The Business of Bookselling

Intro: In this season, we’re going to explore working with publishers, why publisher-bookstore relationships are so important, and how they can become a mutually beneficial relationship, even as it is, by nature, a transactional one – they need us to sell their product – primarily books – and we need their primary product to sell in our shops. But there are a lot of places indie booksellers can acquire books and book-related products. So why concern ourselves with establishing publisher relationships as opposed to, say, buying all of our books from one wholesale distributor or a remainder warehouse or sourcing books from the community or online? That’s what we’re going to explore in these episodes that are a combination of general informational overview and how-to guide. Welcome to the Business of Bookselling! This is the first episode of season 2.

Transcript: Before we go further, I wanted to assure you that there’s bound to be something I haven’t covered that you’ve heard about or something that changes in how booksellers and publishers work together between the time I’ve recorded these podcast episodes and the time you’re listening to them, so don’t forget to always double-check any business-related information I’ve provided here. This is all advice based on my own lived experience and public information currently available to me, and may not reflect someone else’s experience or what information is available whenever you listen to this.

Also before I give you any new information, back in season 1, episode 5, A Bookselling Glossary, I defined (as one might expect from an episode with “glossary” in the name of it) a lot of bookselling words, including providing the distinction between what a publisher is versus a wholesale distributor, and what a publisher of a book versus the distributor of a book is. Here’s a quick recap to make sure we’re on the same page with the primary terms I’ll be using in this episode.

The word “publishing” usually refers to everything up to and including the point of printing, warehousing, and shipping the book. But, not all publishers have the ability to do all of those things for themselves, because costs. If that’s the case, Publisher A may be the publisher of a book, meaning they edit, design, and print the book, while Publisher B may be the distributor of the book, meaning they store, sell, and distribute the book for Publisher A. Penguin Random House, for instance, is a publishing company of their own books, while also being a distributor of smaller presses, such as Beacon Press. This information is particularly important for this episode because when you consider working with publishers, what’s the first thing that probably comes to mind? 

It should be, purchasing books from them at a greater discount so that you can maximize profits! 

If other things like, events, or free advanced copies, comes to mind, those aren’t wrong answers, but from a business of bookselling perspective (see name of this podcast), I’m, of course, going to talk about the biggest impact to the financial well-being of the bookselling business first. 

So when you work with a publisher to purchase books from them, you’re not only able to purchase the books they themselves publish, but ALSO the books they distribute for other publishers, known as their distribution clients. The books publishers create themselves are organized into different imprints, which is a collection of books within a publishing company; publishing companies usually have multiple imprints that publish different genres or children’s books vs adult books, etc. They will also distribute all the imprints that are housed within the other publishing companies that are their distribution clients. 

Now, a wholesaler distributor, or wholesaler, is an organization that sells you books by multiple publishers, often with lower discounts and higher minimums to be reached when ordering from them. They also often distribute self-published authors. 

The reason so many bookstores order from wholesalers, even with the monopoly held by an industry wholesaler leading to longer shipping times, reduced customer services, lower discounts and higher minimums for reaching maximum benefits when ordering from them, etc. is because they have many many more books to choose from than ordering from one single publisher at a time. Also, while jumping through those ordering hoops can be tricky, it is still often easier for a one person or small staff store to order all their books from one place, rather than placing a number of different orders with different publishing companies. Despite monopolies in general being bad, I’m not passing judgement on stores that order only through wholesalers and certainly no shame should be felt by booksellers going that route! This episode, however, is exploring the wonderful working relationship between the publishers of books and us – the independent booksellers who sell the books being published to our joint end customers – the general reading public. 

The way we’re going to analyze working with publishers is by using a triple bottom line sustainability framework. This is the business lens that I use to evaluate the benefit of just about everything impacting the bookselling business ecosystem and my own specific shop. Triple Bottom Line sustainability, in short, means taking into consideration the impact of something on the three P’s – people, planet, and profit. It’s about not only looking at the financial impact of business (that’s the profit part), but also looking at how business impacts the environment (that’s the planet part), and society or cultural impacts the business has as well (that’s the people part). When most business people think of triple bottom line sustainability (shortened to TBL), they’re thinking about the impact their business has on the three P’s in the world at large. And while I DO look at my business’s impact outwardly on the three P’s, I also make it a priority to look at how the decisions I’m making for my business are going to impact the three P’s within my business as well. In my mind, this is the equivalent of putting your oxygen mask on first. If you’re making conscious decisions to prioritize triple bottom line sustainability within your business, it’s naturally going to be prioritized in the parts of the business that are impacting the world at large. 

