To return or not to return: is that the right question?

The debate over ending the practice of buying returnable has been raging for years, but lately it seems to have grown in impetus. I’ve been trying to think through the issue and have had many interesting talks with publishers and booksellers. This post is an attempt to distill those discussions and spark some new ones.

In general, I’m supportive of the idea that we as an industry need to end or sharply reduce returns: they negatively affect a publisher’s ability to budget accurately over the course of a year, and they give larger accounts a disproportionate influence over a publisher’s fate. However, so much of the discussion has been focused on the question of whether or not to allow returns. This seems too simplistic. There are several core assumptions underlying the book industry, and a range of actions and behaviors based on these assumptions that all need to change in order to eliminate returns (if that’s indeed the right thing to do).

I want to explore each of the four cornerstone assumptions/truths that make the book industry what it is. As an organizing metaphor, I suggest that we picture  the book industry as a simple table (four legs, one horizontal surface): radically change one of these basic assumptions and you’ve essentially cut one leg off, with predictable results.

A. Books are physical objects made of paper bound between covers.
Still true, but ebooks are gaining market share. For more discussion about ebooks, check out last week’s post.

B. Books that do not sell can be returned within a certain amount of time.
This key fact influences almost all book buyers’ decisions.  When a rep is excited for a book but the store’s buyer is not, it’s a relatively small thing (at least it was before the recession) to bring a couple of copies in and test their hunch — as long as they don’t have a hunch about every title the buyer wants to skip. If books were nonreturnable, few would do that.

Publishers are publishing more than ever before. How much is too much? My answer is, more than can be given meaningful marketing support. At the keynote breakfast on the first day of the recent ABA Winter Institute, Harper Studio head Bob Miller referred to big publishers having a collective 20 “big” new books (I don’t think he was talking about the established brand name authors) with print runs of 200,000 copies and above. That state of affairs can only be supported by returnable terms, because buyers simply couldn’t take that many chances nonreturnable. (Many don’t already, skipping huge chucks of publisher’s catalogs.) Publishers would have to publish far fewer titles, perhaps only 25% of the speculative new voices they currently publish. They would then have to put more marketing and publicity effort behind those books in order to show store buyers that they are serious about making these titles, and not taking the usual spaghetti approach of launching a lot of books and supporting only the few that gain some traction in the media.

Publicity/marketing support would need to be for whole (frontlist) life of a title, not just the first month. Stores would be more likely to give unknown authors a chance if their publisher has a reputation for reliable lifecycle marketing/publicity.

At the indie store level, buying tends to be handled by one or a small number of buyers, who often spend less time on the sales floor than their colleagues. This leads to situations where many of the booksellers in a store may know little about most of the new books (I’m thinking mainly of the new titles which receive coop support for buys above a certain range, here). These books get a couple of weeks at FOS, many fail to catch on and then are banished to section or overstock until they can be returned. Often nobody handsells because only the buyer knows anything about them.

If stores were going to switch to completely nonreturnable terms, then buying would need to involve all booksellers, not just a single buyer. The whole staff would need to take ownership of selection and handsell like crazy (because after all, with increased risk we’d buy relatively fewer titles, and therefore need those titles to turn faster).

Stores would need to develop lifecycle plans for their inventory. There could be no more overstock, and no more banishing books to a shelf in the back room awaiting return because you’re sick of looking at them. Bookstores would need to cycle titles through various display options until they’re sold: FOS, in-section tables/endcaps, seasonal or themed promotional space, staff favorites, in-section face-outs, book club suggestion area, mark-down tables, etc., etc.

Currently, you can argue that publishers bear most of the risk under the current business practices: they might get all the books they print back. (Yes, I know a lot of indies could make an equally strong argument the other way around, but bear with me.) Publishers manage their risk, in part, by confining their marketing investment to a small window following the book’s release. If it doesn’t take off, they effectively cut their losses and move onto the next book. (Obviously, I’m talking about large publisher’s here. Small ones need to make every book successful.) Publishers also offer the smallest discount the market will accept in order to maximize their profits based on an expectation that the majority of books will not sell well enough to return any profit. So they attempt to control their losses on these unprofitable books and pursue the huge bestseller in the hope that the profits on this top 20% will outstrip the losses on the other 80%.

