The practice of book retailer returns in the publishing industry is often baffling to authors.
No author likes to think that a reader has bought their book, curled up with it and started to read, and disliked the book so much that they return the book in disgust. And demand a refund.
It’s okay. You can relax.
That is NOT the kind of return we’re talking about.
Let me explain.
Book Retailer Returns in the Publishing Industry
The book retail industry operates like one big consignment store. A book retailer like Barnes and Noble, or Indigo, or even Amazon, will order books from distributors, bring them into their warehouses and / or their stores, and make them available for sale.
When retailers order copies of your book, the money flows this way:
The retailer buys the book at a wholesale discount (usually 55% off the retail price) from the distributor. The distributor passes the royalties from the sale to the publisher, who in turn pays to the author the royalty percentage owed to them as per their contract.
Because no retailer has a crystal ball that predicts the future, they don’t actually know how many of which titles are going to sell to the end consumer. And when not enough copies of your book have walked out the door after its customers have left money in its cash register, the book retailer returns the unsold books to the distributor.
For a full refund.
When this happens, the money flows the other way:
The book retailer returns the unsold books and gets a refund from the distributor. The distributor gets a refund from the publisher. And the publisher recoup the royalties already paid to the author for these books.
Soft Sale versus Hard Sale
The transaction involving the retailer’s order from the distributor/wholesaler is what’s called a “soft sale.”
Yes, the retailer paid the distributor for the order; the distributor paid the publisher for that order; and the publisher has also likely paid the author for that order. But it’s still a “soft sale” and not final. It’s not guaranteed.
The customer, obviously, is the one who decides which of the books they see on the shelves they will take to the check-out counter with the cash register and purchase.
When that customer pays for the book and leaves the store with it — that’s what’s called a “hard sale.” The sale isn’t final until this happens.
While it’s worth celebrating when you see healthy sales of your books to retailers, the fact is that you can’t count on the keeping the royalties from a retailer until a customer has purchased the book from their store.
Reserve Against Returns
The reserve against returns is a tool publishers use to try to protect themselves and their authors against soft sales that lead to returns.
As Brooke Warner, past chair of the Independent Book Publishers’ Association, wrote in a HuffPost article on returns:
“I once worked on a book that went into Target; they ordered 30,000 books at a 60 percent discount, meaning the publisher got 40 percent to divvy up between themselves adn the author. Of course, the publisher held money against returns, because the likelihood that Target would return that book was very high. Guess how many came back? 25,000 books.”—Brooke Warner
Had that publisher not held money against returns, it could have been very bad news for both the publisher and author. Returns can and have been known to force smaller publishers under — so consider it a sign of good prudence if your publisher engages in the practice.
You’ll know your publisher is aiming to protecting you both from returns if you see a line item on your royalty report for “Reserve Against Returns” or “Hold for Returns” or “Returns Withholding” or similar language. In that case, you can expect the percentage withheld to be in the 20-35% range. When returns are clawed back because a retailer has returned unsold books, the publisher can pay the money back using the funds held in reserve rather than sending you an invoice and asking you to return the money previously paid to you for a soft sale.
You can also expect that, if there have been no significant returns in the first two to four years after your book’s publish date, depending on the publisher’s policy, sales volume, and distribution model, those withheld funds will be released back to you.
If you’re a self-published author, you would be well advised to put aside at least 20-35% of royalties received for physical copies of your book—for at least the first two years after your book is published.
The Role of “Returnable” Status for Self-Published Authors
Self-published authors who upload their own books to POD (print on demand) distributors like IngramSpark are well served to be familiar with a choice they’ll be asked to make:
- Return – deliver.
- Return – destroy.
Return-deliver means the rights holder (may be author or publisher) accepts returns and wants unsold physical copies shipped back to them, at their own cost.
Return – destroy means the rights holder accepts returns but does NOT want the physical copies shipped back to them.
Non-returnable means the rights holder does not accept returns.
Book retailers will almost never bring in books that are non-returnable. So, if you want bookstores to carry your book, either you or your publisher needs to accept returns.
If you wish to minimize the risk of getting stung with a whopping shipping bill in addition to being asked to repay the royalties that have already been provided from the “soft sale,” you’ll want to be sure you do not select “return-deliver” as your option.
An Unfair Money-Back Guarantee?
I am not aware of any other industry that operates the same as book retailer returns. If you know of one, drop a comment! But this whole book retailer returns thing may sound completely unfair and balanced in favour of the retailer. And in many ways, it is.
And never mind the environmental impact surrounding the fact that most books returned end up pulped or destroyed. It seems like such a waste. Doesn’t it seem to make more sense that retailers would do a better job of buying what’s going to sell? Or, selling what they buy? (Which is another argument for another day.)
But the way the publishing industry handles book retailer returns is a decades-old practice that is unlikely to change — at least not soon. And, it means book retailers have a money-back guarantee: if your books don’t sell in their stores, they’ll get their money back.
For another really good look at the publishing industry returns approach and what they’re looking at doing about it on the international stage, check out this blog from the International Publishers’ Association.