Subscribe to RSS 2.0The real cost of returns
Returns are bad and stupid and pointless: yes, we all understand that. But I got to wondering what the real cost of returns is, when Rob posed the question to me: are returns Snowbooks' main problem?
See, returns cost more than just the reversal of the sales value. There are costs associated with processing them. I have calculated that the three main groups of cost (cost of pulping - 6%; cost of some arbitrary charge from our distributor for all returns over 10% - 1.5%; cost of realising the value of the stock once the book is pulped) comes to £1 per book returned. That is a lot of money: more than the cost of printing the thing. Here are some quick Snowbooks' numbers (MAT last 12 months) to put the thing into perspective*:
Average unit cost (how much a book costs to print): £0.83 (this includes 4 colour books)
Average unit sales value £2.55
Average unit gross contribution (sales less cost of print, other title costs and royalties): £0.85
So the cost of £1.00 of a returned book is massive. Last year (our annus horribilis when lots of Xmas 2006 stock came back) the total bill was £42k.
This doesn't include some other, more subtle costs, either. There's the cost of paying royalties on stock you think you've sold, only for it to be returned (and yes, we do include a quite hefty reserve against returns which still isn't sufficient to protect us, oftentimes). There's the distribution cost of shipping the stock for sale in the first place. There are the marketing charges for promotions which are one off charges, not dependent on whether books sell or not. There's the externalities: the cost to the environment of carting books around, of producing them and destroying them a matter of months later. There's the cost to my mental health of trying not to let my brain explode in fury every time I get a returns request.
In summary: our industry is astonishingly backward for being the last bastion of sale or return. And returns are Very Bad. And yes, returns are Snowbooks' main problem (as opposed to low sales, for instance) - sure, we could do with selling more books, as every publisher would believe, but returns have a spectacularly high cost that is much greater than a simple reversal of the original sales value. Thankfully for us our returns rate is much lower than it has been in the past, but that's not the point. Any money spent on returns is money down the drain, and that is unacceptable.
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* We don't hold with corporate secrecy, having had our fill of it in previous jobs. You're most welcome to know our figures and stats. What are you going to do with them that could possibly threaten us - somehow use that data to set up an identical company? Go on, I dare you.
Comments: 8
So what's the alternative? I've read scare stories about stores ordering fewer new releases if they're only available on firm sale. You're right that there are some absolutely idiotic wastes of time thanks to sale-or-return (including absurdities where stock gets recalled one week and sent back to the store a few weeks after), but I'm not sure how booksellers could function on firm sale only - though I'd be more than happy to see individual books treated as items of worth rather than individual bricks being used to build some pointless display.
Posted by: RobC on November 6, 2008 03:33 PM
I'm just in the middle of calculating how few books I could sell at firm sale to make the same money as now. It's not many, actually, which makes me think that the POD model is not as small scale as it seems.
And only this week we had 8 instances of individual stores ordering and returning the same book - in the same week.
Booksellers would function on firm sale the way every other retailer does: by learning how to forecast and manage stock. You don't get to return lettuces if you buy too many or they don't sell, so it tends to focus the mind. And at least books don't go brown and mushy a week after they're produced (ours don't, anyway).
Posted by: Em on November 6, 2008 03:42 PM
I think this brings us back to books being the packaging for the words inside. Which is the same as broadcast TV packaging the content being broadcast, CDs and music, DVDs and films ...
The content and the delivery method will become further and further divorced, surely.
Not that I'm willing the death of printed books - far from it - like RobC, I'd rather see books becoming items of worth.
Posted by: DavidP on November 6, 2008 04:41 PM
One questions really.
What is the cost of the return to a bookshop? (If they did the same type calculation as you.) Until it costs them the same as it costs you - they're still going to insist on it.
The extra problem is that you've got capital tied up in the book while is sits on their shelf and they don't have any.
IMHO any discount level over 50% should be a firm sale. Under 50% they're taking the risk - over 50% you're taking the risk. I'm guessing that with most of your books - that would suddenly be firm sale for most orders. Of course the retial industry wouldn't stand for it. Why should they absorb more (any) risk.
M
Posted by: Matthew on November 6, 2008 05:10 PM
On the note of books becoming things of beauty, we have nearly sold through our limited edition (500 copies only) of The Affinity Bridge. That was firm sale, and £30 rrp, and it's gone down very well. I wonder if there's a future where the paperback is superceded by the ebook version, but there's still room in the market for special, exclusive editions like this?
Posted by: Em on November 6, 2008 05:36 PM
The whole idea of returns is still pretty new to me, yet it scares the bejesus out of me when I consider all those copies of The Reef sitting on the shelves of Waterstones could be on the way to me.
It is possible to make a going concern with firm-sale: PS Publishing does pretty well - Peter & Nicky Crowther are in their tenth year of business: they publish strictly limited hardbacks and their publishing schedule is huge - 30 books this year, I think.
POD still has a stigma attached to it, which is why I prefer the term "digital print" and I stick to a run of x amount of copies: I don't bother with 1's or 2's - for me it just isn't viable.
I like the notion of a sliding scale when it comes to retailing: discounts 50-60%+ = firm sale; less than 50% and it's sor.
Therefore, the retailer could - for instance - order 100 copies firm, with a further 100 copies sor.
That would suit me down to the great wonderfully.
Posted by: Christopher Teague on November 6, 2008 06:27 PM
This is a very ignorant question, so feel free to ignore it.
Could you not just put all the returned books in a storehouse somewhere, instead of pulping them? Would that be cheaper? There might come a time when there's a demand for the book, and surely the cost of storage would be better than the cost of doing a new run.
I don't quite understand the purpose of pulping, though, so again, very ignorant question.
Posted by: KatharineC on November 10, 2008 01:46 PM
It's a totally sensible question. The answer: the reason we pulp returned books is that our distributor only charges 6% of sales value. If we want them to process them back into stock (to unpack them, scrape the promotional stickers off, repalletise them and shrinkwrap the pallets, and store them back on the racks) they charge more. This tips an already unprofitable exercise into a dramatically unprofitable one.
I read somewhere once that 80% of all books printed in the UK end up in motorways. Once they're pulped, the pulped paper seems to have just the right amount of spring to mix into tarmac. Now isn't that a happy thought.
Posted by: Em on November 10, 2008 04:37 PM