Terms to Know: Returns (Rerun)

A small blast from the recent past, mes auteurs. Round up on Friday and a return to the topic of marketing/brand management on Monday! — E

Episode: "Terms to Know: Returns"
Originally aired: Tuesday, November 23rd, 2010

It's been awhile since I've gone back to the basics, mes auteurs, so today's post is on that bête noire of the publishing world: returns.

The book business differs from most other commercial enterprises in that stock sold by the content provider (publisher) to retailers (book stores) is 100% returnable: if a book store can't sell its stock to consumers, it sends it right back to the house.

This is a holdover from Depression-era economics designed to get retailers to take books under circumstances they normally wouldn't (i.e., by drastically reducing, if not totally erasing, their exposure to risk). With the exception of a very small number of select retailers ("special markets" that don't sell books as their primary product), all retailers are allowed to return unsold stock to the publisher.

What does this mean for you, dear authors?

Well, assuming you earn out your advance, it can (partially) explain why it takes publishers awhile to calculate your royalties, as the returns reduce their gross sales (billing, or the money they made by selling stock to retailers) to net sales. If your royalty structure takes this into account, the publisher needs to wait for returns to come back before issuing you a check.

Occasionally, a publisher will even withhold money against future returns in a kind of escrow account, which means that money that is technically yours won't be paid out until returns are calculated several months down the line.

Granted, the problem could be "fixed" by moving the industry en masse back to a firm sale model (that is, no returns), but even if something like that could be done (which seems doubtful—see below), all it would mean would be a sharp reduction in stock for début and midlist authors like yourselves. If you force the stores to take on their own risk in today's bookselling environment, they'll simply cut their orders for anything that isn't a sure thing (read: James Patterson and Sarah Palin).

The good news is, cats & kittens, that it soon won't matter whether physical books are returnable because the market will shift principally to e-books over the next decade. Problems pertaining to physical books that plague today's publishers and retailers—warehouse space, shipping and return costs, physical co-op, &c—don't and won't apply to e-books, so returns will become a thing of the past and you'll get your royalty statements faster. Some of you who have successfully published e-books already know this.

In short: yes, returns are a pain, and yes, the industry has been running on an outmoded and inefficient sales model for the past 80 years. At this point, however, it isn't worth changing: as e-books become the primary format for the written (and read) word, the issue will become more or less moot.

That said: if you're planning on publishing a book this decade, plan on getting a call from your agent at some point asking if you'd like to buy your returned/remaindered units at cost. And don't be surprised if your royalty statements, should you get any, take their sweet time arriving in your mailbox.

Tomorrow: Thanksgiving festivities begin, meine Autoren, so I'll be taking a short break. We'll be back with the return of genre sales breakdowns on Monday, November 29th!