What bookstores want….and why indie authors should learn to give it to them. Part II.

                                                                             Via: Flickr

In part one of this post I mentioned that things had changed regarding bookstores and how they got their product. This is true, and it’s probably the biggest thing to happen to the publishing business this year.

But you would think that nobody had heard about it.

Actually, they may have, but simply lacked the knowledge of the industry to recognize the implications. Not their fault, one can always catch up. Many of the booksellers out there are still unaware of these changes. The ABA is doing its best to fix this by conducting training seminars with up to 500 bookstore operators at a time. At the Winter Institute this past February they went over all of the recent changes with an emphasis on indie publishing. So the word is getting out and it’s time for the indie authors to educate themselves so they can take advantage of it.

A little history first.

Way back in time, about eight or nine months ago, the bookstores were using the same system they had been using for years to find and order books for their stores.  That system still exist today, but it has options now, options that came about this past spring.

Under the old system a bookstore owner would hear about a book through the publishing company’s rep, the publishers catalogs, small press flyers and brochures, fellow bookstore owners, advertising and through the established distribution system. There were also the industry trade publications such as Publishers Weekly. Bookstores would then contact their distributor and place their orders. Each store had its own relationship with the distributor in regards to discount, returns and credit. They could order at will, knowing that if the books didn’t sell they could be returned for full credit.

Self-published or small publishers could not compete with this as the bookstores could not order their books at a competitive discount. The bookstores couldn’t afford to take them on, they had to stick with what books gave them the highest profit margin. They were also stuck with the book if it didn’t sell as at that time there was no return option. This lead to self-published and Print on Demand (POD) books developing the label of being substandard and the bookstores refusing to carry them. The advent of the e-book has done much to do away with this stigma, but there is still a ways to go.

Back then if a bookstore wanted to order a self-published POD book  they would be lucky to get a 5% discount from the distributor with no return option. It’s not hard to see why they refused to do so knowing they could get a good quality trade published book, writen by a known author, from a Big 5 publisher at a 50% discount. They could do this on credit and with a return option to occupy the same shelf space. From a business standpoint this was not a hard decision.

This is what a bookstore needs from a publisher if they want the book to be on their shelf.

            -The title needs to be listed in their existing wholesalers  catalog.

            -It needs a discount of 45%-55%. The higher the better.

            -It needs to be priced correctly.

            -It needs to have a return option.

What exactly is discount? The discount off the retail price should, at a minimum be 40%. For example: If a book has a retail price of $20.00, the bookstore has to be able to buy it from the publisher (or indie author), or the wholesaler (Ingrams), for a maximum of $12.00. That allows the store to make a profit of $8.00 and thats what they need to keep the doors open.

You will also need to have your book priced competitively for its size and genre. Average pricing today falls about here:

            – $7 to $8 for mass market paperback

            – $14 to $18 for trade (6×9) paperback

            – $28-$30 for hardcover

Until this past spring these things were out of reach of the indie author. So what happened in April? Big changes in how the wholesalers and distributors handle self-published and POD books.

POD has changed the whole dynamic of the print trade.

But before we go there let’s talk about Createspace, before the big change.

Createspace:

Most people I hear complaining have their book published in paperback with Createspace, yet they don’t see the bookstores willing to stock it and they don’t seem to sell many books except through Amazon. So they complain that the bookstores are against indie authors and that they won’t sell their books because they hate Amazon.

Well yes and no, they don’t hate indie authors, but they do have a problem with Amazon. It’s just not the problem everyone thinks it is.

It has to do with the discount they get from Createspace.

As I said before, a bookstore, in order for it to survive, has to have a 40% or greater discount on any book it buys in order for it to earn a place on their shelves. Just think of 40% as the magic number.

Createspace requires that the indie publisher give them a 60% discount in order for them to place their book in its Expanded Distribution Channel. This means Createspace deducts 60% of the books cover price, plus printing costs, before paying the publisher. Createspace then places the book into three outlets.

Outlet one is called CreatespaceDirect, this simply means that verified retailers (sellers of books  who have gone through the process of registration), can order your book from the Createspace e-store with a discount in the 25%-35% range. Since this is well below the magic number of 40%, and the e-store is not a standard supplier, it’s no surprise that few books are actually sold this way. The buyers saw those numbers and they remembered them.

Outlet two is referred to as Bookstores and Online Retailers. This is nothing but a link to Lightning Source, which is Createspaces largest competitor and the company Amazon had a retail war with not too long ago. Now they are the central force behind their “Expanded Distribution Channel”.

This is the point where most self-published authors got lost. They saw that 60% discount that Createspace demanded in order for them to sign up and they thought that’s what was being passed on to the bookstores. After all, 60% is way better than the 40% I claimed was the magic number, right?

