During the 25 years that I have been in the book business, the discount and margin given to independent booksellers has not appreciably changed; it remains 43%–47% for trade titles. Even more astounding is the fact that all of the major publishers are within two to three points of each other, essentially not competing.
Since margin is essential to a viable business, one can only surmise that the reason publishers have not helped booksellers stay in business with improved margins is that they are greedy, they don’t care, or they expect bookstores to carry fewer books and make up the difference with higher-margin items such as toys and gifts. Recently, I spoke with a sales manager at one of the major houses and aired my concerns. The response was, “We are talking about it; we know it’s hard.” The problem is that this feet shuffling doesn’t make up for the increased cost of doing business.
Like many states, Maine, where our stores are located, passed a mandatory progressive minimum wage bill with no offsetting tax reduction provisions. In eight years, our minimum wage will be over $15 an hour and will continue to climb annually. We also have to make contributions to FICA, workers’ compensation, and unemployment, and pay increased local and state taxes. With a total cost to employers of over $20 an hour per employee, the book business will not be sustainable without margin support from publishers. Thanks to the practice of prepricing books, we cannot raise prices and can only lower them. The hard math of running a bookstore is that most run on a razor-thin net operating margin of 0%–4%. We need a minimum 50% publisher discount in order to be viable.
Over the 18 years that we have owned Nonesuch Books Cards, publishers have consolidated, gotten bigger, and become more efficient and much more profitable. Yet none of that improvement has benefited independent booksellers beyond occasional same-as-always stock-offer deals. The “new co-op programs” are effectively no more valuable than they were in the past, and were streamlined mainly to save publishers from processing payroll. Indies are at a particular disadvantage, as we don’t have a consolidated voice to address the discount issue; the American Booksellers Association is not legally allowed to talk about pricing or discounts with the publishers.
Everything began to unravel for the industry when publishers made the tragic mistake of not setting reasonable off-price discounting policies for big-box stores in the 1990s, effectively turning books into widgets. This lack of judgment was seized upon by Amazon, which took discounting to the extreme by selling books below its effective operating cost. The company continues to gouge the market by making books loss leaders, offering discounts of up to 55% during the 2017 holiday season.
The reality today is that there are four groups of players selling books: indies, Amazon, mass market chain stores, and Barnes Noble, which is barely hanging on. As more and more consumers have flocked to Amazon due to its predatory pricing, indies are being reduced to showrooms for Amazon and the publishing industry—places where customers can sample books before buying them for less elsewhere. With rising costs in rent, insurance, taxes, freight, and mandated payroll increases in many communities, indies are caught in a potential death spiral that needs to be addressed now.
When my wife and I retire, either our stores will be profitable and will be sold to a new owner, thereby keeping them in our community, or we will close the stores and walk away. Which scenario is in the best interest of the publishers? Every year farmers spread fertilizer on their fields and plant winter crops to increase nitrogen, taking care of the land that produces their crops and earns them a living. Publishers need to start thinking in these terms or they will be left with a dust bowl and Amazon.
Jonathan Platt has owned Nonesuch Books Cards in South Portland and Biddeford, Maine, for 18 years. Prior to that, he was operations manager for a 13-store regional bookstore chain. He has been in retail for 34 years.