Bits of Destruction Hit the Book Publishing Business: Part 3
In Part 1, we described the three big waves crashing down on the traditional book publishing business: Google Search, the Kindle and e-books, and print on demand. In Part 2, we indulged in some science fiction, envisioning the future of the major players in book publishing: readers, authors, printers, publishers, retailers, and e-book device vendors. In Part 3, we'll dig into one very specific business practice: returnability (a.k.a. "the curse of unsold inventory"). Some thinking outside the box on this 70-year-old business practice could possibly help an industry in turmoil. Unless e-books simply replace all physical books (which seems highly unlikely), some radical changes will need to be made to the physical book supply chain.
Bruce Batchelor: POD Pioneer and Returnability Crusader
We outlined the practice of "returnability" in Part 1, but it took a pioneer in print on demand (POD) from Canada to help us see the scale of the issue. Bruce Batchelor is a successful publisher and author. Back in 1995, he created the world's first POD publishing service, Trafford Publishing, which was recently acquired by US competitor Author Solutions, Inc.
So he knows this game from the inside. Through some emails exchanged with him, we began to see that eliminating this business practice was critical. Eliminating it may seem radical and impossible to book industry veterans who have never known an alternative. But change may now be feasible: necessity is often the mother of invention.
Further down, we'll look at new technology that could change the supply chain even more radically.
The Problem
Bruce describes the problem very well on his site. There, you'll find a 7-minute YouTube video for people who need the basics. Those in the book industry already know this, but for outsiders, here are the basics:
- Publisher says to retailer, "Here are some books. If you don't sell them, we'll take them back."
- According to Bruce, "Returns (and eventual shredding) reportedly run between 40% and 80%." That is massive waste.
- How can publishers afford this? By charging the retailer more. In most other markets, retailers get 50% off the retail price. For books, they get 40% off.
Bruce's mission is to get publishers to change this 70-year-old practice (it started in the Depression of the 1930s). That would save publishers a ton of money.
What About Retailers?
Our question to Bruce was, "Nice idea for publishers, not having to deal with returns. But retailers are already struggling. How will they survive if they have to deal with this added risk of inventory?"
Bruce told us:
"The answer is to give the retailers a deeper discount [which he explains in his video and on his website]. If retailers now get 40% and are barely surviving, think how much better off they would be getting 50% off. That's a 10% (of gross sales) reduction in expenses and would go directly to the bottom line.
"The sad truth is that small booksellers already order carefully and are not rewarded for doing so. It is the chains that grossly over-order, according to every publisher I've ever talked to. And the chains are already getting 50% to 65%(!) off simply by bullying the publishers. So, the smaller stores are subsidizing the wanton waste of the chains".
Retailers do pay higher prices, then. They pay to return books, and that cost is significant. It is not a free lunch for them, and it is a disaster for publishers.
Without this practice, what would happen? There would be inventory sales and discounts: i.e. the normal functioning of free markets.
What Other Industry Has this Practice?
Music retailing engages in returnability as well, and that industry seems to be doing just fi... er, nevermind.
If Trees Could Vote
Trees would vote to change this business practice. This is an ecological disaster. If consumers knew the environmental cost of those stacked shelves, they might change their behavior. Yes, it would accelerate the trend to e-books and many would see that as a positive, but it would also cause terrible hardship to all who work in the industry and would deprive people the inexpensive pleasure of the good old-fashioned book.
Can technology deliver a solution that totally eliminates waste from the physical book supply chain?
Is the Espresso Book Machine the Answer?
We are all techies here at ReadWriteWeb, so we tend to look for answers in technology. In Part 2 we described something we thought was science fiction:
"We can even imagine digital printers setting up shop in the back of coffee shop/bookstores."
What we thought was science fiction is already a reality called the Espresso Book Machine. It is POD in the retail store. You order something that you can't find on the shelves and, 20 minutes later, voila: a freshly minted book!
Ah, the wonders of technology. We love this stuff. Because Bruce is a pioneer in POD, we had to ask:
"Do you think something like the Espresso Book Machine is a part of the solution? Could it really remove the costs, risks, and inventory from the supply chain?
"Or is that a techie's pipe dream?"
Bruce responded:
"A decade ago, a small company called Sprout.com tried to introduce similar devices to bookstores. They even managed to get Borders to buy into the concept and install one machine. But the enterprise died because of many factors that are still around today. The machines work only for some formats of books: no color or oversized books, no hardcover or coil bindings, a lot of dust, fumes, and production issues, and s-l-o-w. Lack of demand is the real kicker. No one seems to want these out-of-print books very much.
"So, my answer is no, I don't think Espresso machines will make a significant difference to the situation."
We would take issue with his response. He is on a mission, and it is a good one, so he is probably smart to stay on message and not get sidetracked by this technological wonder. He talks of retailer POD as being only for out-of-print books. But there is no reason this could not work just as well for the latest blockbuster. If retailer POD became widespread, we would get an Amazon-like long tail for physical books at the retail level. That would eventually change both author and reader behavior.
