Think Like A Publisher #10…. The Returns System

I can’t even believe I’m writing this post in this series. A number of people suggested it and I just looked at them like they were nuts. No indie publisher should ever allow returns or even think about them. Duh.

Then a top indie writer, a very smart person, and someone I have followed for some time said in response to a question, “I don’t want to put my books into bookstores because I don’t want to deal with the returns system.”

I almost snorted my iced-tea all over my keyboard when I read that statement. Why would a very smart indie publisher say something that silly?

At that moment, I realized it was time to talk about the returns sytem.

I thought about doing this post as a Killing the Sacred Cows chapter. But I decided it fit here because I am trying to get indie writers to think like a publisher and sell books to more than just Kindle. And if the myth about the returns system is as bad as it appears, then I figured this was the place.

So hold on. We have an ugly myth to take a hammer to.

The myth: To sell books to bookstores, you must allow returns.

Total foolishness.

Some History

The returns system started in the Great Depression as a way for publishers to help bookstores stay in business and keep selling their books. Some publishers, but not all, continued the practice up into the sixties as a promotion that started and stopped and only included some lines and imprints.

Through the late sixties and early seventies, the numbers of books being produced exploded and almost all major publishers standardized the returns promotion to level the playing field in the expanding market.

However, to this day there are lines of traditionally published books that do not allow returns.

Traditional publishers HATE the returns system, but now are stuck with it. If all the publishers got together to change it, bookstores would sue them for antitrust, restraint of trade, and a host of other things. So the returns system is stuck in place for the traditional publishers and has been for decades. And it will be one of the factors that will really hurt traditional publishers in this changing world.

But indie publishers, smaller literary publishers, university presses, and specialty presses do not do returns and never really have, with only a few exceptions.

In 1987 Kris and I started Pulphouse Publishing and all our books were nonreturnable. Period.

All specialty presses of the time had that policy. And we all sold a ton of books. As did the presses before us and the presses after us.

The returns system is not mandatory for any publisher and never has been.

Giving bookstores the ability to return all books was simply a good deed done by publishers back in the Great Depression. That good deed, through the publisher’s own stupidity, turned around after a few decades and bit them on the ass.

What is the “Returns System” exactly in traditional publishing?

Traditional publishers use the returns system to get what is called “market penetration.” They believe (in the old system) that for a customer to find a book on a shelf, there has to be two books there. (Silly thinking, but we’ll let that go for now.)

So the sales force jam the numbers of a book shipped as high as they can get it. And thus, 50% returns became the normal for many books. Sometimes higher.

And that is accepted practice.

Yup, that’s as stupid as it sounds, but we’ll let that go as well.

What happens when a traditionally published book is returned?

—Hardbacks and trade paper are sent back full-copy in most cases.

—Mass market paperbacks have their covers stripped and the books tossed away and the covers sent back.

Traditional publishers give bookstores either full credit or partial credit for the returned books, depending on the program and the length of time the store has had the book and other factors.

(I won’t go into the fact that bookstores over the last thirty years have not had to take responsibility for their own inventory. The publishers, with the returns system, became responsible for bookstores inventory. Thankfully, that is starting to change with the decrease in chain stores and the increase in indie and specialty publishing.)

So in traditional publishing, every second book in a bookstore is returned or destroyed. And the publisher carries the loss.

That means that the price of the one book sold in traditional publishing must carry the entire cost of producing two or more books.

Yup, that’s ugly and should be avoided at all costs by anyone going into the publishing business at any level.

Not a one of the major traditional publishers has had the courage to cut the returns system in any more than an imprint or two.

Even though it is bad business and they all hate it.

(No comment once again.)

Advice to Indie Publishers

As you go through the steps of setting up your indie press, just make it a flat policy to not accept returns. State that policy on your flyer, on your web site, and every time you talk with a bookstore.

Your policy should be:

1) Cash in Advance

2) No returns

Okay, that’s done. Problem solved. Right?

Not really. 99%, but not completely.

There are two places in indie publishing you must take returns, but neither will hurt you, and both are logical and good business for you to participate in.

1) Electronic Returns.

