Tuesday, May 06, 2008

As Books Fill Dumps, Publishers Target 'Insane' Returns Policy

May 6 (Bloomberg) -- When Robert Miller announced last month that he was leaving Hyperion, the Walt Disney Co. book unit he created, to start a new imprint at HarperCollins, he made headlines.

Miller, who's vowed to revolutionize publishing in his new post, instantly targeted a surreal policy that's been sacrosanct for too long: the practice that allows booksellers to send unsold copies back to publishers for credit.

In his last job, Miller published bestselling books such as Mitch Albom's ``For One More Day'' and ``The Last Lecture'' by Randy Pausch and Jeffrey Zaslow.

At HarperCollins, Miller said he'll experiment with some nontraditional business practices, like offering authors profit- sharing instead of the typical advance/royalty arrangement, and bundling hardcover, nonfiction books with e-book versions of the same titles.

But it's the returns policy that got everyone excited.

Miller wants to sell his books on a non-returnable basis in a bid to kick the industry's addiction to overprinting and overstocking.

Depression-Era Practice

Returns date back to the Depression, when publishers implemented the practice as a way to ensure that bookstores would continue stocking new books.

Today, publishers have convinced retailers that stacks of books piled high in the aisles will attract customers and spawn bestsellers. It's a leaky theory posing little risk for booksellers. If the books don't sell, they're only out the cost of shipping and handling the returns.

``Let's face it, returns are bad for everyone, and things have to change,'' Miller said in a telephone interview last month. ``The only way to make it happen was to start something entirely from scratch.''

In 2005, roughly 1.5 billion books were shipped in the U.S., according to the Association of American Publishers. Of those, 465 million, or 31 percent, were returned to publishers.

``In the past, when economies of scale made it cost- effective to overprint books, we saw numbers as high as 40 percent,'' said Jim Milliot, an editor at Publishers Weekly, a trade magazine. ``But just-in-time shipping, inventory management and better point-of-sale data have helped the number come down.''


Publishers and booksellers agree it's a costly and wasteful system, and it leaves a big footprint that's no longer defensible for an industry that generates $25 billion a year in retail sales, according to the publishers association.

``In this age of global warming it's insane to be shipping books back and forth across the country for no good reason,'' said Margo Baldwin, president of Chelsea Green Publishing Co. of White River Junction, Vermont. ``It's just a waste of energy and, not only that, it still encourages the overproduction of books -- many of which end up in landfills.''

Baldwin, a publisher of titles about sustainable living, has started a ``green partnership program,'' signing up 30 bookstores that have agreed to take books on a non-returnable basis. In exchange, she gives them extra discounts and priority access to her authors for readings and events.

Allison Hill, president and chief operating officer of Vroman's Bookstore in Pasadena, California, agrees that returns are a big drain on her business.

Excess Production

``We'd like to see them reduced, not only for the environmental impact but for the fact that pulling returns, boxing them and shipping is one of the most time-consuming things our employees do,'' Hill said.

Mark Suchomel, president of Independent Publishers Group, one of the largest small-press distributors in the country, said he's held returns to 20 percent and is convinced that number can be reduced even further.

When authors and agents press for large print runs, he said, publishers, in turn, push the excess production into bookstores, even though they know much of it won't sell.

Ultimately, the market will decide if curtailing returns makes economic sense. For one thing, booksellers will demand a larger discount if they can't return what they don't sell.

Miller, provided he keeps his list of titles to a modest size, might succeed, though the practice has a lot of inertia on its side. Big publishing conglomerates would have to do some heavy rethinking.

``It would require Random House or HarperCollins to develop an entirely new business model,'' said Milliot of Publishers Weekly. ``And that is not going to happen.''