HarperCollins’ Quixotic Quest

To change an industry model, you must close the loop

April 2008 By Denny Hatch

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As readers of this e-zine know, I started out in the book business—first in publicity departments and later as a traveling salesman calling on bookstores, wholesalers and libraries in the East and Midwest.

As a salesman, I used to get commissions. As an author of books, I receive royalties. The killer on any commission or royalty statement is the line, “Returns”—unsold books returned to the publisher for credit on which commissions and royalties are deducted.

Returns have been the bane of book publishing for more than 70 years.

The announcement that HarperCollins will launch a new division that will not accept returns from booksellers marks a gargantuan change to a stodgy, built-for-failure business model.

If you could wave a magic wand, what changes would you make in your company—and your industry?

Returns
My second job after the Army in 1961 was working as publicity director for Franklin Watts, a leading publisher of children’s books and a hard-drinking, hard-driving, ex-traveling book salesman with a wicked sense of humor.

Every year on his birthday he would storm into the office. “Do not wish me many happy returns,” he would snarl. “There is no such thing as a happy return.”

During the Great Depression of the 1930s, business was so bad that bookstores could not afford to buy books from publishers and stock them in any quantity. So the book trade sweetened the deal by coming up with the policy that all unsold books were fully returnable—a situation that exists 70 years later. As a result, publishers have become bankers, turning the book trade in a loopy consignment-like business model. As Jeffrey A. Trachtenberg wrote in The Wall Street Journal of June 3, 2005:

Returns are the dark side of the book world, marking not only failed expectations, but the crippling inefficiencies of an antiquated business. It’s a problem that’s only getting worse. The industry’s current economic model pushes publishers to generate a small number of blockbuster hits. But picking winners is a quixotic enterprise, and as publishers ship an ever-increasing number of books to stores, hoping to hit the jackpot every time, stores are sending an ever-increasing number back.

According to Michael Drew’s BeneathTheCover.com:

* 40 percent of manufactured books never sell.

* The typical waiting period before books start the long and expensive trek back to the warehouse is a mere four months.