The Bargain Book Business By the Numbers

In Guest Contributors by Guest Contributor

Larry May

By Larry May, director of The Spring Book Show

KNOXVILLE: When I was younger and much more foolish, I studied Judo with a former South Korean Olympic Champion. Quite often, after a grueling round of randori (Judo sparring where he used the bodies of his students to “clean up” the mats) he loved to go out and eat and drink…and drink! He was a story teller and particularly loved to tell how difficult it was for him when he first came to America. He had lived in South Korea as an Olympian where he was treated quite well and had left his homeland to make his fortune in the United States. Things didn’t go so well at first and as a matter of survival, he soon found himself working in a hog slaughtering factory in Iowa. He used to say to us, “one day live like a king, next day killing hogs…very difficult, very difficult”.

Somehow he found his way to the Smokey Mountains of east Tennessee and after many starts and failures, became a successful and respected businessman in the community.  Today, he owns some twenty Judo/Taekwondo schools throughout the state of Tennessee. He was once interviewed by the local newspaper and asked to “tell his story” and the secret of his success. A long story appeared in the newspaper shortly thereafter and the headline read like this: “99 TIMES FALL DOWN, 100 TIMES STAND UP.”

This story is not so dissimilar from what many of you who are in the book industry are facing today. The book industry which once allowed us to fuel our passions in a fertile and robust marketplace has now become a game of survival. In the early ’90s, I remember having a conversation with the President of the American Booksellers Association (ABA) and he told me that the ABA’s membership had peaked somewhere between 4,500-5,000 members. Today, ABA membership hovers somewhere around 1,700. What happened? Well, the story is well known: “Big Box” chain retailers, online bookselling, and now e-books have all eroded the independent book retailing business.

Okay, so what should our response to this be? Do we pack up our bags, go home and look for something new to do? Or do we invoke the words of my former Judo instructor? If yes to the latter then I would encourage you to familiarize yourself with the industry in which I have spent the largest portion of my career…bargain books.

I have been in the bargain book industry for over 20 years now and consider this segment of the industry to be a possible answer to the competition that you are facing today. Bargain books can go a long way toward improving your store’s lagging sales and profitability. For those of you not familiar with bargain books, they can be categorized in to four different components.

The Four Types of Bargain Books

Remainders: These are books that have “remained” in the warehouse. Simply put, a publisher has printed more books than they sold and are discounting what sat in the warehouse. These books are in pristine condition and are usually sold to “remainder houses” who bid on large quantities and then re-offer them in discounted form back to bookstores.

Hurts or returns. A “returned book” is most often considered “hurt for resale” and they are sold in tubs or large, thick cardboard boxes known as “Gaylords.” Returns exist primarily because of the publishing industry’s policy of guaranteed sales. Publishers give distributors and/or bookstores the right to return books that they have not sold. Translation: Buy 10 books, sell 7, return 3. Those 3 are considered “hurt” and thrown into a Gaylord where they will be sold from 85% to 95% off of publisher’s retail.

Promotional books: Quite often these are coffee table books that are reprints and have a high perceived value. They are most often accompanied with a “false retail.” For instance, a promotional book may have a suggested retail of $29.99 and a “promotional price” of $14.99. Although it has never sold at the higher price, the consumer perceives it to be an exceptionally nice bargain.

White sales: These are books that publishers wish to keep on backlist but want to reduce their inventory and increase cash flow — so, they may offer a one-time “white sale” by offering an extra 25% off of their normal discount on that title.

Now, understanding how tough the retail picture is in this country, the reaction to bargain books –- particularly from independent booksellers — often puzzles me.  I single out independent booksellers because all of the Big Box chain stores already sell bargain books. It would be impossible for me to tell you how many times I have heard comments from “front list,” full price booksellers like this, “Oh, we don’t sell those kinds of books in our stores. Our customers only want new books.”

It is almost as if they see bargain books as a “less than worthy” way of selling books. (As my wife always points out, “I’ll bet they buy clothes or shoes on sale!”) And, by the way, they often say this after complaining about faltering sales and profits. My question to the reader is this, “If you haven’t tried bargain books in your store, why wouldn’t you?”

“And if you have tried some bargain books, why not more?” Bargain books is one of the few categories in the book industry where you can actually make good margins.

By the Numbers

Consider this, some bargain book retailers estimate that their Cost of Goods (COGs) is as low as 35% with most averaging around 47-48%.

Let’s break these numbers down and compare bargain bookstore COGs with a front list bookstore’s COGs. On a $10.00 retail sale, bargain books will yield an approximate, gross profit of between $5.20 and $6.50. Front list bookstores with a COG’s of 58-62% will make $3.80 to $4.20 on the same $10.00 sale. Used bookstores margins are even better with a COG’s of between 25-35%, averaging $6.50-$7.50 gross profit on the same $10.00.

I should also mention that bargain books are probably being retailed at least at 1/2 off of the publisher’s suggested retail. So, not only are you making better margins but you are offering your customer a strong discount on the book.

Now, understandably, there are many other factors to weigh considering a store’s retail sales — concepts like turns, volume, sales per square foot, customer base, personnel, etc. — but the numbers for bargain books work.

So, whatever barriers exist in the minds of the bookstore owners about “bargain books,” it may be time to rethink them. Consider the words of Gayle Shanks, the former volunteer president of the ABA as she spoke at a booksellers workshop at the Spring Book Show in Atlanta, Georgia several years ago: “If you are in the retail book business today and don’t sell remainders, bargain books and sidelines, you have a hobby, not a business. Let’s keep thinking, let’s keep trying and remember the words of my old Judo teacher: “99 times fall down, 100 times stand up.”

Larry May is the director of the Spring Book Show takes place this Friday, Saturday, and Sunday, March 26-28, at the Cobb Galleria in Atlanta, Georgia. For more information, phone 865-922-7490.

EMAIL: Larry May directly.

VISIT: The Web site for the Spring Book Show.

DISCUSS: Will e-books kill the remainder book business?

About the Author

Guest Contributor

Guest contributors to Publishing Perspectives have diverse backgrounds in publishing, media and technology. They live across the globe and bring unique, first-hand experience to their writing.