Before the sales of e-books exploded in 2010 and 2011, lowering the rate of book returns was one of the major issues that publishers, distributors, and booksellers grappled with on a regular basis. But as the surge in e-book sales called into question the future of print books, the topic of returns was put on the back burner for most companies. Now that sales of print trade books have stabilized, we checked in with companies in different parts of the supply chain to find out about the recent trends in returns.
For the most part, the executives said that returns have gone down in the era of digital books. Industry consolidation and improved technology that has increased the efficiency in the supply were cited as the two major reasons for the reduced return rate. Statistics compiled by the Association of American Publishers in its monthly StatShot program showed that returns fell in each of the major three print formats—hardcover, trade paperback, and mass market paperback—in 2015 compared to 2014. The trade paperback return rate from reporting publishers was the lowest, around 20%, while hardcover returns were 26% and the mass market return rate was 48%.
Sasha Quinton, v-p of marketing at Readerlink Distribution Services, said the return dollars at the distributor were down by double digits through April, compared to the same period in 2015. Readerlink has made a number of acquisitions over the past couple of years—the most recent, the purchase of Anconnect’s retail arm, last month—and those purchases have allowed the company to operate more efficiently by consolidating the number of shipments it makes to its growing number of accounts. Readerlink has invested heavily in new systems over the years, and it has installed those systems in each of the companies it has bought. Among the benefits those upgrades have yielded is an improved ability for Readerlink to engage in what Quinton called “strategic purchasing.” With improved analytics, Readerlink can better understand what types of books sell best at different accounts and in what quantities, Quinton explained. Many accounts have lowered their initial orders and trust in Readerlink’s ability to replenish stores quickly on hot-selling titles, Quinton said.
Since Readerlink has only a small presence in the distribution of e-books, “returns have always been a priority for us,” Quinton said. “We did a lot of work in 2015 to improve our efficiency, and we are enjoying the fruits of our labor in 2016.” Despite the gains made, Quinton sees more room for improvement. “The store environment is always changing,” she said. “The key is picking the right book, at the right time, in the right quantity.”
Independent Publishers Group president Joe Matthews said the return rate has stayed about the same in the last few years, although the pattern of returns has changed. He noted that with mass merchandisers now an important part of sales for certain titles, if a title misses at one of those chains, “you are going to get a big return.” Another thing that can trigger many returns is when a large customer changes its buying algorithm or product mix. “It can take a while to get adjusted,” he said. Those two factors, Matthews speculated, account for why, at different points over the past 18 months or so, returns have “spiked alarmingly” then fallen back to normal levels.
The adult-coloring-book phenomenon has also played a part in recent return patterns, as stores sent back titles in other genres to make way for the new titles in the fast-selling segment, Matthews said. But coloring books have a decided upside as well: the return rate for them is just about zero.
Like most experienced distributors, Matthews said he doesn’t want to see returns drop too low. When talking to publishers, Matthews said if he sees an overall return rate fall too much, to around 8%, it is a sign that the house is not being aggressive enough in the marketplace. He thinks an average return rate of 20% is acceptable, but once the rate gets closer to 25% “you are starting to eat into your margin.”
Simon & Schuster CEO Carolyn Reidy also thinks returns are an industry necessity. It is important to get enough copies into stores so titles can be visible, she said. “There is value in creating a showroom,” she said. Still, S&S has worked to limit returns. With e-books taking a large slice of some frontlist titles, many accounts have become more cautious about the size of their initial orders. “With more data available, we work with accounts to find the ideal number” for orders, she said. Like Quinton, Reidy said that faster shipping times by publishers has made accounts more comfortable with depending on speedy reorders to meet demand for hot titles.
Compared to five years ago, returns for hardcovers and trade paperback are down by double digits, although Reidy said declines have slowed the last two years. Returns for mass market paperbacks, however, are another story. The mass market paperback business is undergoing a wrenching transition, Reidy said, with returns only one part of the challenges facing the format.
At wholesaler Bookazine, COO Richard Kallman said that returns for his company have declined percentage-wise year over year due to better frontlist buying, technology, and sales increases.
