Many Unhappy Returns

By Susan Driscoll
The major publishers are putting a tremendous emphasis on inventory management and just-in-time fulfillment, and the retailers are using historical data to better predict demand. But the reality is that the returns problem in ...

For newcomers to the publishing business, here's the reality: publishing is one of the few industries that accepts full return of its unsold product, and for major titles, about 40 percent of all units sold to retailers will eventually be returned.

I recently received this query from an author who heard me speak publicly about the returns problem in traditional publishing: "I wanted to make sure I understood this. Did you mean 40 percent of all books manufactured and sent to bookstores are returned—meaning that if a publisher sells 100,000 books in one year, they'll have 40,000 (40 percent) of them returned?"

The answer is that for major titles, at least 40 percent of the units printed and shipped to bookstores will likely be returned. (When I refer to retailers I'm also including the warehouse club stores like Costco or Sam's Club and online stores like Amazon.) While this sounds crazy, there is a logic to why these books are returned. First, there is competition among retailers. Amazon, Barnes & Noble, Borders, Wal-Mart and your local independent bookstore all want to sell you a copy of that new best seller, so each retailer orders a copy of the book for you. However, you will buy only one copy, from only one of these retailers—leaving the other copies sitting on the competitors' shelves. No retailer wants to run the risk of not having the title in stock when you come in to buy it, so retailers always order more copies than they may need.

Second, geography plays a role. Barnes & Noble, for example, might buy five copies of a new title for every one of its stores. Certain books often sell better in different parts of the country (or in urban or rural locations). The reality is that 10 stores in the Northeast might continually order additional copies from the publisher even though there are hundreds of stores in other parts of the country that haven't sold the initial five copies that they bought. Because it's more efficient for a retailer to return unsold copies than to move copies between stores, there is always stock sitting out in the market that will ultimately be returned. That's just how the business works.

I should add that no one in the publishing industry likes the returns problem. It's expensive for retailers to pay for shipping of returns, so it's in their best interests to order just enough rather than to have to return large quantities. And of course, publishers pay the printing costs—and usually the initial shipping costs—so there's an incentive for them to control inventory as closely as possible. The major publishers are putting a tremendous emphasis on inventory management and just-in-time fulfillment, and the retailers are using historical data to better predict demand. But the reality is that the returns problem in traditional publishing is here to stay.

When an author decides to self-publish completely on her own and wants to pursue bookstore stocking, the inventory issues can be staggering. With little or no experience in inventory management, authors are likely to make catastrophic mistakes—printing too many copies, or worse yet, not enough. Authors may get lower royalties from a traditional publisher than they would on their own but they also assume much less risk.

All of this explains why I'm such an advocate of the demand-first approach—which is, of course, the iUniverse approach—to publishing. With print-on-demand technology, iUniverse offers twenty-four-hour order fulfillment with no risk of returns and no unsold inventory. Authors can focus on finding their readers rather than on inventory management. Isn't that the way it should be?