Tuesday, 16 December 2008

Borders Buying Breaks with History - No Returns Policy with HarperStudio agreed

HarperStudio and Borders have reached an agreement to end returns. In exchange for an initial purchase discount ranging from 58-63%, Borders will buy HarperStudio books on a non-returnable basis, departing from a decades-old publishing tradition, the Wall Street Journal reported.

The Wall Street Journal says, "Under the terms of the deal, the nation's second-largest bookstore chain by revenue will get a deeper discount on initial orders of books published by the new imprint of News Corp.'s HarperCollins Publishers -- 58% to 63% off the cover price, instead of the usual 48%. In exchange, Borders won't return any unsold books to HarperStudio, instead probably discounting them in the store."

Industry practice dating from the 1930s allowed retailers to return unsold titles to publishers for full credit and without incurring shipping costs. These titles, about 30 percent to 40 percent of all titles according to industry figures, may get sent back to the stores for heavily discounted sale, but others are pulped.

The WSJ quoted HarperStudio's president and publisher Robert Miller saying that the economic downturn has made publishers and booksellers more open to experimenting with models that might decrease waste and increase profit.

HarperStudio is the new imprint of News Corp's HarperCollins Publishers.

This news may come as no surprise to many who believed that the returns policy was long overdue for a rehaul.

That includes Paul Smiddy, retail analyst at HSBC, who said in The Bookseller earlier this year, “The [book] retail supply chain is currently more akin to the 19th century than the 21st.”... "The number of routes from publisher to each retail store are “far too numerous to make commercial sense. Most publishers have their own sales forces and distribution networks,” he added, with some smaller publishers using the services of larger ones such as Random House and HarperCollins. “Wholesalers, of which there are now only two main ones left, act as consolidators to a degree. Most retailers do not have their own centralised distribution system.”

Add to this already complicated system the sheer number of times a book can travel up and down the supply chain—a problem caused by sale or return. “It’s remarkable because in most other retail sectors the retailers take more of the stock risk, and product doesn’t go back down the supply chain with a consequential increase in handling costs,” Smiddy said.

We will see if this small step between Borders and HarperStudio becomes a trial model for others in the business. It seems like it must make business sense, for improved product supply, demand and profitability, but what of the impacts on publishers and authors? Will it make publishers less willing to take on new authors who may not sell as an unknown to bookstores? Will stores reduce the number of different books they buy, and focus on selling more copies of those they do purchase, reducing their spread of risk? Will it mean an increased focus on quality or saleability? It will surely become a more popular model of the future, and whilst book buyers continue to act as gatekeepers between the consumer and the supplier they will be ever more conscious to maximise their profit, meet their customers demands and follow the most environmentally sound and financially sensible buying model they can. In overcrowded bookstores and a saturated market, ever edging towards greater sales of e-books, some may think, it's about time.

View the GalleyCat interview with Bob Miller here.

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