The Business of Bookselling

Intro: Welcome to the Business of Bookselling! In the first episode of this season, I went over opening a publisher account. And why do most stores open publisher accounts? To place direct orders, of course! So in this episode we’re going to go over ordering schedules and three things to do to make sure you’re making ordering directly from publishers work for your store’s cashflow.

Transcript: My first independent bookstore buyer position was as the children’s department manager for a store that had been newly renovated. My predecessor had been with the store for 20 years, but had retired prior to the renovation, which meant I got to choose all the new children’s books & sidelines – that’s puzzles, toys, stuffed animals, and other gift products – to fit into the newly expanded space, AND I had to learn and then keep up with meeting the expectations of a community who had known the previous buyer for 20 years! Following that, I had the opportunity to be the first general manager for a store that was opening for the first time. I chose their point-of-sale system, created their inventory system from scratch, opened all their brand new publisher accounts, and ordered all of their book inventory for opening day.

At both stores, I also ran the weekly reports for backlist orders, met with reps for seasonal ordering, visited warehouses and met with reps for remainder book ordering, went to national and regional book, toy, and gift conferences and tradeshows to scope out new products, open new accounts, and place orders, placed event and special customer orders, and did yearly inventory and quarterly returns. Both of those stores were large brick-and-mortar enterprises, and so when it came time to open my own novel model store and start opening accounts and ordering books for pop-ups, I knew a lot about where to get started and then learned a lot more about creating new systems and scaling back for a business that wasn’t a brick-and-mortar, large volume location.

This episode is going to talk a lot about standard practices as they were taught to me, but I’ll also discuss some updated methodology and you can form systems for whatever works best for you and your store, which are often dependent on the size of your store, size of your staff, your point-of-sale and inventory management system, available money in the bank, projected budget, cash flow, and any other number of factors that are specific to you and your store.

It used to be really common for bookstores to place orders with publishers in this type of cycle: on a weekly or bi-weekly basis, usually on a Monday after the busy weekend days, the bookstore would order any backlist titles that they’ve sold recently and are currently out of (plus special orders for customers, plus books for an upcoming event, preorder campaign, or other promotion). 

Then, once a season – which, depending on the publisher can be two, three, or four times a year, depending on how many seasons they have defined for publishing their books, and no, sorry, that’s not standard across the industry – the bookstore would meet with their sales rep either in-person or over the phone, and they would review the frontlist titles together, and then the store would place a very large frontlist order for many months at a time (sometimes as many as six months ahead of time!). 

Due to the discount and ordering terms I’ve mentioned in previous episodes, stores that place large seasonal orders like this don’t have to pay upfront for the frontlist order. They would be invoiced as the books ship and in accordance with the special promotional terms being offered for placing that season’s frontlist order (sometimes that would be an extra discount for ordering extra copies of top seasonal titles; sometimes that would be extended or delayed dating, meaning the store would have longer than the standard 30 days from the shipped date to pay the invoice; or any many other types of special promotions). Separate orders for frontlist event books would be placed whenever needed, and usually are placed outside of the established frontlist order or weekly backlist orders.

Even with all the discount terms and extended dating, that sort of buying schedule may not work for your store these days for cash flow, staffing, seasonality, or any other reason. Don’t worry, there are many other ways that you can go about organizing your own store’s ordering schedule. As this is the Business of Bookselling podcast, I’m going to focus on some options and additional considerations for creating a buying schedule that prioritizes a healthy cashflow for your store.