For many indie booksellers who rely on companies such as Bookazine, little has changed. Some stores, including Eagle Eye Book Shop in Decatur, Ga., continue to have a relatively high rate of return: 45% in 2013, 50% in 2015, and 42% last year. In part that’s because the store holds about 200 book signings a year and doesn’t like to run out of stock for them. “We are using Above the Treeline and our point-of-sale system, Basil, to help us with frontlist ordering,” owner Doug Robinson said.
Other stores make a more concerted effort to keep returns in the low double-digits. At 34-year-old Schuler Books in Grand Rapids, which operates three stores under that name, and Nicola’s Books in Ann Arbor, buying-department administrator T.J. Moore said that he keeps returns between 15% and 20% and has seen them trending downward over the past five years. Publishers have told him that they would “happily” take more back and encourage him to take more risks. “The problem with that,” Moore said, “is the vast majority of our returns are titles that have sold zero copies within 10 to 12 months of receiving, and most of these are frontlist.”
Rapid replenishment, a publisher program to speed up indie orders designed to encourage booksellers to buy direct, hasn’t affected returns except in those instances in which a bookseller decides not to wait for the order to come from the publisher and orders from the distributor as well. “The speed and consistency is not currently comparable to the service we get from our distributors, and it may never be, as speed is their specialty,” Moore said.
Boulder Book Store in Boulder, Colo., keeps a similarly low returns rate. “Any increase or decrease is basically related to the events and conferences we are doing. The more things we do, the more returns we generate. We never, ever want to run out of a book at an event, so we basically always over order,” head buyer Arsen Kashkashian said.
As at Schuler Books, rapid replenishment has had little effect on returns for Boulder Book Store. “The main effect has been to increase our overall margins and lower our orders with wholesalers,” Kashkashian said. “Of course, with Partners West going out of business and the Baker & Taylor sale to Follett, it makes you think about what are the larger repercussions of these changes in publisher’s replenishment times. Will the wholesalers be viable in the long run?”
One area where Kashkashian has seen a change is the replacement of mass market paperback with trade. “We order the trade paperbacks a little more conservatively on the frontlist than we used to order the mass markets,” he said. That’s because mass markets often came in dumps and booksellers could strip the cover and send it back for returns, whereas stores have to return the full trade paperback. “I might like to see some trade paperback books offered on a strip cover return basis, so we could take the chance and really stack them up the way we used to do in the 1990s,” Kashkashian said.
Kashkashian still regards low returns as a sign of an industry problem. “I try to buy aggressively in many areas, especially in fiction and poetry, because I believe we have a responsibility to give these authors some exposure. Many, many of these titles aren’t going to work, and I don’t hesitate to return them. But I worry that if returns are really going down and if that becomes a focus, it becomes harder for those authors to get a foothold,” he noted.
On the bargain books side, some large wholesalers have found a niche in returns. Book Depot in Thorvald, Ontario, for instance, is completing a $3 million project to update its sortation technology to grow its returns processing business. For the past five years, Book Depot has been processing returns for one of the Big Five publishers, and CEO Wilf Wikkerink said he would like to do more. “We have the ability to sort the books according to publisher disposition rules, so that books can be returned to the publisher, destroyed, or seamlessly purchased by Book Depot as a return for a prearranged price,” he explained.
At Texas Bookman, the wholesale division of Half Price Books, director of acquisitions James Palmer has found no shortage on the hurts/returns side of the business. But even though there’s no “huge” shortage in terms of the breadth of titles, depth is another matter. “It’s pretty obvious that print runs are better managed to accommodate demand, and stores are ordering smarter, because there are rarely the larger numbers of single titles in returns,” Palmer said. Fewer “desirable” returns have caused Texas Bookman to increase the number of printed or packaged books that it prints.
That said, returns continue to be important to Texas Bookman. “Returns give us better margin and more flexibility in pricing for both retail and wholesale,” Palmer said. “Their existence allows us to take more risks finding new books to give a new life as a bargain title.”