Ask The Experts – Online Book Sales

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Topics Discussed Below Include:
Online Re-sellers Discounting
Amazon vs. Amazon Canada
Hawaii – Getting Amazon to Pay for Shipping Costs
Amazon and Online Vendors Changing Book Prices
Listing Collections for Free
Whether to End a POD Arrangement and List the Book on the Amazon Marketplace
Structuring an eBook on Amazon.com
Kindle SRP and Author Royalties

Question:

We currently have a relationship with Baker & Taylor, who buys our books at a 55% discount to retail price. They are our only distributor, though we are starting up in Ingram soon. We’ve noticed a curious thing on Amazon, which are these huge resellers in the marketplace, who sell millions of different titles of new books; we estimate one of the largest earns $300,000 a year in profits doing this. The only way they could do this, I believe, is by bidding on books at extremely low margins and then drop-shipping from one of the distributors, as they would not hold tens of millions in inventory to make a paltry $300k a year.

On some of our books, they are discounting new copies at 50% of retail. Our understanding is that Baker/Taylor only discounts 40% to their customers, making the 15% spread. Also, sometimes Baker/Taylor sends us “stock offers” where they will order additional books if we give them another 5-10% off. I have a number of questions:

1. Do some BT customers get deeper discounts than 40%? Does Baker/Taylor sometimes discount to all of their customers to move aged inventory, even if that means selling books at a loss?

2. Are the stock offers Trojan horses, in the sense that they first ask their customers to indicate which books they would like additional discounts on, and then ask the publisher for those discounts. Or, alternatively, do they pass along the stock offer discount to the customer?

3. We are wondering how these resellers can sell our books at 50% off and drop ship for a mere $3.99 in shipping from Amazon.

Answer (09/2013):

1. A few accounts will get more than 40% because they have centralized warehouses or other factors that make things easier/cheaper for B&T, but the best they offer is 42 – 43%. No, they do not sell aged inventory, they return it to the publisher. They do not have to sell books at a loss, they return them.

2. It is the customer that gets the discount, not certain books. Occasionally, they will offer an extra point for an entire order if the bookstore/library hits some sort of milestone, but that is extremely rare.

3. They cannot. Often, they are just listing the book, but when you try to buy it, it is mysteriously “out of stock”… it is a way to increase their perceived stock and presence on the site. For real books that they DO have and ARE selling – They list the books that they get from reviewers and other places where they can buy sample books that you sent out. Reviewers and other people who get sample copies sell them. Part of the deal when you send out review copies I am afraid.

~ Amy Collins started her career in the book industry as the book buyer for Village Green Books. She then “hopped the desk” and enjoyed 5 years as a National Account Rep. In 2001, Amy was named Director of Sales at Adams Media and eventually Special Sales Director for parent company, F+W Media. Amy founded The Cadence Group and New Shelves Distribution in 2006 to offer services to new and small presses.


Question:

Here’s a question re: Amazon Canada. I’m a U.S. publisher that already sells actively to Amazon in the U.S. I have delayed setting up an Amazon Canada account because I don’t want to agree to less favorable terms with Amazon CA then have those terms be applied to my Amazon account in the U.S. (Less favorable terms may include higher discounts and shipping costs borne by publisher.) Can anyone tell me whether Amazon and Amazon CA function as separate entities (with separate sets of terms for U.S. publishers) or whether the Canada terms might actually affect terms of our business with Amazon in the U.S.? I’ve tried questioning Amazon direct, but, as with a lot of issues, they simply don’t respond.

Answer (05/2013):

I cannot completely answer the Amazon question. We have a Canadian partner that manages much of the backroom function. Import duties and drop shipping from the US isn’t practical for us given the large volume of business we do in Canada. But, our title file manager who handles the product metadata with all Amazon accounts tells me that product metadata for US and Canadian systems are entirely separate and so she would assume that the other backroom functions are handled differently as well. So, in her opinion, Canadian terms shouldn’t affect US terms. Sorry, I can’t be more definitive, but I hope that’s somewhat helpful.