Eliminating returns would shift much (most?) of the risk onto bookstores (but, also spread the risk between those stores, reducing the impact of a massive failure – which today might sink a house or result in numerous layoffs). However, in order to convince stores to assume this additional risk, publishers would need to provide better marketing and publicity support, continue it throughout the frontlist lifecycle of the book, and significantly raise the discount offered to give bookstores better margin to reward their added risk.

This increase in the incentive for stores to sell through the breadth of their buys could force indie bookstores to become more creative and ultimately result in more books becoming profitable than in the past, and perhaps reduce the reliance on huge bestsellers. Wouldn’t spreading the risk in this way be better for everybody?

I’m alarmed that I don’t see much discussion (at least in public) of better marketing and publicity support or fewer titles coming to market (although it seems to be implicit in the missions of new imprints like Twelve and Harper Studio). The carrot dangled to justify ending returns has been increased margin, but I don’t think that will be enough, on its own, to give booksellers the confidence that going nonreturnable would be in their interests.

Another thing publishers would need to do if going nonreturnable is launch more books in trade paperback from day one. It’s the format of choice for most book clubs, and combined with the marketing and publicity resources put behind a typical hardcover release would make a great deal of the mid-list fiction released every year more viable (again, assuming fewer overall books).

At the risk of seeming contradictory, if a publisher decides to release a title in hardcover, they should consider a longer gap (with lifecycle marketing support) between that and the trade paperback (maybe two years). This would give readers more incentive to purchase the hardcover, booksellers a longer window to sell through a nonreturnable buy, and publishers an added urgency to make each hardcover work.

Many booksellers, of course, feel that they carry all the risk, and that being able to return books is the only thing that keeps them viable. To illustrate the importance of returnability for indies, let’s speculate about the impact ending returns might have on somebody seeking to open their own indie bookstore.

Right now there are two typical career paths to opening your own bookstore. One is making lots of money in a different field and then buying an existing store. The other is learning the trade working at one store, them moving elsewhere to open your store. The pie is pretty small, so it makes more sense to try not to compete directly with an established indie.

When you open your store, you then have to learn the tastes and preferences of your new community. You have to do this through trial and error. That you can return the mistakes makes this possible.  If bookstores only had the option to buy nonreturnable, many more fledgling stores would fail in the first year because they’d find themselves stuck with too much inventory that didn’t meet the tastes of their communities.

This would force booksellers who want to be their own boss to open their store in the same community where they learned their trade. The risk of moving elsewhere would be far greater. Obviously, this would change the dynamic within the industry from one of camaraderie and cooperation through adversity, to mutual suspicion and wariness. How would two stores in close proximity to each other differentiate themselves? Price would probably be seen as the most effective method.

This makes me think that any program of buying non-returnable would have to coexist with traditional returnable buying. Perhaps two programs with extremely different discount structures. Perhaps a store could only be one or the other: returnable for the first years of its existence, and going nonreturnable once the owner has got the pulse of her market. Some publishers already have dual terms, but with only slightly higher discounts for buying nonreturnable. However, the dialogue on the publisher side appears to be focused on completely nonreturnable buying.

C. Nobody in their right mind would sell books at a loss.
We thought this was a rather basic economic truth until the big box discounters (US) and the supermarkets (UK) realized popular books made great loss leaders. Between the mass merchandisers and the general discounting war, margin has shrunk to a barely sufficient level for most bookstores. To make matters worse, it’s the most popular books that get the heaviest discounts. (Trevor Dolby has a great piece on this in Book Brunch.)

D. People value the “center of the web” function that bookstores provide.
I’ll write some thing about this in the future. This post is too long already.

The scary thing is, all of these cornerstones are being challenged at once. The discussion cannot focus on fixing just one area, because changes to one area affect the others, and only a holistic solution will work.  To go back to the table metaphor, any changes made to one leg must be reflected on the others or the table can’t function properly.

So what do you think? What am I missing? How do we address some of these issues?