Canadian newspapers are reporting the scheduled closing of Duthie Books in Vancouver. As many comments at the Vancouver Sun newspaper website have pointed out, there was a significant lack of business sense at Duthie Books. Yet we needn’t single this store out: the entire book publishing sector is operating on a broken business model. McNally Robinson just closed two of its four stores.
Unlike other retailers who buy at about 50% off retail price, bookstore owners buy at only 40% off. How can they expect to be profitable? Why don’t the store owners read some of those business how-to books they stock?
The rationale for this poor margin is because the books are acquired from publishers on a “returnable” basis (i.e. on consignment). So bookstore managers merrily overstock and pay for shipping both ways on stock they don’t immediately sell. Instead of getting their stock at a better margin, and marking it down if it doesn’t sell at full price, they are stuck to this bizarre returnable practice like deer caught in the headlights.
This antiquated process is bankrupting not only booksellers, but distributors and publishers, too. Meanwhile the Canadian and provincial governments are handing over tens of millions of dollars annually to subsidize losses by incompetent executives.
It isn’t Kindle that is the biggest threat to bookstores, it is the reluctance to demand a reasonable business arrangement from publishers. The toll this inefficiency is costing the Canadian book industry? Over $300 Million each year. Check out the analysis at www.BookIndustryBailout.ca