Say you’re a new store and you don’t know whether a traditional buying cycle suits your customers’ buying cycle, or if you’re an established store that has had changes in your community that have impacted customer buying habits, or if your community and/or country are going through turbulent times and consumers are spending less overall and you’re just not sure how to predict buying patterns and store cashflow three-to-six months from now – if you’re worried about cashflow and ordering direct from publishers, here are three things you can do, depending on what works best for your store, to have better control over your inventory cashflow (that is to say, these are three things to do after you’ve already created your order and due date spreadsheets and tried to stagger your ordering on a calendar so that all your invoices don’t come due to each publisher at the same time – this is specifically in regards to backlist, of course; though sometimes, like after the holiday season, you just can’t help it – many invoices are always going to be due in January and February – but after you’ve done all that, here are three other things to consider):

1. Prepay only. 

This may be something that’s required of you as a new wholesale account anyway, especially if you’re a new business and don’t have many credit references. By prepaying for books, you’re putting a credit card on file at the publisher, and you’re only buying books your card will let you afford. 

Two things to note with this:

1) if you need to place a bigger order than what your card will allow for some reason (say an author event, or a subscription box book you chose suddenly went viral and you now have 1000 orders to fulfill), you can always get a certified bank check or wire transfer sent to the publisher’s account department directly and they will release the bigger order, and 

2) this doesn’t mean you can’t make use of the other terms being offered, just because you’re not using the dating term (that’s the 30 day dating); you can still use the discount and freight terms of regular discount terms and special promotional offers.

2. The second thing you can do to have better control over your cashflow is to order in shorter frontlist timespans and longer backlist timespans. 

What does that actually mean or look like? It looks like reviewing what books you want to order from a frontlist, not-yet-published books catalog, and separate your order by publication month, and then order only a month or two or three at a time in advance. 

This means that if you’re having a slower season, customers aren’t buying as much, you have a lot of inventory left on your shelves and not a lot of cash in your bank account, whatever the reason, you can adjust your frontlist orders to be smaller or even skip ordering certain books altogether until you can afford it; overall you’re placing smaller orders until business picks up again and you can afford to pay larger invoices. To not forget to order the books you skipped, you can add those books onto a separate order that you’ll place in the future, most likely by placing a backlist order for the books at that point.

Remember, backlist orders aren’t only for books your store has ordered before. Backlist simply refers to books that have already been published, or that have “already come out” (to my queer family out there, that is not a coming out of the closet reference, that’s just how we talk about books being published). 

Going back to frontlist orders for a minute, if you have placed, say, 6 months worth of frontlist orders at one time, and 2 months into that frontlist season, you’ve realized that you’ve way over-ordered for customer demand and are hemorrhaging money paying frontlist invoices, you CAN reach out to your rep to see about amending your not-yet-shipped frontlist orders. That said, there may not be a chance to edit all your frontlist orders in time to receive fewer titles and reduce the inventory coming in. 

Just don’t forget, in the shorter frontlist timespan ordering, to prioritize ordering anything that may sell out if you order too late. This includes limited print runs, special first printing editions, books that are guaranteed to be HUGE bestsellers that all your customers are going to be asking for – those are the books you want to make sure to order. The reality is, if you choose to not order a deluxe edition of a frontlist title, the deluxe edition may run out by the time you have a chance to stock it. Figuring out exactly which titles to bring in or not bring in is the eternal bookseller question. That said, if something catches your eye in a frontlist catalog that you want to make sure to bring it at some point – for instance, I have a whole list of books titled “Order in Paperback” of books I think look interesting but which I’m not convinced are going to sell well for me in hardcover, so I make sure to check every few months to see what’s coming out in paperback soon – or if you move something off an order you had initially placed, essentially everything you don’t order immediately when looking at a frontlist catalog, you can place it on “possible order” lists and then send those in when you’re ready and feeling more comfortable with your cashflow.

In terms of those backlist orders, keep those in mind as well when you’re prioritizing your healthy cashflow, and increase the time in-between placing large backlist orders to start stretching those out, because those are the invoices that are going to be due a lot sooner than the frontlist order for books coming out six months from now. Backlist orders are most likely going to have invoices due in 30 days, unless you’re using a backlist special promotion from a publisher that provides you with extended dating (meaning you have longer than 30 days to pay it off). 

Here are three big things to be careful of or to keep in mind when delaying backlist orders: 

1. “Special orders” is the first thing to consider.