~ Tom Doherty has worked in publishing for more than 30 years with 20 of those involved in distribution at both large and small companies. Since 2000 he has served as president of Cardinal Publishers Group, a full service national book distributor, and since 2004 also as publisher of Blue River Press.


Question:

As a publishing company based in Hawaii, we incur a significant amount of shipping costs when sending books to Amazon’s warehouses across the continental U.S. However, some Hawaii book vendors do not pay for shipping costs when sending books to Amazon (Amazon pays for their shipping costs). How can we participate in this program where Amazon would pay for our shipping costs?

Answer (05/2013):

This is a difficult question to answer and I do suggest seeking more advice. I suppose you would start by asking that question to Amazon. You might also ask these other Hawaiian publishers how they did it. If you can’t get a respond from the other publishers or Amazon won’t change their terms, then you might try one of several other approaches, like:

1. Shut down your direct account and funnel the Amazon business through a wholesaler (line Ingram, Baker & Taylor or Partners West) where you might ship larger quantities more often and thereby reduce your shipping cost per unit. Then at a later date if you are selling enough books you might attempt to open up a new account with Amazon at different terms.

2. A way some customers and suppliers work together to reduce the burden of shipping over long distance is for the customer to arrange for a consolidator (usually near a port) who collects shipments from a variety of publishers and then reships them all together. In this scenario the supplier may pay freight to the consolidation point, but the customer then pays the freight from their consolidation point to their distribution center. This is quite common for US publishers shipping books to European or Asian customers or distributors.

3. Another way is for the customer to bill back the shipping costs to the supplier. Since the customer moves much more freight their costs are significantly less than the publisher.

4. If you are currently shipping to several Amazon distribution centers they may allow you to consolidate all your POs to one of their stateside DCs and then Amazon would handle the shipping to the customer from that point. This allows you to ship larger quantities thereby reducing your overall cost per unit.

You can propose these ideas to Amazon and perhaps they already have programs to assist publishers in your situation. Be sure to carefully read all of their online instructions first.

Sorry I can’t be more definitive, but hopefully that offers some assistance.

~ Tom Doherty has worked in publishing for more than 30 years with 20 of those involved in distribution at both large and small companies. Since 2000 he has served as president of Cardinal Publishers Group, a full service national book distributor, and since 2004 also as publisher of Blue River Press.


Question:

I have a question regarding the online vendors of our books. I guess that all the publishers run into this problem, but I’d like to see what IBPA thinks of this.

We have a distributor in the U.S. which is Book Atlas and in Canada which is Quanta. Yet when we look up our books on sites such as Amazon, Abebooks and others, the prices of our books don’t match what we sent our distributors. Are you aware if Amazon and the other on-line vendors change the prices of books?

An other issue is that these site propose used books for lesser prices and yet, we don’t sell used books, we only offer new books… So we’re a bit confused to see our books at various prices on various sites and to see that used books exist. Where can they come from or do the online sites only offer them and don’t have them in stock?

As I mentioned I guess we’re not the only ones to have run into this problem.

Answer (02/2013):

Amazon and the other retailers often discount book prices, so that is not uncommon and nothing to worry about. You should still receive payment for your books based on your retail price minus the trade discount (typically 40% to 55%).

The listing for used books is actually from other online booksellers. When you make your books available through Ingram, other booksellers see the titles there and can order them. What most do is list them for sale on independent bookstore sites and through the Used area on Amazon, attempting to capture a sale by pricing your book at slightly less than Amazon’s price. If it sells, they will drop-ship a copy from Ingram. So you won’t actually enjoy the benefits of those listing unless they actually sell, but then you will receive your standard compensation from Ingram.

~ Stephanie Chandler is the author of several books including Own Your Niche: Hype-Free Internet Marketing Tactics to Establish Authority in Your Field and Promote Your Service-Based Business. Stephanie is also founder and CEO of http://AuthorityPublishing.com, specializing in custom publishing for non-fiction books and social media marketing services, and http://BusinessInfoGuide.com, a directory of resources for entrepreneurs.


