t return unsold gasoline to be burned by the refineries, do they?

      There was another time when gas retail prices were even closer and it wasn’t because of competition. The result was a legendary antitrust case.

    • @ Karl Keating

      “A mile from me is an intersection with a gas station on each corner.”

      Wow! Used to see that all the time when I was a kid. Can’t remember how long it’s been since I’ve seen a 4-gas-station intersection. Not here in LA, that’s fer sure.

      • Down the street a couple blocks is a three-corners-with-gas-stations thing. Caught my attention when we moved here this summer, because I’m not used to even seeing THREE corners of four with them, and all three have car wash detailing businesses set up. 🙂

    • Why? Because they’re colluding? No, because they’re competing.

      Because their gas all comes from the same refinery?

  5. Bookstores products doesn’t spoil, is stackable, easily displayed, requires no maintenance, is returnable to the supplier for full recompense if it doesn’t sell, and has excessively high margins. And yet they never cease complaining.

    • Well, since they keep getting stuff they can’t move at the prices they want to move them at …

      And the bills for rent/power/paychecks keep going up …

      They’re looking ‘adapt or die’ in the face and don’t know what to do. Their answer is to just whine about how unfair it all is … 😉

  6. Don’t booksellers still have an unlimited right of return on unsold inventory? Those margins seem reasonable to me, with all the extra risk the publishers are incurring.

    The reality today is that there are four groups of players selling books: indies, Amazon, mass market chain stores, and Barnes & Noble, which is barely hanging on.

    But the market is hardly split evenly. IIRC Independent bookstores in total are well below 10% of the market. Aside from the publicity mess they’re the market segment publishers can most afford to lose.

    • That is why they helped Borders and B&N kill thousands of them in the early 90’s.
      Borders alone had 19% share when they pushed it into liquidation.
      They don’t think anybody is essential but them.

  7. This is easy to fix:

    1. Increase the price so the bookstore pays the same, yet its payment is now 50% of the price printed on the book.
    OR
    2. Eliminate preprinted cover prices, and ask widget sellers how they manage without prices printed on the widgets.

    • The latter won’t happen. As the article’s cluelessness about Amazon’s involvement in the bookselling industry demonstrates (seriously, does the author think Bezos is twirling his mustachios and cackling as he plots to rule the publishing industry or something?) outside the big dogs, writers and booksellers have the unfortunately common malady among creative types called “I don’t need to even try to understand market forces, because art.”
      Publishers have been taking advantage of this for a long time, and now it’s coming back to bite them.

  8. The market will “fix” things all by itself if the regulators continue to be prepared to step in to prevent any further attempts to collude in stifling competition and the legislators continue to resist spurious arguments for protection of the legacy players.

  9. I confess, when I saw the title I thought it was talking about page margins in books.

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