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Understanding Book Discounts
by Susan C. Daffron, SPAWN President
Many book publishers find discounts confusing. When you sell your book, you need to decide on the discount you will offer and whether or not you will take returns.
For me, it took ages to "get" how discounts work because of the name itself. Anyone who shops thinks "discount" equals a very good thing. (Get 10 pairs of socks at a 50% discount!)
However, as a publisher, setting a higher discount means you make less money per book, which is obviously a bad thing.
Most bookstores require a 55% discount and retailers, like gift stores, often want 40%. That means instead of paying you $20 per book, they pay you 55% or 40% less. That is the "wholesale price." If you want to have your book carried by a distributor, they often take an additional 15%, so you can end up having a discount of 65% or 75%.
So, for example, if you were selling a book for a retail price of $20 at a bookstore, you would subtract $11 (55%). The bookstore would buy your books for $9 each. If you are paying $5 to print each book, you make $4 of profit on each sale. As you can see, however, if you set your retail price at $10, you'd actually lose $1 per book.
The Traditional Approach
Making profit is a good thing, and the way books were traditionally printed, this model could work if you had a lot of money up front to do your first print run. With offset printing, you need to print a lot of books to get the unit cost down low enough to make any profit. Most people would print 2,000 - 5,000 book at a cost of about $4,000 - $10,000.
Another thing to understand about bookstores is that they want books to be returnable. In other words, unlike any other type of retailer, they can return any unsold merchandise. Here's where things get risky. You could get a big purchase order from a bookstore for 1,000 books. You are thrilled with the $9,000 check. But 6 months later, they return 800 of the book, and want $8000 back. You can imagine the accounting nightmare this could cause. Plus, you are now stuck with 800 books in used condition.
High discounts and returns are the reason self-publishing expert Dan Poynter has said for years that bookstores are just about the worst place to sell books.
Print-on-demand through companies like Lightning Source and the Internet have changed the book publishing landscape considerably. The issue of discounts is one of the primary reasons I use the method I do to print my books.
I print my books through a company called Lightning Source (LSI), which means I can get my book into Amazon.com and BarnesandNoble.com with only a 20% discount, and avoid accepting returns.
Printing through Lightning Source is the least expensive way to get your book into Amazon.com. If you get into Amazon via a distributor or the Amazon Advantage program, you'll pay a higher discount.
Lightning Source is owned by Ingram, so when you sign up with LSI and pay $12 per year (per title), you get your book into Ingram's large distribution network. Getting your book into the Ingram database through LSI also makes it available to other leading distributors such as Baker & Taylor, Barnes & Noble, Amazon.com and others.
When you print your books with Lightning Source, you can set a lower discount than the industry standard of 55%. The lowest discount you can set is 20%, which is called a "short discount" in the trade. On the Lightning Source Web site, when you set up your book, you also set the discount and decide whether or not you will accept returns.
Kiss Bookstores Goodbye
If you opt for a short discount, such as 20%, you need to accept the fact that your book will never be stocked in bricks and mortar bookstores. (You absolutely won't get bookstore sales unless you set your discount to 55% and accept returns, but as noted earlier, it also incurs a lot more risk.)
Here's how the numbers work for my books. I have several books that list for $20 and cost about $3.00 to print. My distribution cost is $4 per title ($20 x 20% discount = $4), instead of the $11 in the example above. When I subtract the $3.00 print cost, it means every book puts $13 in my pocket. I also have set my books so that I am not accepting returns. That means I keep my $13.
I need to sell a lot fewer books to make a lot more money than if I took the traditional route of printing thousands of books at a time and selling through bookstores. Also I have no inventory, except a small amount of books in a cabinet that I sell via my Web site for those folks who want autographed copies or want to buy direct from me for some reason. I also can take these books to promotional events such as book festivals, conferences, and book signings.
I didn't have to spend the $4,000 - $10,000 to print my books. My cost to print my books was $75 set up + $30 for a proof. It costs $12 per year (per title) to get your books into the Ingram distribution network.
Although I'm avoiding bookstores, that doesn't preclude selling books at wholesale prices to other retailers. Bulk buyers such as catalogs or colleges have purchased our books at wholesale. In that case, I invoice the retailer for the wholesale amount and either drop ship books from Lightning Source to the retailer or ship them from the books I have in stock here.
When you buy your own books directly from LSI, you just pay the cost of printing and shipping. Any discount you decide to offer on those books is up to you. You can see examples of the wholesale discount I offer to retailers on our Happy Hound site, for example http://www.happyhoundbook.com/wholesale.htm.
In addition to selling wholesale, we also offer a better nonprofit discount, which is targeted at people raising money to help homeless animals. A non-profit coalition of rescue groups recently purchased Funds to the Rescue in quantity to give out to their members as a gift. We gave them the non-profit price (i.e., a 50% discount).
When I get a really big order of books (but not before then), I'll switch to printing my books offset. There is no reason you can't have your book printed by more than one printer, and although I'd get quotes from Lightning Source, I'd also check around with other printers to see how low I can get the unit cost.
Understanding discounts is an important part of making money in publishing. Although it can seem like a confusing topic, you need to understand how discounts work to avoid making expensive mistakes.
Susan Daffron aka The Book Consultant is the President and Webmaster of SPAWN. She is the author of 12 books, including Publishize: How to Quickly and Affordably Self-Publish a Book That Promotes Your Expertise. Susan owns a book and software publishing company called Logical Expressions, Inc., which offers book layout, design and consulting services.
You can read more of Susan's publishing articles on the Book Consultant Web site.
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