If you’re a store that allows special orders, the majority of what customers are ordering are backlist titles and they’re looking for them right away. Of course some customers are going to preorder frontlist titles, and that’s great news, because you have plenty of time to know exactly how many books of that frontlist title order based on the number of preorders you’ve sold. But for backlist special orders, what are you going to do with those if you’re not placing a publisher backlist order as often? You might be delaying a special order in that case, and risk losing the order and possibly the customer, as a lot of customers aren’t into delayed gratification thanks to things like next-day shipping and same-day delivery that big box retailers can offer. So what do you do in this instance?

Well, a lot of stores use wholesalers to fulfill special orders, as wholesale distributors do often offer faster shipping (keep in mind that the holiday season is its own special scenario, so I’m talking about 10/11 months out of the year, not November/December in this case). As long as you’ve reached the wholesale order minimum (and you can sometimes do this easily by keeping a running list of inexpensive items supplied by the wholesaler, like sticker books, that you don’t mind ordering in bulk, or holiday season titles you know you’ll sell a ton of so there’s no return risk, or staff favorites to handsell that you can throw onto a wholesale order that’s close to meeting the minimum order needed), using wholesalers to place a weekly customer special orders plus emergency restock orders is a good way to go. That’s going to ship to your store directly.

A second option some wholesalers offer is a direct-to-home shipment option, where you as the store can basically place a special order for someone via your own wholesaler and have it shipped directly to the customer as opposed to your store. There are no minimums to meet in this case, but direct-to-home shipments often cost the store more in lower discounts, hidden convenience fees, and higher shipping costs than what you possibly charged the customer, if you charged them shipping at all, so beware of this option if you’re truly counting your pennies and make sure it’s a cost-effective one for you. Adjacent to this scenario, for stores that have a Bookshop.org account, you can also place an order for the customer special order book using your store’s Bookshop.org account, but have it ship directly to the customer; by doing this, there are no hidden fees, and though you may get a smaller percentage profit (as an ABA member affiliate store, you receive 30% of the sale; if you’re an affiliate bookstore that’s not an ABA member, you’ll receive only 10% of the sale), you still know upfront what your discount is and what the shipping cost will be, so there’s no losing surprise money being lost on this transaction, and it’s a much faster way to look up what to charge the customer in real time.

I’m going to sidebar for a second here on special orders. A lot of OG stores don’t require customers to prepay for their special orders. None of the stores that raised me in my early career days charged customers upfront from their orders. Even at the time, in my early 20s as a newbie bookseller, I thought that was a poor financial choice. I’m not saying I don’t understand the customer service act the stores want to provide. As it was explained to me when I inquired, a customer may not always know if they want the book for sure, and if the store orders the book and the customer decides they don’t want it, the store will just put it on the shelf and someone will surely buy it at some point or they’ll pull it for a return at some point. Considering the often razor thin margins of the bookselling business, I think that’s an absolutely bananas take to have – a bookstore is not a lending library. A bookstore, whether for profit or non-profit as a business entity, still needs to turn a profit to exist. So why would I, as a store owner, want to accept the risk of ordering in a book that a customer may decide they don’t want, incur and potentially eat the cost of that book that I may not be able to then sell to someone else, and then if it doesn’t sell, completely eat the cost of the return shipment, or if I can’t return it for any number of reasons, either make a smaller percentage profit on it if I end up discounting it to sell or perhaps not selling it at all, zeroing it out of my inventory, eating the entire cost, and then donating it? Also, do you know how many customers place special orders that they never come to pick up? It’s an astonishing number of customers. 

While this may be an unpopular opinion amongst OG and even newbie booksellers, from a purely financial business perspective, I would recommend having all your special orders be prepaid and having a clearly stated policy that any special orders, prepaid or not, that have not been picked up within three months from the first date you call or text or email to let the customer know their book has arrived will become store property without a refund being owed (special circumstances notwithstanding, of course). At that point, you can either choose to donate the book, put it back on the shelf to be sold to someone else, or send it back to the publisher or wholesaler for a refund with a clear conscience and without having lost any money other than the staffing time for dealing with it in the first place. We can agree to disagree as business owners on this if we ever meet in person, but I’ve never had a customer push back on prepaying for a special order for my own store; people are used to prepaying for the goods and services they’re getting from other businesses – why should the goods and services I and my bookstore provide be any different?

