Book publishers are wasting two billion US dollars annually; massive impact on environment

Currently the book publishing and retailing sector is in dire straits. You know this. That’s not exactly news. Seems there is little hope. Most publishing companies will follow the music companies off the cliff like so many more lemmings. The playing field is not just becoming leveled so the independent riffraff are swarming about, it is flooding and beginning to resemble a bog. Bricks-and-mortar bookstores are folding like, well, just like music stores were a few years back, and just like video rental stores are beginning to go under. Enough with the poor metaphors. You get the point.

If there is to be a cushion of time and money for the US book publishing sector to adjust to Web 2.0, 3.0, 4.0 whatever, it won’t come from Obama or Stephen Harper providing a bailout package. Nonetheless there is hope. It’s something the publishing community can do itself, and in short order. We may be at the tipping point for a positive change … ending returnability of books. That would be an instant $2 Billion annual relief package to be spread across the industry. That’s a big pie to be divvied up between publishers, retailers, authors and consumers. That’s enough to keep many players afloat as they try to figure out how to exist in the coming mostly-digital era. And it is a huge saving for the environment.

For anyone NOT working in the publishing industry, I’d better explain that most books are sold to bookstores on a CONSIGNMENT (fully returnable) basis. It may seem bizarre to outsiders, but the bookstore can order any quantity it wants (and publishers’ reps encourage massive overstocking) without paying anything up front. If the books are returned within a set period (usually 90 days), the bookstore doesn’t have to pay anything for having (and squandering) mountains of new books. Those copies — as much as 80% of all copies printed for some genres — end up languishing in some warehouse for years, until sold as pulp. Some might be “remaindered” (sold back to the bookstore at pennies for their bargain bin), but most are waste. What does all this waste cost? Massive amounts of money and an incredible amount of environmental damage!

Where do I get the $2 Billion figure? You can do some tighter estimating, but the basics are as follows for the US market (divide by 20 for Canada):

  • between 40% to 80% of all books printed (depending on genre) are ultimately never purchased by an end consumer … let’s use 50% for calculating ‘cuz that’s credible and easy for multiplying
  • the total US book market is about $$24.25 billion annually, 2008 figures according to the Association of American Publishers (okay, you’d have to decide what to include and exclude, but this is ballparking, right?) … let’s use a $22B figure
  • the print cost of a book is typically assumed to be about 14% of the retail price (according to the professors of publishing) … so we have a total print cost of 14% x $22B = $3.08B for the copies that are sold
  • since 50% aren’t sold, those wasted copies also cost $3.08B and incur additional costs for shipping back and forth, warehousing, inventorying, accounting, collections, financing, waste processing … so let’s say we’re up to $4B by now
  • because few people are willing to admit to being a party to the annual waste of money, time and natural resources of $4B per year in a sector that is only $22B, I’ll happily divide my calculations by two…. this is still an incredible $2B opportunity for publishers, retailers, authors and consumers to regroup.

What would it take to make the switchover? Surprisingly little. There are no books in the system right now with a return allowed period of more than 3 months. We need the major players to sit down and decide the new “deal” for dividing the pie, set a date, issue a notice of the new terms… and it is done. Presto, end of returns. Best to have a few government lawyers in the room so no one gets worried about being accused of “price-fixing”.

Who wins? Consider a small independent bookstore that doesn’t grossly over-order right now, and is existing on 1% profit margin (if that) while buying new books at 60 cents on the dollar of retail price — on the current consignment terms. With the new terms, this bookstore will be paying only 50 cents. Holey shit, this store is suddenly making 11% margin! Actually more because the store isn’t paying for the shipping for books being sent back. Instead, it is marking down the retail price for the books that don’t sell by 30% or 40% and still making money on these “duds” or “extras” which customers see as a great incentive for patronizing the store.

Consider the publisher who now will know how many it has sold before ordering a second printing! Right now, a second (even third) printing may be ordered by a publisher who then learns that the first run wasn’t all sold. In future, publishers wouldn’t be left holding the bag. Or the pallets. Suddenly a publisher can cut the print cost drastically, minimize warehousing, shipping, etc. This could become a fun business again.

Who loses? Shipping would be drastically reduced. Printers will manufacture less. Both those would be great for the environment. Inventory-taking and accounting would be greatly simplified. As well, the role of wholesalers/distributors would be simpler and could therefore be less expensive for publishers. Currently these middlemen (who take none of the risk) are charging between 10% and 15% of the retail price. With books going only in one direction and less warehousing, this need only cost perhaps 5%. Gees, maybe there is much more than $2B in savings, eh?

This is not a kooky idea. People like the head of Barnes & Noble are in favor of a change. I’ve a degree in pure math in combinatorics and optimization, and decades of experience in the publishing field, so I’m confident in my analysis. Ending returnability is a solution crying out for an advocate. It will be good for everyone in the sector and for the consumers. It is needed for our environment. Maybe the industry needs to take this step itself before Greenpeace and others embarrass us all by making this a public cause?

Oh, and of course, the books that will be printed and sold on “firm sale” terms — those should be on recycled paper, right?  :-)

By the way, because of the spamming of all “comment” functions on blogs across the Internet, I’ll be disabling that function on this blog too. You can write me directly at
b r u c e (dot) b a t c h e l o r (at) gmail.com though. Love to hear your thoughts!

One Response to “Book publishers are wasting two billion US dollars annually; massive impact on environment”

  1. Hey, great news from HarperStudio. They will be selling their books to Borders on a non-returnable basis! See publisher Bob Miller in this video interview:
    http://www.mediabistro.com/galleycat/publishing/exclusive_video_harperstudio_publisher_bob_miller_on_book_returns_103591.asp