Yup, I said that: Electronic Returns. Anyone who has done Kindle books for any time knows exactly what I mean. A customer will often hit the “buy” button by accident or when they don’t want to, so Kindle allows them to say “Overs!” And the customer gets their money back.

On your publisher statement from Kindle that shows as a return.

That’s good business for all of us.

I wouldn’t touch an electronic book if it didn’t have that feature. I have ten thumbs and none of them work the way I want them to at times.

2) POD Returns

CreateSpace and LightningSource both have minor returns systems. And they are minor.

If you subscribe to the premium program for your book (which you will do to get cheaper books for your company), you allow your books to get into the Baker & Taylor catalog or the Ingrams Catalog for a bookstore to buy your book way.

These extended sales programs are a good thing for your sales in finding customers. You won’t sell many copies, but it allows a reader to walk into any store on the planet and special order one of your books from any bookstore. THIS IS A GOOD THING! Duh.

Here is how the CreateSpace “returns” system works:

1… A bookstore buys a couple of your books through Baker & Taylor.

2… Baker & Taylor orders your books through CreateSpace and CreateSpace prints and ships them directly to the bookstore.

3… You get paid.

4… Two months later the bookstore returns a full copy of the book to Baker & Taylor.

5… Baker & Taylor keeps your book in their warehouse and your account at CreateSpace is debited. (CreateSpace does not make you pay out, just deducts what they paid you from your total.)

6… When Baker & Taylor gets another order for your book, Baker & Taylor ships the one out of the warehouse and you get credited again.

That’s it. Simple and painless.

And very, very minor.

So Why All The Fuss?

Why? Because writers have made up so much crap about the returns system, the myth of returns is strong as writers start to learn how to be publishers.

And for traditional publishers who are using the old warehouse model, it is ugly. Plain and simple. Traditional publishers have to pay up front to print two books for every one they hope to sell.

But Indie Publishers don’t have to do that.

We don’t have to pay any money out at all.

We get paid when a book order comes in, before printing even happens.

If there is a return, it’s a debit on an account, nothing more. The book is not destroyed, and you don’t have to pay for another book when the next one sells. The returned one is just shipped for the next order.

In Summary:

— Returns are for traditional publishers. Indie publishers, specialty presses, and most other small presses around the country do not use the return system.

— Returns are allowed in only two minor places in indie publishing. 1) Electronic-mistake returns and 2) full-copy POD returns to distributors that do not cost you anything.

— Bookstores will buy books from your press without the return system. You must offer decent discounts as I talked about before. 40-45%.

— Do Not Reduce Sales for fear of a few returns. The goal is to get your books in front of as many people as you possibly can. That should include the extended distribution through the major distributors. It’s minor since few stores will use those systems because of the smaller discounts.

But all stores will use the extended distribution for special orders for customers. And that’s a very, very good thing for your readers.

— For your own press, do NOT allow returns in direct sales to bookstores. And always have all money paid ahead. Set those two policies clearly in all your flyers and on your web site.

–— However, do allow a damaged-copy return. If the dealer or customer gets a damaged copy from your printer, allow them to send it back to you and you replace the damaged book at no cost, of course. (Then use the damaged book as a promotion in some way or another. Or give it to your library to let more readers find you there.)

Returns are part of any business.

I returned a small computer last week that I bought at Fry’s Electronics and got a full refund. At Christmas we all return things that don’t fit. Returns are normal and are nothing to fear if you have a good policy in place for your business.

Traditional publishers have taken returns far, far too far, that’s for sure, and it’s hurting them. But a few minor returns are just a cost of doing business.

Do not limit your sales outlets simply because you believe in a myth.

Think like a business person.

Think like publisher in a brand new world, one where returns are limited by common sense.

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And speaking of the Magic Bakery, this chapter is now part of my inventory in my bakery. (Confused on that, read the Killing the Sacred Cows of Publishing post about making money with writing.) I’m giving you this small slice as a sample. I’m giving you a taste, but not selling any of the pie.

If you feel this helped you in any way, toss a tip into the tip jar on the way out of the Magic Bakery.

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Thanks, Dean