Many new self-publishers don’t quite understand how discounting works in different parts of the book distribution system. This topic is vital to understand if you expect all your hard work to result in profitable self-publishing and a viable business enterprise.
On a title by title level, it also helps you determine what kind of book to publish, and how to produce it.
As a self-publisher, you are a retail product manufacturer. You are supplying a unique product to the market and it’s up to you to set the terms on which you sell your product.
Depending on how your book is produced, you may have more or less flexibility in how you deal with the rest of the chain of distribution. Here are some scenarios:
Skip the Book Distribution System
You, as the manufacturer, sell directly to the end user. For example, real estate investor John T. Reed only sells his books from his website. He has no need for a discount schedule because he is outside the chain of distribution. This method has some advantages, too. You capture 100% of the sales price since you don’t have to share it with wholesalers, distributors, jobbers, or retailers. You also can capture the names and email addresses of everyone who buys a book, helping you build an asset that’s very valuable when it comes time to offer other books or services to the same market.
The disadvantage of this method is that you have to do all the work yourself or pay for fulfillment through a fulfillment service. Also, some people may be reluctant to buy from a self-publisher’s website, trusting big companies like Amazon to protect them and offer services like bundled shipping, free shipping, returns, and other amenities. In addition, you will have to do all the marketing for your book, and any interruption you have on your website hosting will cause a financial loss from lost sales.
Use a Print on Demand (POD) Provider
Most print on demand (POD) suppliers restrict the size of your discount, demand minimum discounts, or don’t allow you any say at all in discounts. Other suppliers, like Lightning Source, allow you to set your own discount within limits but offer just that one discount to every retailer or jobber who buys your book from Ingram—the world’s largest book distributor and the parent company of Lightning Source and IngramSpark. So if you set your discount to 20%—the minimum allowed at Lightning Source—bookstores won’t buy the book because they need a minimum 40% discount. But if you set your discount at 40% (the minimum at IS) to appeal to bookstores, and then end up selling most of your books on Amazon or BN.com, you will have given up 20% and gotten nothing in return.
Use Offset Printing
If your book has to be offset printed (color books printed overseas, odd-sized books, and books that can’t be produced by POD methods) you will be your own distributor, unless you sign with a distributor (see the next option). That means that you’ll have to come up with a discount schedule that applies to retailers, a separate one for libraries, and other terms for special sales or direct sales. In addition, some retailers will demand steep discounts, up to 55% off your retail price, and you’ll have to agree to take returns of unsold merchandise. You will also be responsible for shipping books to retailers, effectively reducing your profit margin even farther.
And, as it should be clear by now, you will spend a lot more of your time handling all the details of wholesale selling, including paperwork, invoicing, tracking payments, packing and shipping books, and all the other minutia of doing your own fulfillment and distribution.
Sign With a Distributor
In this scenario, your book is of wide enough interest and large enough potential or has a proven history of sales that enable you to get a distributor to take over supplying your book to retailers.* Distributors will put your book in their catalog, their sales reps may help promote the book to booksellers, and they will deal with the bookstore bookkeeping, returns, shipping, warehousing and may even offer fulfillment services for single copy sales. The downside to having a distributor is what you have to give up: usually 65% or more of the cover price. Let’s say your book costs $10. You will receive $3.50 for each book sold after giving up 65%. If the book cost you $2.00 to produce, your gross profit is 15%. This is not significantly better than the royalty offered by most trade publishers, and it will take you a lot of work and risk to earn it.
This option only makes sense if you have a book that you think you can promote nationally, and for which you realistically can expect to have sales of 5,000 or more copies per year. Distribution also becomes a more viable option when you start to have more books in your product line. If you have 5 books, you might find distribution an advantage, because if any one of them sells well it will help the others get a foot in the door.
*Some distributors that will take on single-book publishers if the title is commercial:
Profitable Self-Publishing Means Knowing Your Buyer
All this is to say that profitable self-publishing starts when you plan on publishing your book. Think about the eventual buyers you will market to. Where do they buy their books?
Knowing this can help you make smart decisions about how you approach dealing with retailers and, consequently, how you choose to manufacture, distribute, and discount your books.
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