2. The second thing to be careful about when delaying backlist orders is forgetting what was selling by the time you go to place a backlist order! 

If you’re wondering what I’m talking about, remember back at the beginning of this episode when I talked about a traditional buying schedule and mentioned how many stores place weekly restock backlist orders? In a system where you place fewer backlist orders farther apart, you do run the risk of forgetting something that sold a few weeks ago that may drop off a backlist report for some reason. In order to not do this, my advice is to continue to run your out-of-stock and what’s sold reports on a weekly basis and add those titles to your backlist order, even if you’re not going to be placing that order right away. You can continue to build your order up over time, and when you are finally ready to place a backlist order again, you can review the order and make sure you really do want all those books prior to placing.

Those weekly stock review and then pre-purchasing review steps should help you watch out for another issue that sometimes arises when delaying backlist orders.

3. This third thing to watch out for when placing delaying backlist orders is kind of two issues, but it’s really more like two sides of the same coin, and that’s either forgetting to put a book onto a backlist restock that is perhaps a deep backlist title that’s important to you personally or to have representation of some kind on your shelf, but it only sells once every 4 months or so, and yet you always want to reorder that one copy when it sells, but if you run an out-of-stock report only once a month, you might miss the fact that it’s sold and then forget to order it for when you need it next, OR you miss out on ordering a book that was for a time-specific opportunity, and by the time you DO place that backlist order, that time has passed (this happens a LOT with seasonal titles for specific holidays), and so now you have 10 copies of a Valentine’s Day title that have come in on March 1st.

Try really hard to avoid doing that, is my advice, BUT if that does end up happening to you, you can fix that problem by doing the third suggestion for helping with the cashflow issue:

3. Returns! Returns are exactly what they sound like – return books to the publisher – but as with all business-related things, there is a strategy behind it and also a couple of catches. 

Before I dive into all that, though, here’s how returns work: the bookstore pulls books off their shelves that are in like-new condition, usually 90 days or more after having received the book, packages them up in a box, creates an invoice or packing list or credit memo that lists what is in the box, what discount you received it into your point-of-sale system as, and what credit is owed to you for the book, and send it all back to the returns warehouse address, and then 4-6 weeks later (roughly), the store will receive a credit to your account that hopefully matches the credit you had calculated as owed to you, and you then ask the accounting department of that publisher to apply that credit toward any outstanding invoices for the store. 

Now to break that down a bit, first and foremost, you need to make sure that when you have opened a publisher account, you have opened up a returnable publisher account if you would like to do returns. Publishers will often have a different discount schedule for accounts that are returnable vs non-returnable, and yes, the non-returnable accounts will often have a higher discount. BUT, if you buy non-returnable, it does prevent you from having returns as a viable part of your cash flow strategy. This is not to say one is better than the other; they both just have different considerations. 

Also, please note that even if you are a returnable account, many publishers offer B2B discounts for YOU, which means if you’re purchasing a bulk order of books that you’re selling on to a customers, such as a school or business, since this is a guaranteed non-returnable order, the publisher will give you a higher nonreturnable discount on that bulk order so that you can still profit off of the sale, since you’re usually giving your own customer a discount for placing the bulk order with you in the first place, which means your own profit is even more limited off the sale. If you don’t know if a publisher offers a B2B discount for you to use, please just ask before you place your bulk order. 

