Smart Planning: The Reality of Book Distribution

This article provides a realistic look into what book distributors do, how they profit, and better options for the author who is publishing a book.
 
Congratulations!  After a long journey of book edits and re-edits, you have perfected a new book ready to print.  Now, as its publisher and number one proprietor, you have two primary concerns for your efforts: to get the book read by others and to see a return on your investment. Misconceptions in publishing abound, there are certain realities many people don’t understand about the book distribution system.

In a step towards clearing some of the confusion, let’s clarify the difference between a distributor and a wholesaler.

A book distributor makes its income through marketing and merchandising the books their publishers create, and takes an overall percentage of the retail selling price. Distributors rarely work with individuals (self-publishers) because they need a steady volume of new titles regularly published every season to make a profit. 
A wholesaler is a large warehouse that holds and sells books when retailers or other sellers ask for them.  They will have a list of books they sell, and they make their income off the difference between the price that they buy the book from the publisher and the price that they sell it for to the retailer. 

In most cases of publishing, book wholesalers and distributors are not the best choice for authors who are personally financing their books’ publishing services.  It is not unusual for distributors and wholesalers in the United States to take ninety days or more to pay an author after receiving the books after book printing.  Additionally, a percentage of the author’s profit will be held back for returns.  This means if your book does not sell in the stores, copies will be returned to the distributor and ultimately to you, the publisher, where you must absorb that loss in profit.  These returned copies may be damaged after spending time on the shelves of a bookstore, making them difficult to sell later on.  It is an unfortunate reality that an authors may find themselves with a garage full of damaged copies of returned books, after only being stocked on the shelves of a major book retailer for a month or two.
 
Alternatively, there are lucrative distribution plans that circumvent the major bookstores, the distributors and the wholesale warehouses, all of which take a major cut of a book’s retail price.  Such alternative methods of book distribution employ the author’s strengths and preexisting customer bases (such as active mailing lists, attendees to an author’s lecture, etc.) to distribute more directly and efficiently.  A strategic self-marketing plan can generate a profit equal or greater to what a major book distributor offers its clients, for much less of the cost.
 
To illustrate, here are two cases of different book distribution plans, each netting its self-publisher a profit of $26,000 at the end of the year:

Case 1. Let’s say, as the publisher of your book, you buy 10,000 copies of your book at a unit price of $2.00 each from a book printer.  You also set the book’s retail price at $20 per copy.  You have so far spent $20,000 on printing costs, and if all books sell at retail, you have the potential for $200,000 in total sales.
Now let’s suppose you employ a distributor to manage your marketing and distribution. They may charge you 62-65% of the retail price of the book in order for them to pass it through different distribution channels and still make a profit. 
 
The book stores, depending who they are and how many they buy, get a 45%-55% discount on the book, and also have the option to return.  If your book sits on their shelves for too long, they will send it back down the distribution channel, and these copies will eventually come back to you.
 
Let’s review that $20 retail price:
The printer was paid up front $2.00 per unit.
The book store takes an average of $10.00 per unit.
The distributor takes an average of $2.00 per unit.
This leaves you, the publisher, with a net of $6.00 of the $20 retail price.
 
However, this $6.00 does not yet include the author’s royalty, if the publisher was not himself the author. If we allow the author’s royalty to be 10% of the wholesale price, this will be cutting another piece of the pie at $0.80 per copy (retail price $20 – discounts $12 = $8 wholesale price. 10% of $8 Wholesale = $0.80).
 
Thus, the publisher’s actual net ($6.00 – author’s royalty $0.80) = $5.20 per book.
 
If 10,000 books are sold into distribution, that means $52,000 goes to you, the publisher.  Now you must deduct the original publishing services and costs of producing the book (editing, designing, illustrations, etc.).  The cost of publishing services can easily be around $25,000, or even more, but let’s say that 50% ($26,000) of your $52,000 went to production costs.  This leaves $26,000.
 
In Case 1 using a major distributor, from a possible $200,000 in retail sales, the self-publisher nets $26,000, or 13% of total retail value.
 
Now, let’s take a look at an alternative business model for a self-publisher:
 
Case 2. Let’s allow this author to be a public speaker with an active mailing list of 2,000 people.  Allow 50% of his mailing list to purchase his book directly from him for $20, resulting in $20,000 in sales.  Over the next 12 months, this author sells an additional 1,000 copies at seminars and lectures, for a total net potential of $40,000 in sales.
 
Costs for printing books will be slightly higher in Case 2 because a smaller quantity of books is being ordered. Book printing costs him $3 a copy for 2,000 copies, for a total printing cost of $6,000.  The more modest costs of publishing services to package his book (book editing, designing, illustrations, etc.) amount to $8,000.  Total production costs (book printing costs at $6,000 + packaging services costs at $8,000) = $14,000.
 
Breakdown for 2,000 copies:
Total sales $40,000
Total production costs $14,000.
 
The author’s net proceeds ($40,000 – $14,000) = $26,000, or 65% of total retail value.
 
Compare this to the high-volume distributor scenario in Case 1, where 10,000 copies were needed to return $26,000 to the author, which was only 13% of the total retail value ($200,000).  In Case 2, the author distributed and sold copies directly to an already existing market, allowing him to see the same $26,000 profit of a volume of only 2,000 copies, and at 65% of total retail value.
 
Further, after this publisher in Case 2 sells his first 2,000 copies during his first year, he may print another 1,000 book copies to sell.  Because packaging costs to produce the book have already been paid, he would only subtract the cost of book printing from the retail price.
 
So, in the following year, he prints 1,000 copies to sell at a $20 retail price.  This publisher generates $20,000 in total revenue. $20,000 in sales – printing cost $3,000 = a net profit of $17,000 in this publisher’s subsequent year (85% of the book’s retail value).

The Bottom Line:  Choose a distribution and marketing plan that makes the most sense for your unique book, and the plan that allows for the most profits off the book’s retail value.  Printing fewer books can actually produce more of a profit if it is done under a strategic business plan.  In reality, major distributors and book stores hold little invested in the individual publisher’s success, and will take substantial cuts from every book sold off their shelves.  As a general rule, carefully targeting a specific customer pocket to directly distribute your books will be more profitable than diluting copies all over the book market.

This is something I especially like to discuss with new publishers, and invite you to contact Sea Hill Press if you have any questions forming your unique book publishing and distribution plan.

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