Another reason I use TBL as a foundational lens is that it also provides opportunities for different markers and measures of success. For instance, while we can all recognize that it is hard work to turn a profit as an independent bookstore, independent bookstores are often hyper aware of their very real impact on culture and society at large, and especially within their community, whether that’s providing book access to generations of readers and defending freedom of speech, existing as third spaces and places for people to meet outside of home and work, or being taste makers for the educational and entertainment content being consumed. They’ve got that “people” part down pat. And thanks to shop local movements, and the resources available from organizations like the Institute for Local Self Reliance and the American Booksellers Association, small, independently-owned, and locally-owned businesses have more language to talk about how shopping small and shopping locally keeps more money in the local economy.

Did you know that on average, for every dollar spent with a locally-owned business, 70 cents stays within the community, contributing to greater community financial health, as opposed to just 30 cents out of every dollar spent with a corporate or chain organization? Spending money with locally owned businesses also creates a multiplier effect that results in more jobs being created locally, increases in local payroll and subsequently more money spent locally, and contributes to the local tax base which results in greater community benefits. So in addition to those cultural benefits stores provide, there are very real economic – or profit – benefits that impact the community, simply by nature of being a locally-owned small business. So that’s two out of the three P’s that indies have aced. Unfortunately the book industry isn’t one that’s particularly environmentally friendly, but there are definitely things individual businesses can do to improve their impact on the planet and we’ll be sure to explore some of those in a future episode.

Bringing this discussion back to publishers, to illustrate how to use this lens to measure their impact, I’m going to use a people example. There is a marked difference in the TBL “people” measures between my relationship with publishers and my relationship with my wholesale distributor. My relationship with my wholesaler distributor is entirely transactional. I order books from them, they ship books to me, they invoice me, and I pay them. Despite having worked in the book industry for 20 years, I have no established relationships with anybody from my wholesaler – in part because my wholesale rep changes frequently and in part because their own business model doesn’t prioritize having a relationship with me. 

I’ve had the same cell phone number my entire life. You heard that right – I was in college when cell phones became a thing that the average person started to have, and my parents kindly got cell phones and cell phone numbers for their kids. After having worked in this industry for 20 years, you can imagine how many book people’s phone numbers I’ve put into my phone! I have four Rolodex books of business cards – yes, I said Rolodex, and if you don’t know what I’m talking about, enjoy using a search engine to find out about an obsolete piece of technology that I still enjoy using – and I have over 300 book industry phone numbers saved into my phone. Not one of them is for anyone I’ve met from my wholesale distributor. To my mind, that’s a pretty epic fail on behalf of that third P, the people, or cultural, part of that wholesaler’s relationship with me personally and my business. By contrast, my full-time job for the last 5 years has been working for the publisher Sourcebooks. I’m bringing that up now for two reasons – 1) so that for the sake of full transparency you as the listener can understand that when I’m speaking about booksellers and publishers working together, I have experience on both sides of that coin. My job at Sourcebooks is specifically to work with independent bookstores, and I got that job because the woman who hired me was someone who I had worked with previously as a bookseller for many years. An opportunity came up for temporary work at Sourcebooks, and she reached out to me directly to see if I was interested. A three-month contact turned into a longer freelance contract, which then turned into a full-time salaried role. All because of the relationships I’ve cultivated with publishers AND with independent booksellers over the last 20 years, because without those relationships, I wouldn’t have known about the role, been the right fit for the role, and ultimately been offered the role. 

All of that said, the second reason I bring this up is to make the very public disclaimer that all the views expressed on the Business of Bookselling podcast are my own and do not reflect the views of Sourcebooks in any way, nor is Sourcebooks endorsing me or this podcast in any way.