Perhaps 20 minutes is too long to wait for a book in our rushed ADD world? My advice, of course, would be to "Chill out, dude!" But there are times when 20 minutes might really be too long; say, when you are rushing to catch a flight. But mobile devices could help with that. You could browse the catalog on your mobile device while waiting in line to pass security, order the book, and then pick it up as you head for the gate.
We are also likely at an early stage with this technology. These devices may be comparable to the IBM mainframes of the 1960s: amazing that they work at all.
This is a potentially big market for printer companies. It is hard to imagine HP, Canon, and Xerox not wanting a piece of this action.
The two approaches (eliminating returnability and retail POD) are complementary, not competitive. They are two approaches to a supply chain problem that is really hurting the industry. Whoever holds the inventory carries the old curse of "May you have much inventory on you!"
Eliminating returnability could trigger faster adoption of retail POD. Knowing that retail POD is feasible might make retailers more willing to accept the change in practice.
Just-in-time manufacturing worked for Dell in the PC industry, and book printing is a bit simpler.
Part 4 Returns to Regularly Scheduled Programming
We had planned for this Part 3 to focus on the author's point of view. We got diverted down the supply chain. Tune in to next week's thrilling installment to find out how our starving genius who hacks away at a typewriter in the attic might be able to prosper in this new world...
Facebook
Comments
Subscribe to comments for this post OR Subscribe to comments for all ReadWriteWeb posts
> Perhaps 20 minutes is too long to wait for a book in our rushed
> ADD world? My advice, of course, would be to "Chill out, dude!"
except that you're operating under the common conception that
the bookstore wouldn't print a book until a customer bought it...
no reason the bookstore can't print one copy of each popular book,
and stock it on the shelves so customers could thumb through it and
carry it away on purchase, while the store then queued up that book
to be printed and restocked on the shelf within the next 20 minutes.
that way you have the benefit of a fully-stocked store, but yet waste
no money on "over-stocking" or "wrong-stocking", and furthermore
do not force your paying customer to wait unnecessarily... simple...
-bowerbird
good point bowerbird
I don't know any book lovers who are capable of spending less than 20 minutes in a bookstore---myself included, and I'm mostly a reader of ebooks and listener of audiobooks these days. Something happens once you walk into a bookstore; you lose all sense of time and purpose. It's sort of like walking into a casino, or Target store, in that way.
Sure there is bowerbird... look at the current shelves. They're full. So where to all of the single copies of books that aren't currently stocked going to go? If there's only one copy of each book on the shelves, then you need a realtime system that automatically prints a new copy for each one that's bought and you need to have an efficient way to restock those. This is a big change for bookstores to make, all for books that are currently out of print and, in most cases, probably not in high demand.
Alternatively, if someone really wants a lot of out of print books they can buy a Kindle or its successor.
I don't like ebooks. It is not pleasant experience to read from the PC screen for more than 2 hours, while I often keep reading books for more than 5 hours.
I prefer reading books. You can actually touch the paper. It feels so good and safe.
This is great insight.
Personally speaking, i think ebook are more environmentally friendly and cheaper.
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Sara
http://pianotutorial.net
It's too bad that Bruce brushed aside the idea of POD at the retail level helping his cause. He's a smart guy with some good ideas on improving supply chain efficiencies. He should look closer at how POD can work.
I run a bookstore and am fortunate enough to have an Espresso Book Machine and can honestly say that it's definitely NOT just out of print books available on the EBM - I've worked with various publishers to make their titles available on demand in my store (yes, with a single copy of many of them, but not ALL of them, on display on the shelves), and in every single case, both my bookstore and the publishers are delighted and happy and, yes, making slightly MORE money than before for two simple reasons:
1) The publisher isn't getting returns from me for these titles I'm printing on demand in my store because I'm able to more properly print to meet the demand of my customers in a really short turn-around time (it only takes 5 minutes to print and bind the average book)
2) I'm getting better than a 40% discount on most trade books as well as saving on shipping costs, which more than makes up for the cost of purchasing paper, glue and ink.
Just a side note here -- because my store is a campus bookstore and I stock both general interest trade books as well as textbooks, my primary reason for wanting an EBM was to try to find a way to get a better price on textbooks so I could reduce the price for students. The average discount offered to bookstores on textbooks is 20% -- but I've been able to increase my savings on those by as much as an additional 30% in a few cases, which I can pass along to students. (Which, ironically, means that more textbooks sell -- which is a bit of an anomaly these days with the ridiculously inflated textbook prices)
The side effect from getting an Espresso Book Machine to get better pricing for students was that my trade/general interest book sales (a dying breed in many campus bookstores) have started to increase for the first time in ten years (and I haven't even turned on my access to the catalog of the hundreds of thousands of other publisher titles yet - I've mostly been dealing with smaller publishers and just one or two larger ones at this point)
Does the 20' delay match a reasonable sales rhythm?
