How bookselling works now: shops, chains and online
Online retail was supposed to finish off the bookshop. Many closed, but the bookshop turned out to be tougher than predicted. How the money works, why returns matter, and what changed.
Where a bookshop's money comes from
A bookshop buys books from publishers or wholesalers at a discount off the cover price and sells them at, or below, that price. The discount is its gross margin, and out of it the shop pays rent, staff, utilities, card fees, shipping and everything else. Trade discounts are negotiated and vary by publisher, by the size of the order and by the type of book, and for general trade books from large publishers the discount is usually a substantial share of the cover price; it is often smaller for academic or specialist titles and for many self-published books.
That sounds generous until you remember the costs. Books are a low-price, high-volume product with modest margins, and independent bookshops have traditionally operated on thin net profits. Many supplement book sales with higher-margin items such as stationery, cards and gifts, and with events, cafés and subscriptions.
Returns: the system that shapes everything
In most of the English-language book trade, shops can return unsold books to the publisher for credit. This practice is old and unusual compared with most retail, and it has large effects:
- It lets shops take risks. A bookseller can stock a debut novel or a new author without being stuck with the copies if it does not sell.
- It shifts risk to publishers. The publisher does not really know how many copies have sold until returns come back, sometimes months later.
- It drives print runs up. Books have to be in shops to be seen, so publishers print and ship more than will sell, and accept that a share will come back and may be pulped.
- It makes non-returnable books hard to stock. Many print-on-demand and self-published books are offered on non-returnable terms, which is a major reason shops hesitate to carry them.
Wholesalers, distributors and the supply chain
A shop could not deal individually with thousands of publishers. Instead, it buys most new books either directly from large publishers' sales teams or through wholesalers, which stock titles from many publishers and ship quickly. Smaller publishers usually reach shops through distributors, which handle sales, warehousing, invoicing and returns on their behalf.
This chain runs on data. Each book's ISBN and metadata, its price, availability and discount, flows through bibliographic databases to the systems booksellers use to order. A book that is missing from these systems, or listed with poor information, is effectively invisible to the trade.
What online retail changed
Online bookselling began in the 1990s and grew into the dominant channel for many kinds of book in several countries. A single online retailer, Amazon, became the largest seller of books in the United States by most estimates, across print, e-books and audio, and a major one in many other markets. Online retail changed the trade in ways that are hard to overstate:
- Range. A physical shop stocks what fits on its shelves. An online store can list essentially every book in print, which helped backlist and niche titles.
- Price. Deep discounting on bestsellers set customer expectations that physical shops, paying rent and staff, often cannot match.
- Data and discovery. Recommendations, reader reviews and sales rankings became a new way for readers to find books, and a new set of signals for publishers to chase.
- Bargaining power. A dominant retailer can negotiate hard with publishers on terms, and disputes between large publishers and Amazon over e-book pricing and terms have occasionally played out in public.
Many bookshops and several chains closed in the decades that followed. Not all of that was due to online retail: high rents, changing high streets and the spread of discount supermarkets and department stores selling bestsellers also played a part.
Why the bookshop survived
The death of the physical bookshop was predicted more often than the death of the book, and it has not happened either. In the United States, the American Booksellers Association has reported growth in its independent bookstore membership in recent years after a long earlier decline. Shops that have done well tend to share a few things:
- Curation. A good bookseller chooses and recommends. Handwritten shelf cards and staff picks offer something an algorithm does not: a known person's judgement.
- Browsing. Readers often go in for one book and leave with another they did not know they wanted. That kind of discovery is hard to reproduce online.
- Events and community. Author readings, signings, book clubs, children's story times and school partnerships make a shop a place, not just a till.
- Specialisation. Shops that focus on children's books, crime, travel, cookery, comics, second-hand or a particular community can become destinations.
- Reinvention of chains. Some chains that struggled recovered by giving local store managers more say over what to stock, behaving more like independents.
Independent shops online
Independent shops have also built their own online channels. Many sell through their own websites using shared ordering and fulfilment services. In the United States and the UK, Bookshop.org, launched in January 2020, lets readers buy online while directing a share of the profit to independent bookshops, either a shop the reader chooses or a shared pool. Independent shops have also joined digital-audio and e-book programmes that let them earn from digital sales to their customers.
Fixed prices: a different model
Not every country leaves book prices to the market. France has had a fixed book price law since 1981, under which publishers set the retail price and sellers may discount only slightly. Germany and several other European countries have similar rules. Supporters argue that fixed prices protect bookshop diversity and stop bestsellers being sold as loss leaders; critics argue that they keep prices high for readers. The United Kingdom had a comparable arrangement, the Net Book Agreement, until it collapsed in the 1990s. Comparing these markets is one of the more interesting natural experiments in bookselling, though separating the effect of the law from everything else is difficult.
How readers can support the bookshops they like
- Buy from them, including by ordering books they do not have on the shelf; most shops can get any book in print within days.
- Pre-order new books from them, which helps both the shop and the author's launch.
- Go to events, and buy the book at the event.
- Use their online shop or a service that shares revenue with them.
- Ask booksellers for recommendations; it is the thing they are best at.
For how books reach shops in the first place, see how trade publishing works, and for how readers decide what to buy, see book reviews online.
Sources
- American Booksellers Association (membership and industry news).
- Bookshop.org (about the company and its revenue sharing).
- Wikipedia, fixed book price agreements (France's 1981 law and other national schemes, with references).
- Wikipedia, Net Book Agreement.