But back to using a TBL lens to assess the publisher vs wholesaler relationship – so far publishers win out on the people part (in my experience), but how do they compare on the profitability side of things?

The reality is that publishers DO offer better discounts for their B2B customers, which indie booksellers are, than wholesalers do! B2B means that the publisher – a business, the first B – is selling their product directly to us indie booksellers, another business, the second B – and as a result, we get a better discount for ordering directly through them (often shortened to the term “ordering direct”). While other entities such as wholesalers and the website Faire also offer B2B terms, publishers offer better overall terms in terms of consistently higher discounts, free shipping minimums, invoicing dates, and returns credit options than wholesalers and Faire. These other entities may offer the occasional promotion that increases a discount or offers a free shipping special, but those are rarer instances than publisher standard terms. Also, publishers never have their full inventories up on Faire, and Faire is usually nonreturnable, so while it’s not a bad way to get started for book ordering, it remains less than optimal.

To further explain why publishers offer greater profitability when independent bookstores order from them, I’m going to do another quick review of a few terms related to discounting on this episode now that I outlined already on Season 1, Episode 5. 

The word “terms” itself (imagine that in air quotes) is short for the two words, “discount terms.” Discount terms, or terms for short, refers to the special deal that you as a business are getting as a wholesale customer from the business you’re purchasing the product from, and whatever those terms are is then going to impact your profit when you sell the product on to your retail customer. The thing to remember about books in America is that the publisher sets the price of the book. This is known as the Manufacturer’s Suggested Retail Price, or MSRP, and you can’t charge more for your books than the MSRP that’s printed on the book. This does not take into account special cases like bundling a book with ticket, creating a mystery book package that has a value you’ve chosen based on the cost of the items included in package, or including a flat shipping fee for mailing a book ordered from your store online, etc. The MSRP refers to the price charged in an average retail transaction when a customer wants to buy a book from your bookstores directly, and you charge the MSRP, also known as the cover price (plus tax if you’re in a state or county that charges sales tax).

Before I define the word “terms” any further, I have another disclaimer to make. Because I am an independent bookstore owner talking on a podcast about the business of bookselling to an audience of mostly other established or aspiring bookstore owners or bookstore owning dreamers, I need to be careful about what I say about terms thanks to the Sherman Act’s antitrust guidelines, which say that competitors can’t discuss price or pricing policies. Because of those guidelines, I’m going to use general examples from this point on in order to demonstrate the definition of what terms actually look like from a financial perspective.

Most independent bookstores get their newly published books for a discount between 40 to 50%, regardless of where they’re purchasing the book, which means they’re paying 50 to 60% of the cover price for that book. This excludes used books and remainders, by the way; I’m talking only new, never-before-owned, recently printed books. In vague, general terms, not mentioning any names, but a good rule of thumb for your calculations if you’re putting together a business plan is to estimate getting a discount of 40-43% from a wholesaler, a discount of 45-50% from a publisher, and a discount of 60-75% from a remainder company. 

Discounts terms are one part of terms offered – how many units of a product the wholesale customer has to order in order to receive the largest discount on offer. I said “units” because you can purchase multiple copies of the same title, and you also might be ordering more than books – you might order stickers or toys or puzzles or games at the same time – so the word “units” covers all those bases. So in this example, which is the same one I used in episode 5, just for consistency’s sake – Publisher A has terms defined as an order of 20 units equals a 45% discount, meaning you as the wholesale customer would need to place an order for 20 units of the product, and in meeting the order minimum quantity, you would receive a 45% discount off the MSRP, meaning you would pay Publisher A 55% of the MSRP.  For example, if a bookstore ordered 20 copies of a book priced at $18.99, the retail cost is 20 x the MSRP, the “quote-unquote-price of the book”, $18.99, which equals $379.80. Luckily that’s not what you’re paying as a bookstore. You’re paying only the wholesale cost. The wholesale cost in this scenario is that $379.80 retail cost minus your 45% wholesale discount, which equals $208.89. When a store charges their retail customer the $18.99 MSRP printed on that book, their potential profit on that book is the wholesale discount that you received on that book. So the most a bookstore could make in profit on 20 copies of an $18.99 book for which they received a 45% wholesale discount when originally purchasing the product would be $170.91 once they’ve sold all their product to the consumer. The publisher would make more than you; they are making the $208.89 that you paid them on those 20 books. As a side note, wholesale customers are exempt from paying tax on the products they purchase as their stock, so we don’t need to factor tax into this equation yet. As a retailer, you will still charge your customers tax though, if you’re in a state that has sales tax. The wholesale discount is just one type of discount term offered.