Question:

I will have three titles by the end of October: an eBook novel, which I will price at $2.99; and two small eBook collections of stories from my blog. I would like to list the collection eBooks. Is it possible to offer the collections for free? I’m asking because my eBook distribution service enforces a price of $0.99.

Answer (09/2012):

A couple of things to consider:

1. It makes sense a distribution service would have a minimum sales amount, because they still would have to do the title file work, upload the files and handle the billing and collections. Even if the product generates no revenue (sells for $0.00) it must be assigned a product number entered in the customer service and accounting systems of both the distributor and the customer and sales need to be tracked. That said, if a client is generating revenue and the give-away would possibly generate more revenue by promoting the sales of other products then the distributor should be able to find a way to accommodate the client assuming the customer allows it.

2. If you have a distribution service they should have multiple retail outlets. If you’re promoting a product consider offering it through all retail channels.

3. Alternative – Include the free material as an appendix to the $2.99 eBook and promote it as ‘free with purchase.’

4. Alternative – It may not violate your distribution agreement to give away product that doesn’t compete with the same product they are selling, as in this case. If that is true there should be no reason the publisher/author couldn’t set up their own Amazon account and author page and promote all their books and have link to free product or direct people to their blog/website to give away product there.

Here’s some follow up from our rep that handles eBooks for Amazon:

You are free to set up free or reduced price promotions by filling out the “Kindle Free and Reduced Wholesale Price Promotions Template”. You can find the template by logging into Vendor Central and clicking on “Resource Center” in the upper right hand corner of the screen. From there, scroll down to “Selling Your Products” and you will see the template listed as the first item. You can download the form and fill it out by following the instructions in the instructions tab. Once you’ve completed the form submit it by attaching to a Contact Us case.

~ Tom Doherty has worked in publishing for more than 30 years with 20 of those involved in distribution at both large and small companies. Since 2000 he has served as president of Cardinal Publishers Group, a full service national book distributor, and since 2004 also as publisher of Blue River Press.


Question:

Given the changes at Amazon as described in Amazon Availability in Independent January 2012, I have a dilemma. We have a book which is intended for people who are sitting in ICU waiting rooms with an immediate need for answers to their many questions. When they locate our book on Amazon and see that it “usually ships within 1 to 3 weeks” we probably lose the sale, unless they go to Marketplace where they can order the book directly from us and receive it in much less time.

This book is made available to Amazon through a POD arrangement we have with SelfPublishing.com/Thor Distribution/Lightning Source/Ingram/Amazon.

My question: Would we be better off if we end our POD arrangement and just have the book listed on Amazon as a Marketplace offering? This is a great service. Thanks.

Answer (04/2012):

POD is a good option for the situation you describe, but the PURPOSE of POD is to have the book AVAILABLE everywhere…. If Amazon does not have copies on hand, what is the point?

First, I would contact Thor and ask them to request that Amazon stock up on your book (15 to start?). If they cannot or will not, I would strongly suggest that you STILL produce the book POD, but use CreateSpace for Amazon and perhaps Lightning Source for Ingram.

Offering it through the marketplace option is not a good idea. It puts people off.

~ Amy Collins started her career in the book industry as the book buyer for Village Green Books. She then “hopped the desk” and enjoyed 5 years as a National Account Rep. In 2001, Amy was named Director of Sales at Adams Media and eventually Special Sales Director for parent company, F+W Media. Amy founded The Cadence Group and New Shelves Distribution in 2006 to offer services to new and small presses.


Question:

I’m a member and would appreciate some feedback on structuring our ebooks on Amazon.com.

We’ve been at the 35% rate which allows Amazon to set a selling price, for the past few years. We’re thinking of moving to the 70% rate, which would also allow us to fix the selling price.

We’re already at 70% at Apple simply because that’s the only deal they offer. B&N, Kobo, Sony and Google offer different rates but most of the activity we’ve seen has been with Amazon and Apple. I’m wondering what other publishers are doing and how you see this issue.