Err, not exactly.

The only party involved that saw that 60% discount was Createspace. Nothing says they had to pass on the full 60% to anybody. When Createspace handed your book off to Lightning Source it did so with only a 45% discount. They kept 15% for themselves.

Okay, you might be saying, I still had 45% left, so I’m still above the magic number. What’s the problem?

Lightning Source is primarily a printer. They are owned by Ingrams, the largest wholesaler in the business. Lightning Source will print your books for a calculated fee and then hand them off to Ingrams (and their other partners) for sale to bookstores and other retailers. For this service Ingrams takes an additional 15% bringing the final discount down to 30%. This is the number the bookstore owner saw whenever they looked up a Createspace book.

30%.  Well below the magic number of 40%.

This is why the bookstores refused to carry Createspace books. They simply couldn’t afford to do so. Sure your book was available to be ordered, Createspace didn’t lie to you, it would just never be stocked. If the reader insisted on getting the book from the bookstore the store could order it for them. But the store was taking a chance every time it did so. If that customer never showed up to get the book they ordered the store was stuck with it. It would’ve then had to go on the shelf and hopefully sell since Createspace did not except returns. Most likely the customer would not wish to wait to get it from the store anyway, they’d instead go home and just order the book from Amazon.

Which is what the numbers say was going to happen anyway. It’s almost like someone set it up that way on purpose?!?

We’ll come back to that later. Moving on.

The third outlet is listed as Libraries and Academic Institutions. This is another link, this time to Baker & Taylor. B&T are the distant second largest wholesaler in the US after Ingrams. Ingrams is the primary supplier to Barnes and Noble while B&T was the primary supplier for Borders. (You can see why they went from second to distant second) B&T has its own POD service called Textstream. Textstream, for all practical purposes, is basically worthless. The good news is that your book does not get printed by Textstream. Instead, copies of your book are provided to B&T from Createspace with B&T acting as a wholesaler only.

There is of course a catch, several of them actually; B&T are getting the same discount as Lightning Source/Ingram. The same discount that makes the book unstockable to retailers. They also require a Createspace ISBN so B&T can link the book to its accounting system. The kicker is that unless B&T keeps your book in stock (and that would be a negative) they won’t even bother to list it in the publications they send out to retailers. So librarys are not getting better priceing than the indie bookstore.

This is what you get for the $25 you pay to get into Expanded Distribution. Using our imaginary $20 book from earlier it looks like this;             

Cover Price: $20

Publishers Discount: 60%

Cost to print: $6

Authors Profit $3

Createspace cut $3

Ingrams cut $3

Bookstore profit $5 (at a 30% dicount)

Keep in mind that with Createspace you move your book through separate channels. Amazon is one channel and the Expanded Distribution Channel is another. If you were selling copies through Createspace’s Expanded Distribution Channel you would see the required discount of 60%. Don’t be confused by this. Remember, the discount for books sold to Amazon from Createspace is still 40%. Amazon gets the better deal as nobody else is taking a cut of that percentage.

Selling through the Amazon channel is a whole different challenge in itself.

By selecting to sell your book via the Amazon channel you can set your own price. Amazon then determines the discount. (up to 45% is the average reported) Unfortunately, you have no idea what kind of discount Amazon is going to give your book when you publish with them. You have to pick a price, publish, and then wait and see what the actual retail price is when it appears on Amazon. The only way to hit your target price, the one you want Amazon to actually charge, is to publish the book with the retail price you want, wait and see what discount Amazon assigns, and then adjust your price to hit the retail price you desired. This gets you to the price point you were after, but it doesn’t change the discount.

With the EDC if Amazon receives an order for your book from a bookstore they will place that order with Createspace first for obvious reasons. Only if there is some issue that can’t be overcome will that order go to Lightning Source. So opting out of expanded distribution will not really hurt your print sales at Amazon, and you’ll save the $25.00 fee, which I never really understood in the first place.

So, not quite the picture most indie authors have when they think of Createspace. But, as I mentioned, there have been some big changes. Not to everything though, there are still some things in place that need to be covered first.

This post is about getting your book into bookstores so it makes sense to consider things from their point-of-view. This my own way of looking at this so please just follow along. For the sake of this argument we’ll assume your book is high quality and comparable to any trade published book out there.

You have to put yourself in the bookstore owners shoes. For simplicity’s sake let’s say he divides his inventory by profit margin. The most profitable books go into the green zone. Medium profit books go into the yellow and low into the red. Green zone books sit on the table at the front of the store and in the window. The staff promotes them to the customers regularly. Medium profit books sit on the shelf, cover-out, or on the staff recommendation shelf. Red books sit on the remaining shelves spine out. 