But back to returns – once you’ve established that you have a returnable account, the next most important thing to know is that you ARE paying for the return shipping of these books to the publisher. So I recommend only pulling returns a few times a year so that you hopefully have enough books going back to the publisher to make the return worthwhile. My threshold is usually if I’m going to be receiving around $200-$250 worth of returns credit, that makes shipping the books to the warehouse via the cheapest method possible, often media mail, worth it for me. The strategy behind returns is to basically have a clear out a few times a year that makes room on your shelves for new books and that gets money credited to your account that you can use during the lean months to pay off any outstanding invoices. 

I usually do this in January, after the holiday season; some stores combine this with a yearly inventory and as they’re counting every single book on the shelves, they pull out the ones that match their returns reports. Returns reports are usually run to include books sitting on the shelves that have been there 90 days or more, as the average “turn” (short for inventory turnover) or time it takes to sell a backlist title is 90 days. 

As an aside, great turn is selling a book three times in 90 days, or roughly once a month for a quarter of the year. If a book has done that, you want to keep it on your shelves. If a book hasn’t done that, you might want to consider why. For instance, is it shelved in a place where it’s not getting attention and should you consider moving it? Is it the movie tie-in cover of a movie based on that book and that’s no longer in vogue, or vice versa, your customers only want the movie tie-in cover? Often when doing inventory or returns, I’ll keep a note on the side about random themed displays I’d like to do, like, “Books with dog in the title,” or “Orange book covers,” or “Books by someone named Jane,” and sometimes I won’t return titles that fit a display idea just to see if I can sell it off the random display. You may also want to keep some books on your shelves in order to make sure you have a certain kind of representation in a certain genre or category, or you may have ordered titles as remainders or nonreturnable at a steep discount for a certain holiday, and just keep those in stock until they sell through. But I digress. 

Here’s an average yearly returns schedule:

• In January, clear out all the stock that was bloated up to entice holiday season shoppers (which may mean you’re pulling titles are have been there less than 90 days, if you just got them in for November/December), and then keep the store lean heading into the spring, as January through April are historically the slowest browsing months for book retail (though it could naturally be different in your market if you’re in a tourist town for a specific season or if you’ve built up a robust events calendar to make up for a slow season, etc.)
• In April, clear out stock to make way for school summer reading lists and beachy or other vacation reads; and
• In August, consider another clear-out as the fall is traditionally when some of the biggest books of the year are published and you want to make sure to have room for all those new books.
• After August, you probably want to leave all the books there in case any of them sell through the holiday season, unless you’re returning fall holiday-specific titles, such as those for Halloween and Thanksgiving, etc.

You can probably tell why having a shipping/receiving manager, or an inventory manager who also does shipping/receiving, would be helpful! 

Now the important thing to watch out for when doing returns is that the credit memo that the publisher sends to you does reflect the discount you originally received for each book you’ve sent back. The reason this is so important is that you may have ordered a book at different times under different special promotions, and so the discount you’ve put down may not match whichever order and discount (most likely the most recent one) that the publisher has pulled for your account’s history with that title. Also, please note that because this is money credited to your account, the publisher cannot automatically apply that money to outstanding invoices, as much as that makes sense that you’d want them to do so, because even though it’s not cash in your bank account, it is a type of cash in a sense that does belong to your business, and so you have to dictate exactly what happens with it. This means you have to tell the publisher accounting department to apply that credit to whichever invoices you would like them to apply it to. It means you can save up that credit for future use, or you can use it all on the next invoice. Entirely up to you.

Most publishers will NOT send you a check for the amount of credit you have on your account at the end of the year; they will simply roll it over to the next year. I know of only one publisher who has ever sent me a check for credit on my account, and no, I’m not going to name it here in case they don’t do that anymore or in case mentioning it violates the Sherman Act for some reason, but all of that’s just to say that the point of returns is to accrue credit on your account that should offset the amount of money needed to pay an invoice, thus leaving you with more cash in your actual bank account, which is why this can be such an effective strategy for managing cashflow. 

Hopefully this episode either alleviated any worries you had about ordering directly from publishers or gave you some new ideas to consider implementing in your buying and returns store processes.

As always, 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!