|
DEFINITIONS
Retail margin is basically the difference between your book’s
wholesale price and your book’s retail price. For example,
a book with a cover price of $10 and a wholesale price of $5 has
a 50% retail margin.
Wholesale price is the cost of your book to a retailer. To use
the same rudimentary example, a book with a cover price of $10
and a retail margin of 50% will be sold to a retailer for $5.
Retail price is the same as cover price or
selling price. This is the cost of the book to the end
consumer (the reader). The retail price is typically printed on
the cover of the book and also “embedded” within the
barcode on the back. For example, a book with a wholesale price
of $5 and a retail margin of 50% will have a retail price of $10.
As you can see, retail margin, wholesale price, and retail price
are interconnected. By having two figures, the third can be calculated.
The fourth definition to be aware of is the trade discount,
which is the percentage off the retail price that a wholesaler
or distributor pays for your book. Since the retail margin
is a portion of the trade discount, the trade discount always
exceeds the retail margin. Distributors typically expect between
50% - 70% in order to provide an acceptable margin to the retailer.
MAKING DISTRIBUTION WORK FOR YOU
It should come as no surprise that the amount of distribution
your book enjoys rests largely upon its trade discount. Generally,
the higher the discount, the greater the distribution.
Think about it - distributors want to make money, too. So do
retailers.
While your book's trade discount is but a piece of your pie (albeit
a big piece), it is the entire cake for distributors and retailers,
who together must split the take. The greater the number, the
greater incentive they have to distribute your book, sell your
book, and market your book, etc.
The proper trade discount depends upon each author's intentions,
and can vary from author to author just as readily as from book
to book. Obviously, the higher the retail margin, the higher the
cover price, so authors interested in maintaining the lowest cover
price possible will often opt for a lower retail margin.
Conversely, those authors who long for the best distribution
possible will elect a higher trade discount, even though their
cover price will increase accordingly (or their profit will decrease
accordingly). Non-fiction or niche-markets are less affected by
higher retail prices and greater distribution is often advantageous
in finding those markets.
Often, the author will have little to no say in what trade discount
to offer for their books -- its whatever the distributor mandates.
Trade discounts can be as low as 20% to successfully get listed
on Internet retailers like Amazon.com, who manage to make a profit
with such low margins through EDI (electronic data interface)
with distributors like Ingram and on-demand publishers like Outskirts
Press.
By comparison, trade discounts can be as high as 75% - 80% when
dealing with a niche wholesaler, or when attempting distribution
for a book that does not have a proven market. In these cases,
the distributor may be padding the coffers a bit in anticipation
for a "harder sell" and perhaps, also, in preparation
for offering an increased retail margin to close the deal.
INDUSTRY STANDARDS
Industry standards for retail margins are difficult to define
because, ultimately, it comes down to negotiation between all
parties involved. Publishers have the power to negotiate with
distributors, who have the power to negotiate with retailers,
who have the ability to negotiate with the reader, but the typical
trade discount is around 55%, which allows for a typical retail
margin of 40%.
Publishing-on-demand is removing some of the participants in
this little dance, and as a result, the same piece of pie is being
divided among fewer people, resulting in more money for the remaining
players (especially the author).
|