Another part of discount terms is what’s called “dating,” which is the amount of time you have to pay the invoice for the product you purchased. Standard dating is usually 30 days from the time the product has shipped out, not 30 days from when you ordered it in the first place. That said, you might not even receive the product until 7 days into its 30-day invoicing countdown. If you order a book on standard terms and it doesn’t sell before the invoice is due, as a bookstore, you’re going to be paying for that book out of your own bookstore pocket, which means that you could be paying for the majority of the books in your store upfront, before anyone purchases them. This is one of the main reasons that it’s so expensive to start a new book bookselling business and one of the main reasons why paying attention to all of the terms being offered is so important. Publishers occasionally offer specials with extended dating terms, which means you have more than 30 days to pay the invoices for the books you order using that promotion. These promotions are sometimes offered for specific titles, authors, or seasons; for instance, some publishers offer them for orders placed between September and November, knowing that indies will do what’s called “ordering up” – meaning they’re placing bigger orders with anticipation of larger than usual sales – for the holiday season, and as a result, indies will be able to pay those bigger than average invoices due to the increased amount of cash they’ll have on hand at the end of the holiday season.

In addition to the discount and the dating, the other terms piece to consider is freight. Most publishers will throw in free freight as part of the terms you receive when you’ve met the minimum unit order quantity. 

Why is free freight so important? Well, if you’ve met the free freight minimum for your book order, but not every book on your order is ready to ship right away, you could be charged freight on every single package that ships out carrying books from your order if the terms specified that all books ordered need to ship together in order to meet the free freight minimum. This is usually the case for wholesalers, but is NOT usually the case for publishers. This is yet another reason why ordering direct from publishers can really add up in terms of the positive benefits to your financial bottom line.

The reason so many publishers will offer free freight on all books in an order even if they’re not shipped together at one time is because of the way the publishing cycle works. As a bookstore, you’re purchasing books that have already been published, known as backlist, AND you’re ordering ahead – you’re ordering books that have not yet been published, called frontlist. Some publishers require that frontlist and backlist orders are placed separately; some publishers offer different promotional discounts each season for frontlist vs backlist orders. This is because most backlist titles are going to ship out right away, as they’ve already…been published. But for those that are out of stock, they’re often being reprinted, and so will be back in stock at some point in the future, and publishers want to make sure that the bookstores that still want to stock that book have it on order, which will be fulfilled when their reprint finally comes back in. Otherwise, the publishers is left with a whole lot of reprinted books that no one is selling. Now as for frontlist, most frontlist titles on an order are not going to ship out at the same time, as they, obviously, are published on different days (but always on a Tuesday – pro tip, in case you didn’t know that – new books come out on Tuesdays!). It’s so much easier for both the publisher and the independent bookstore placing the order to agree that if the terms of the order are met, there’s free freight for all shipments, regardless of whether that shipment has 20 books in it and is going out tomorrow or one single title shipping out to the store in three months, just in time to hit the shelves for the pub date.

With this much ordering going on, cashflow can become tricky because books don’t always ship when you think they’re going to ship, invoices come due all the time, and businesses can have peak and slow times, which impacts how much cash is actually sitting in a bank account at any given moment. The next episode is going to dive deeper into the book buying cycle and things you can do if you’re worried about cashflow and ordering directly from publishers that will help you have better control over your inventory-related cashflow.

That said, I hope I’ve laid out a case for why publisher accounts for ordering direct do offer increased benefits on the profit side, and throughout this whole season, I’ll be adding to the case for why cultivating publisher relationships – that people part – can be so beneficial as well. Unfortunately on the planet side, as I said before, the reality is that the book business is not one that focuses on environmental sustainability, BUT some improvements have been made, such as using Batch for Books, an online invoicing and payment system that a lot of publishers have gotten onto that can help cut down on some of the paper trail aspects of invoicing and payments.