Answer #1 (01/2012):

Amazon has three arrangements. First, if you are a larger publisher the discount is negotiated individually with each publisher. My own experience is that each year you a publisher should expect that Amazon will return and want to renegotiate this discount. Second, Amazon offers smaller publishers and self-publishers the Kindle Direct programs. These are either the 70 percent or 35 percent royalty options. These two options are very different and a publisher needs to understand their market in order to choose wisely.

70 percent option: This option is what Amazon wants everyone to gravitate to. Hence, the larger royalty. However, there are constraints. These constraints include domestic sales only, the content must be available in the Kindle Lending Library, the pricing has to be between $2.99 and $9.99, and depending on the size of the EPub can have delivery costs to the customer that Amazon pushes back to the publisher.

The 35 percent option has no constraints. It includes international sales, no lending library, complete pricing freedom and no download costs.

If a publisher believe that the majority of the market is domestic and that the pricing strategy is consistent with Amazon’s $2.99 to $9.99 strategy, then the 70 percent option is obvious. You’d need to have a $20.00 book or sell twice as many books at the 35 percent program to achieve the same dollar margin as the 70 percent option.

We recommend that small publishers do everything they can to keep them in the 70 percent program and let the international sales and download cost happen. They will probably be small fraction of the overall sales and costs. Based on the market response, you can make an educated decision as to whether your overall margin would be better going with the 35 percent program.

~ Christopher Robbins, Pater Familius (founder and president) of Familius, has been in the magazine and book publishing industry for more than twenty years, most recently as the CEO of Gibbs Smith. Charles Coonradt, author of Game of Work and The Better People Leader, called him “…one of those rare people who can conceptualize outside the box and make the seemingly impossible reality.”

Answer #2 (01/2012):

Do you realize that the 70% royalty rate means you get 70%? It is not a 70% to Amazon, it is getting 70% from Amazon. The only time 35% makes sense is if there are a ton of photos and images and a great many over seas sales. If this is a domestic book with a majority of the sales/downloads going to US folks. Run don’t walk and make it 70%.

~ Amy Collins started her career in the book industry as the book buyer for Village Green Books. She then “hopped the desk” and enjoyed 5 years as a National Account Rep. In 2001, Amy was named Director of Sales at Adams Media and eventually Special Sales Director for parent company, F+W Media. Amy founded The Cadence Group and New Shelves Distribution in 2006 to offer services to new and small presses.


Question:

I come to you for two quick questions regarding Kindle because I have been unable to find the answers in the web site’s resources section, although I have found the same questions.

• Our physical books’ SRP is $24.95. Amazon sells them for ±$17. In order to get Amazon to sell the Kindle versions for around $14, what should be our SRP?

• What kind of royalties are the majority of publishers paying to authors. I’m thinking 25 to 30%, but I thought you may have compiled statistics to help in our decision.

Answer (11/2011):

1) Do you have an Agency Model or Non-Agency agreement? If you have an “Agency Model” agreement in place (where the publisher sets the price) you can lower your SRP to whatever you’d like and Amazon has to sell it for that price. If you have a “Non-Agency Model“ agreement, then Amazon is allowed to sell the books for whatever price they’d like.

2) Bowker does not collect royalty information—However, in my experience as a former Publisher, I’ve learned that royalties vary widely based on the author’s previous experience. For example; if the author is publishing his book for the first time it’d be anywhere between 12-15%.. for an “A list Publisher“- 25-30%.

Small press agencies generally pay 12-15%, as far as I’m aware of.

Kelly Gallagher serves as VP of Publishing Services at RR Bowker. In this role he manages the implementation of a host of Bowker business intelligence services, including the PubTrack consumer research panel reaching over 40,000 ‘e’ and ‘p’ book consumers. For the past year, he has been leading a team of researchers on a three-year initiative for the Book Industry Study Group to study consumer attitudes toward e-devices and digital content.


We hope you will find this program useful, but as with any advice, we recommend that you make sure it fits your specific business needs. IBPA does not specifically endorse or support any particular group or service.


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