(5' seems more manageable, but still...)
I hope for most bookshops that they have fairly often peeks of customers at the cash register.
In the actual situation, Mark Leslie's experience is obviously a sound mix between traditional inventory and (too) few titles available on POD.
@Mark: Could you tell us how your POD customers manage their time in the shop?
Do they select the POD title, pay for it and just wait, browsing or reading while their order is being printed?
Or do they preorder and come back on another occasion to pick it?
The 40%-80% statistic of disposed books is rather shocking. A new technology will definately emerge to overcome this waste. Ebooks and its associated readers look to be the first step.
Technology's Effect on Interpersonal Communication
I guess online material is already the first step in the elimination of books and its associated waste. I wonder if there will still be books printed 100 years from now.
Funny Dating Quotes
I think the big part of the espresso book machine that you may touch on in your next piece, is that it allows the bookstores to work directly with local authors. Neighborhood bookstores could become a resource center for aspiring authors looking to get their work published. The bookstore can partner up with firms providing complementary services (i.e. editing, cover design, promotion, etc.) and then offer these and their printing services in a package to the author.
I discussed this idea a bit more in depth in a recent post of mine .
Great work on this series of posts! Very informative and thought provoking.
Gabe,
Reading Local
I think ebook are more cheaper.
Alain -- we do our best to match the delay for the customer to their need. IE, if they need it ASAP, we move the book up in the que (ie, 5 minutes to print a book) - if they're not in a rush, we do it later that day (ie, we'll call or email when it's ready later this afternoon or the following day, whatever their preference is)
And, yes, those waiting for their book to print typically manage their time by browsing the products already merchandised in the store. (We still carry about 40,000 general interest books as well as other product lines - computer accessories, giftware, stationery, clothing, etc - so lots of things to keep themselves amused with while waiting) -- we currently employ a mix of pay in advance and pay upon leaving with the product.
Although, once the larger POD catalog is installed, I can foresee having to do it as a "pay while it's printing or slightly in advance of printing" as a method of prioritizing the ever-growing que.
A vending machine for movies already exists, and we actually PREFER it to have a 20-minute wait time. Here's why. We go online, see what the machine in our local grocery store has in it, and reserve the movie(s) we want. It takes about 20 minutes for us to get ready and drive there. Then, we get the movies and leave right away.
Bookstores could do the same thing. Libraries are already more capable online book sources than most bookstores. It seems so doable to have an online catalog of titles, a machine that makes 80% of books in under 20 minutes, and a way to do e-commerce. I know I'd have used something like this about a dozen times in the last year at our local bookstore, often for bestsellers. After all, the bookstore usually runs out of these titles -- and apparently just as we're pulling up outside!
Booksellers in general seem to have mostly lost their moxie. They don't seem to know the actual margins on their sales, how to mark their books to draw attention and differentiate, how to generate a community -- they are just soft-goods stores that also carry books.
A serious bookseller, like the one in New Hampshire trialing the Espresso -- we need more like that!
At the end of April 09 I was in London bookstore Blackwell and just then they installed first EBM in Europe. The book is really made in 5 minutes nad the machine is connected (or will be) to central book database where you can choose from million of books.
Jason Epstein (The owner of EBM business) said at some conference in Slovenia that people will want EBM books because it will be fast, vast selection and good print quality.
I bought the first book from EBM in Europe (asked the bookstore manager) and the covers ware a little bit sticky, but the print quality very good. I bought The book business from Jason Epstein, off course.
The main question is, if there is big enough market for fiction readers that will be satisfied with limited EBM format of books. As I understand the mind of the fistion reader - the main thing is the story, the secondary is medium, but on the other hand they tend to be very lovers of tradicional books. Maybe they just didnt tried to read the EBM book yet...
Great discussion. I'm bringing out a book via the Espresso Book Machine and have a blog on the process: http://litadventuresinpod.blogspot.com At different points I discuss the environmental and local angles (I've been writing about local economies for Time, etc.) I'd be happy to have comments!
And Andrew, that pioneering bookstore is in Vermont, not New Hampshire -- it's my local bookstore, the Northshire, in Manchester, Vermont!
Judith D. Schwartz
Judith, great to see the connection to local economies, a subject I have been writing about as well (calling it "re-localization" or local 2.0). The technology that brings manufacturing to the point of sale is not just limited to books methinks. I am going to read your blog. BTW, I am not so far away, in Hudson Valley (Rhinebeck).
You're way off with the 20-minute time. Actual time is usually under five minutes. I've seen the Espresso in action.
Michael N. Marcus
Author of "Become a Real Self-Publisher," due soon
http://BookMakingBlog.blogspot.com
http://www.SilverSandsBooks.com
The main question is, if there is big enough market for fiction readers that will be satisfied with limited EBM format of books. As I understand the mind of the fistion reader - the main thing is the story, the secondary is medium, but on the other hand they tend to be very lovers of tradicional books...