Retail Margins & Trade Discounts Explained
By Brent Sampson | Outskirts Press
How much of your book's retail price goes to bookstores and distributors? Understanding retail margins and trade discounts can help you make smarter decisions about book pricing, author profits, and distribution.
Three Terms Every Author Should Know
Retail Price
The suggested price of your book to consumers. Sometimes called the cover price or list price, it provides the starting point for calculating trade discounts.
Retailers may choose to sell your book for less than its suggested retail price.
Trade Discount
The percentage deducted from your book's suggested retail price when it is sold through wholesale and retail distribution channels.
The discount helps compensate wholesalers and retailers for distributing and selling your book.
Retail Margin
The difference between the price a retailer charges for your book and the amount that retailer paid to acquire it.
Retail margin depends on the retailer's actual purchase cost and selling price.
How a Trade Discount Works
Suppose your paperback has a suggested retail price of $20.00 and a trade discount of 55%.
The $11.00 trade discount is the amount allocated to the wholesale and retail distribution channel. How that amount is divided depends on the arrangements between the distributor, wholesaler, and retailer.
The remaining $9.00 is not your author profit. Printing costs and applicable publishing or distribution expenses must still be accounted for before author earnings can be determined.
What Trade Discount is Right for Your Book?
Outskirts Press allows authors to select a trade discount between 40% and 55%. The right choice depends on your distribution goals, retail pricing, and desired author profit.
Online-Focused Distribution
A lower trade discount leaves more of the retail price available to cover printing costs and author earnings.
May be appropriate for authors primarily focused on online sales rather than physical bookstore stocking.
A Middle-Ground Approach
A 50% discount provides more room for wholesale and retail compensation than a 40% discount while retaining more revenue before costs than a 55% discount.
May be suitable for authors seeking a balance between distribution opportunities and pricing flexibility.
Bookstore-Focused Distribution
A 55% trade discount provides terms that are generally more attractive to physical bookstores and their wholesale suppliers.
Recommended for authors actively pursuing bookstore placement, particularly when combined with a returns program.
Important: Outskirts Press requires a Trade Discount Acknowledgment form when an author selects a discount below 50%. A higher discount can improve the commercial terms available to retailers, but it does not guarantee that a bookstore will stock your book.
Trade Discount is Not the Same as Retail Margin
The trade discount is calculated from your book's suggested retail price. The retailer's actual margin is determined by the difference between what the retailer pays for the book and what the retailer ultimately charges its customer.
Example: Calculating Retail Margin
Suppose a bookstore purchases a book for $12.00 and sells it to a customer for $20.00.
Retail margin = ($20.00 - $12.00) / $20.00 = 40%
If that bookstore discounts the selling price to $18.00, its gross retail margin decreases to approximately 33.3%, assuming its acquisition cost remains $12.00.
This is why wholesalers and retailers evaluate trade discounts carefully. The available margin must help support their operating expenses and provide an opportunity to earn a profit.
What Else Matters to Bookstores?
Competitive Trade Terms
Bookstores generally prefer wholesale terms that provide sufficient margin to support their business. A 55% trade discount is commonly recommended for authors pursuing physical bookstore placement.
Returnability
Many physical bookstores prefer books that can be returned if they do not sell. A returns program can reduce a retailer's inventory risk, although returns may create financial obligations for the publisher or author.
Reader Demand
Bookstores also consider customer demand, professional presentation, genre, pricing, and the likelihood that a book will sell. Favorable distribution terms alone do not guarantee shelf placement.
How Trade Discounts Affect Author Profit
Your book's retail price, trade discount, and production costs are closely connected.
Increasing the trade discount reduces the portion of the retail price remaining after the discount. To maintain the same author profit, you may need to increase your suggested retail price.
However, setting a higher retail price can make your book less competitive with similar titles. The goal is to find a balance between an attractive retail price, appropriate distribution terms, and reasonable author earnings.
Choose a Discount That Supports Your Goals
Primarily Selling Online?
If your primary goal is online availability rather than physical bookstore placement, a 40% or 50% trade discount may provide an appropriate balance between distribution and author profit.
Pursuing Bookstore Placement?
If you plan to approach physical bookstores, a 55% trade discount combined with appropriate return terms generally offers more competitive conditions for retailers.
Remember: There is no single trade discount that is best for every book. Consider your genre, intended audience, production costs, retail price, and distribution goals before making your decision.
Make Informed Decisions About Your Book
Understanding trade discounts is just one part of establishing an effective book pricing and distribution strategy. Explore how Outskirts Press helps authors make these decisions.
About the Author
Brent Sampson is the author of Sell Your Book on Amazon and The Book Marketing COACH . As the founder of Outskirts Press, he has helped thousands of independent authors navigate writing, publishing, distribution, and book marketing.