Now that you have a better understanding of why you should open direct ordering publisher accounts, here’s how to actually do it!

I’m sure it will come as no surprise to you that every single publisher has a different way of opening an account with them, but all account applications are essentially asking for the same information. 

Most publishing companies won’t have the wholesale application on their website, so you’ll have to search each publisher’s website for the proper email address to reach out to. Some publisher sites may have a link for one of these words – “booksellers, bookstore, independent bookstore, or independent booksellers.” Some may have a link for “wholesale inquiries.” These links are often in the footer at the bottom of the publisher’s homepage. 

Once you have the correct or even generic email address to reach out to, send an email saying, “ABC Bookstore is an independent bookstore located in City, State, and we would like to open a wholesale account. Can you please send me an account application?” Some publishers have an online form to indicate interest, but you’re essentially saying the same thing on that form.

Once you’ve received the account application, you’ll need to fill it out and send it back in with a copy of your resale certificate. I’ll get to the parts of an application in a minute, but I wanted to let you know why sending in your resale certificate is so important. Also, this can sometimes be called different things in different states, such as a retail tax certificate or a seller’s permit. What it means is that you can purchase products for wholesale without being charged sales tax. There is no fee for getting this certificate from your state; I found my state’s generic resale certificate under the “Sales and Use Tax Permits” page on my state’s Department of Revenue website and simply downloaded it as a PDF, filled it in with my own store’s information, and listed the items for purchase as “books and other literary items.” All publishing companies will need this on file. You can send them a generic one that has your information filled out, the items that you’re purchasing listed as “books,” and they can fill in their own publishing company information themselves.

As for what the account application will ask for, here’s a general list of questions most account applications will ask (if some of these terms are new for you, I’ll be explaining them in brief on this episode, but they’re more defined fully in Season 1, Episode 3, The First Five Business Things):