Obviously you want your book in the green zone, but you also don’t want to give it away in order for it to be there. Createspace doesn’t offer the tools to do this, if anything it keeps you firmly in the red zone or not in the store at all. So let’s look at some alternatives.

The best alternative to Createspace is Lightning Source.

Lightning Source:

 How do you get that extra margin that will put you in the green zone? Publish with Lightning Source AND Createspace. Use Createspace to sell to Amazon and Lightning Source to reach everyone else.

Contrary to what you may have read you CAN publish the same paperback or hardcover with Createspace and Lightning Source at the same time with the same ISBN. Sales will be tallied together.

There are two major advantages for doing so. One, Lightning Source has a larger distribution system, and two, they let the publisher control the price and the discount. With Lightning Source you can set your price at whatever you want (above cost) and your discount anywhere from 20% to 55%. You can also change it at anytime if you wish to. This added control lets you fine tune your way into the green zone.

Lightning Source is owned by Ingrams. It’s important to understand that Lightning Source is primarily a printer while Ingrams is a wholesaler.  Lightning makes the books, Ingrams sells them. Whatever discount you set up with Lightning Source gets passed to Ingrams without them taking a cut. Just because you see another name in the process does not mean they are getting a piece of the pie.

We need to stop and talk about IngramSpark for a moment. IngramSpark was set up by Ingram as a alternative to Lightning Source making it easier for newly self-published authors to sign up with them. Lightning Source is designed to deal with professional publishers and can be confusing for people not familiar with publishing  lingo. Unlike Createspace, they offer little help with the process, while they have templates and manuals to aid you they expect you to know what you’re doing as a publisher from the start. Their reps, while great in my experience, will not hold your hand and walk you through the steps needed to get your book out through them. So, Ingram came up with IngramSpark.

Let me say right here that I advise against using IngramSpark. For a few reasons.

Publisher control over discount is the major reason for using Lightning Source.  IngramSpark however chose to go the way of Createspace and lock everyone in at a standard wholesale discount of 55%. The reason for this  we’ve already covered; retailers need a good standard discount before they will stock a book. They also understand that  new publishers (read indie authors) are mostly ignorant as to how discounting works and will choose the wrong percentage, killing any chance they had of moving their book into the stores. They have no doubt seen a number of new publishers choosing a 40% discount and then calling to see why they have moved zero books into the stores. While this is most likely an attempt by Ingram to save the new publisher from themselves, I find the lack of control over the discount a deal breaker.

The second thing would be the lack of seeing a proof copy before publication. This I find very odd. I’m told this is being fixed but I have not heard or read any verification yet, probably due to the fact that I haven’t checked. A digital proofing option is being offered similar to Createspace, but I have not seen it. (Lightning Source charges a fee of $30-35 (includes shipping) for a proof copy and their quality is very good. It’s to the point that if my book looks good from Createspace, which charges much less for a proof copy, I trust the book to look good at Lightning Source.)

Third: The IngramSpark confidentiality clauses sound like they were written by lawyers from Author Solutions. When signing up for the service, under threat of legal action, you must agree not to disclose its inner workings to anyone else. Really? For a service that you want people to sign up for you first forbid them to spread the word about it? Anyone familiar with internet commerce would call this self-sabotage, but since they are forbidding us from talking about it I guess we’ll just stop here. So, in short, I’m saying no thank-you to IngramSpark.

So what is the optimal way to not only get into the bookstores but also into the green zone?

Simple, take advantage of Createspace AND Lightning Source. The battles they have had in the past are largely over. With the growth of e-books taking an ever increasing slice of the pie both companies are setting themselves up to adjust with the constant changes taking place without wasting time fighting one another. For the indie publisher however, Lightning Source offers the only way to change with the changes.

If you remember the breakdown of Createspace you’ll quickly see the advantage of Lightning Source when looking at this;              

Cover price: $20

Publishers Discount: 55%

Cost to print: $6

Authors profit: $3

Ingrams cut $3

Bookstore profit $8 (at 40% discount)

The cost to print is determined by your choice of book size, number of pages, cover type, etc and these prices are set by Lightning Source. Ingrams cut is also a constant and usually falls in the 15% range.

 Everything else is determined by the publisher!

Notice the authors profit, it is the same as with Createspace. What’s different is the discount offered to the stores and the bookstores profit. We’ve cut out an unnecessary middleman to the tune of 15%. This book is attractive to the bookstores as they can make up to $8 in profit where before they were limited to $5. In other words they can afford to stock it on their shelves!

This difference in discount is what makes a book land on the shelf of an indie bookstore. Before the changes, and some would say still today, it’s as simple as that.

But as I mentioned, things have changed.

Under the old system wholesalers  would stamp a big scarlet P on POD books and segregate them into their own little category. It made them easier to ignore, how nice of them. But they have since saw the light and changed their process dramatically.