• Legal business name – this is the legal business name on your tax forms, for instance, The Bookstore, LLC
• DBA business name – this can be simply dropping the LLC, or it can be something else if you’ve rebranded but haven’t opened as a new business entity. I talk more about what DBAs are in episode 3, The First Five Business Things
• Owner names – if you’re the owner, obviously that’s you. If you own the business with a business partner, put both names. If you’re a new store manager or book buyer filling this out on your store’s behalf, you need to put the owner’s name, not your own.
• Federal ID Number – this is also called your Employer Identification Number (aka EIN or FEIN) and can be applied for at IRS.gov
• Your store’s bill-to address and ship-to address – these can be the same address or different addresses
• Contact information – this includes main contact names, phone numbers, and emails, but could also include specific entries for accounting personnel and other contacts within your business. Don’t feel like you need to have different people doing different roles; it can all be the same name, number, and email if that’s what is working for your store.
• There will most likely be a question about backorders and if your store permits them. Backorders are different from backlist orders. Backorders are orders for books that weren’t immediately shipped upon ordering. This could be because the books were not yet published titles and are going to ship once they are published, or this could mean that a backlist title you ordered was out-of-stock and now the reprint has arrived in the warehouse and so is shipping out now that it’s available. The thing to know about backorders is that you don’t always know when they’re going to ship, so one could ship unexpectedly and then you have an unexpected invoice or charge on your credit card to deal with. If that’s not a problem for your cashflow, then you can choose to let all backorders be permitted. If you’d rather only allow backorders for those not-yet-published titles to be shipped, that’s usually another option, but that does mean you have to pay closer attention when ordering books, as any titles that are out of stock at the time of your order won’t be placed on backorder, and so you either need to order them through another source, such as the wholesaler, or you need to place the titles on a future order you plan to place for that publisher and keep rolling that title over from order to order until it’s finally available for shipping. If you choose to allow NO backorders, it means you can’t place any frontlist orders for not-yet-published titles, so in all honesty I don’t advise that one, but if you’d rather do that, just remember that you won’t ever have newly released titles the week they come out directly from this publisher, because you’ll have to wait until after a book has been published in order to order it and guarantee shipping.
• There may also be a question about electronic ordering, shorted to EDI. EDI technically stands for electronic data interchange, but it’s a way to say that your business systems are going to speak electronically to the publisher’s business systems and submit orders electronically. Some point-of-sale (or POS) systems have this built in to their capabilities, such as Bookmanager, some POS systems link to Pubnet for EDI, and for those that don’t, you can choose to sign up for a service such as Pubeasy. You can search online for information about Pubnet or Pubeasy, but I’ll also include them on a different episode that talks more about what they are more in-depth. In the meantime, what you need to know is that if you don’t know if your POS has EDI capabilities, you don’t need to sign up for electronic ordering in order to place orders with the publisher. You can 100% send them an Excel spreadsheet, or send in orders via your Edelweiss account to your rep, or many other ordering methods that work for your business. BUT, if you DO want to be set up for EDI, you have to indicate that, as there’s some backend stuff on your end in your POS and on the publisher’s end that need to be set up in order to make that happen. For instance, you might be asked for your ISA ID number, which is the Interchange ID number that is a unique identifier for your business that’s needed for the types of ordering transactions you will be doing via EDI. If you don’t know what this is, a lot of businesses use their SAN number instead.
• Regardless of whether you choose to do EDI, you may also be asked for a SAN number, which is a Subscription Account Number most often used by businesses for managing their accounts on the National Do Not Call (or DNC) Registry. The reason why publishers might ask for it is to make sure they comply with federal regulations for calling numbers on the DNC list when they need to contact you. You are not required to have a SAN number. If you want to get a SAN number, go to https://telemarketing.donotcall.gov/profile/Create.aspx, which I know sounds fake, but I swear it’s the right address.
• On to the payment! You will be asked if you would like to prepay or if you’re applying for credit terms. If you’re prepaying, you’ll be asked to either set up electronic payments or to put a credit card on file. If you’re asking for credit terms, 30 day dating is standard (meaning you’ll have 30 days from the time of the invoice to pay off the invoice).
• You’ll be asked for your bank reference. This includes your business bank name, business bank account number, and a bank contact person with phone number. If you don’t have one, your local branch manager is fine.
• You’ll also be asked for credit references. If you’re a new business, this might be a bit difficult, which is why a lot of independent bookstores open Ingram accounts first, as the wholesaler will provide you with a prepay account even if you don’t have any credit references. That said, you should always have at least one because your bank can count as a credit reference!. Other credit references can include other vendors you’ve worked with or ordered from as your business, such as via Faire, or locally in your community. Even if they’re not book-specific vendors or businesses, they still count as organizations you’ve done business with, so if you’ve ordered sidelines or any gift or toy products from anyone for your shop, or if you’ve popped up inside another business and have done any kind of profit sharing with them, you can always put them down as a credit reference.
  • Pro tip: some publishers are willing to act as credit references, but some are not. As of the time of this recording, here are publishing and wholesale distributors that are not willing to act as credit references: Gardners, Hachette, Macmillan, and Penguin Random House. Unfortunately they’re next to impossible for vendors to hear back from, so even if you do have accounts with them, consider listing only one of them as a reference, and then listing 1-to-2 others not on this list that you know will actually respond to a credit reference check.

You may also get some business-specific questions about the type of business you’re looking to do (do you do events, preorders), what your POS system is, other optional self-identified demographic information (Black-owned business, for example), but all of those are optional things to answer. Most account applications are only concerned with the business aspect of things. 

Once you’ve submitted your application with your resale certificate, it can sometimes take 1-2 weeks before being given an account number. Ideally this would come with a welcome email of information and introduction to your new sales rep, but if that’s not been provided for you, you can email back and ask for at the very least your discount terms, credit rep, and sales rep. Your credit rep is the person you want to talk to if you’re going to be paying an invoice late, questions about invoices and credit memos, or have any other questions about the financial status of your account. Your sales rep is the one who should be getting to know your store’s buying habits and who you go to with questions about ordering books (more on that relationship in another episode).

There are many other reasons for and ways to work with publishers, which we’ll be exploring in future episodes this season, but for now, enjoy those new publisher accounts! 

If you have any questions about something I discussed in this episode or something you’d like me to explore in another episode, you can send me an email at hello@businessofbookselling.com. Happy bookselling!