B&T have now removed the scarlet P and placed all books in the same general catalog. They also changed their discount policy. POD books can now be had for as much as a 46% discount to bookstores with good credit. They’ve also changed their returns policy. A bookstore can now return one book for a full credit if it doesn’t sell.

This is a HUGE change. POD books went from 5% discount and no returns to 46% discount and full returns. The self-publisher is now on even terms with the Big 5 publishers.

Ingrams (which owns Lightning Source) saw this and quickly changed their policy’s as well. They even went one step further and announced IngramSpark.

So now there is nothing, from a purely business point of view, to discourage the bookstores from ordering and stocking a POD book. They can order one book at a time and when that book sells they can order another, usually getting it the next day. They can take a chance on a book without worrying about having to eat the cost if it doesn’t sell. This is  great for the bookstore owners as they can now operate under less restriction and at a much leaner cost. This frees up cash flow and that’s always good for a business, it gives them room to try new things and expand.

What’s also good for business is keeping as many hands as possible out of the profit pie. By eliminating unnecessary middlemen and streamlining your distribution system you can raise your profit margin a great deal.

So with these changes isn’t it just easier to go with Createspace if they are offering such a good discount now?

Maybe.

I’m not a member of the ABA and I have not attended their seminar for indie bookstores where they highlight all the changes that have been made. From outside I can only speculate. B&T were Ingrams main competitor before Borders folded. They may have been feeling the pain of that loss  and were looking for a new sugar daddy. If they partnered up with Createspace and Amazon I say more power to them. It can only help the indie authors and indie stores. Obviously they have reworked their discount schedule so that books published through them are more attractive to the stores. I have yet to see the details. What I do know is there has been no change at Createspace when signing up a new book, they still control the discount and indirectly the price and profit of your book.

For me, I still like the greater control of Lightning Source. They offer more options and better channels than what I’m seeing with Createspace and the EDC, their distribution is farther reaching than Createspace, so I’ll be sticking with them for those reason and a few more beyond what I’ve mentioned here.

To recap;

-Publish with Createspace first. Use your own ISBN that you bought from Bowker under your publishing company name. DO NOT opt into expanded distribution.  Watch for the discount they apply at Amazon and adjust the price until you get the retail target price you were after. This will handle sales through Createspace to Amazon. Amazon will get your books from Createspace at a 40% discount. Amazon may discount your book beyond that and that’s fine, it won’t change your profit at all.

-Publish with Lightning Source. Set your discount at 55%. Use the same ISBN that you used with Createspace. Again, play with the pricing until you have your target price and the best discount you can offer the bookstores while still leaving you a profit you are happy with.

 Note: Createspace Terms and Conditions forbids you from listing a price there that is higher than a price you’ve set elsewhere. So make it the same or as close to what you have it listed for without going under. Even if it’s by a penny. Actually, you better make that a nickel as Amazon rounds down while B&N rounds up. Don’t ask me why, it’s a mystery.

The goal is to make your book  that much more attractive to the indie stores. (You can also do what is called short discounting, but that’s a whole other post) Take advantage of every program  Lightning Source offers, even if you’re not ready to use them right now, you may in the future. It doesn’t hurt to sign up for them. Lightning Source has a bigger distribution system than is offered by Createspace, it’s to your advantage to have them handle all your sales outside of Amazon.

You’re probably thinking that this sounds like a lot of work just to get that extra discount and it is. The reason you need it is that the Big 5 still have an advantage; offset printing.

Offset printing is used for large volume orders. Currently at Lightning Source you’ll need an advance order of 1500 paperback or 750 hardcover books to warrant an offset print run. Offset printing can save a good percentage off the cost to produce depending on the size and page count of the book. Big 5 publishers produce the majority of their books via offset printing. Since the offset printed book is cheaper to produce than the POD book the Big 5 have an advantage over the self-publisher right from the start. To overcome this the self-publisher needs to be able to make up the difference in that cost by being able to adjust their price and discount. Only then will they make their way into the green zone. 

Some other things to consider:

-Lightning Source offers Hardcover’s, Createspace does not.

-Ingrams offers bundled content.

-Ingram distributes to over 195 countries.

-Lightning Source offers multi-volume sets including e-books.

-With Lightning Source your books are available through the Espresso book machine.

-Lightning Source has facilities in the UK, Australia, Germany, Brazil and France.

-Lightning Source allows you to publish a paperback or hardcover at cost for distribution to libraries. Ingrams has one of the farthest reaching inroads to library’s.

So visit the Lightning Source website and learn all you can. Check out Ingrams and Baker & Taylor. You’re not just an author now, you’re a small businessman, you’re a publisher and the playing field is level. It’s worth your time.

It is?

Yes, and next time I’ll tell you why.