If one is to buy books effectively, there is no substitute for
a good working knowledge of the economics of wholesaling.
a good working knowledge of the economics of wholesaling.
Melcher on Acquisitions
Few purchasers of books for libraries would question the fact that doing the bulk of one’s ordering from a wholesaler or wholesalers is, for the most part, a wise policy. Faced with some publishers’ reluctance or even outright refusal to sell their books directly to libraries, along with their poor service to and discriminatory pricing/discounting practices for their library customers, the acquisitions librarian is, in many instances, virtually forced to use the services of wholesalers. And it is certainly true that combining orders for many separate titles of disparate publishing houses can be both cost and time efficient; it is a lot easier to handle one shipment of 200 books with a single invoice than to cope with 200 books in, say, 20 shipments, each with its own invoice – and postage and shipping costs that will certainly surpass that for one shipment. It is also easier to monitor the performance of one or two or even a dozen wholesalers than hundreds or even thousands of individual publishers.
Many wholesalers offer services to their library customers that publishers are unable or unwilling to provide. These include free or inexpensive catalog cards (although with the advent of online catalogs this is less of a selling point than in the past); fully processed books or book-processing kits; approval, standing-order, and book-leasing plans; access to timely (usually updated weekly) microfiche or online information on activities in the book world that may influence a librarian’s purchasing decisions; access to in-print book information that is often more up-to-date and thus more useful than that found in the print or online version of Books in Print; and finally (and increasingly), online access to wholesalers’ databases, including the most important information for the acquisitions librarian, warehouse inventory, about which more will be said later in this chapter.
It would seem, then, that ordering books from wholesalers is not only a good idea, but also the answer to the acquisition librarian’s prayers. But it isn’t that simple, of course. A great deal of care must be taken in the selection of these vendors, and equal effort must be spent in monitoring all aspects of their service performance as long as they remain vendors of choice; if the library’s standards are not maintained, then the only choice is to “de-select” the poor performer and start all over with someone else. Like any other business, book wholesaling has its pros and cons, which arise from the radically changed and changing nature of the wholesaling business itself and also from the volatile nature of the publishing industry. There is intense competition among wholesalers for library dollars, and some indulge in sleazy practices to get library customers and to increase their profit margins in this dog-eat-dog business.
There are two broad categories of book wholesalers from which the librarian can choose. First there are full-line wholesalers, which stock a broad variety of titles from a large number of publishers: trade books, paperbacks, juvenile books, art books, small-press titles, remainder university-press titles, technical and professional books, audio books and so on. These wholesalers usually maintain good sized inventories of new titles as well as those backlist titles that are important to their library customers.
A major wholesaler such as Ingram Books or Baker & Taylor will stock 70,000 or more titles in their several distribution centers and if a title is not in stock, will be happy to order the book for the library customer if it is still available. Theoretically, it is possible for a library book purchaser to obtain the vast majority of titles needed from just one such wholesaler. In practice, however, this may not be such a good idea, for reasons discussed later in this chapter.
The second type of wholesaler is the specialized wholesaler, which stocks titles only within a certain category or categories. An example of this is Book Wholesalers Inc., which stocks only children’s books; another is Quality Books, which warehouses small-press titles almost exclusively. This is not to say that most specialized wholesalers will turn away an order for a book that does not fall within their specialties, but only that they stock special categories of books. All but a few specialized wholesalers will order just about anything their customers want, just as full-line wholesalers will.
Whatever the type of wholesaler they choose, librarians generally should expect the following:
- a large inventory of titles in stock
- prompt order fulfillment
- accurate order fulfillment
- accurate order-status reporting
- reasonable and competitive discounts
- strict adherence to each library’s policies regarding invoicing, cancellation of titles, returns, claims and exchanges, backordering, batching of shipments, and the like
- services such as online ordering, catalog cards, processed books or processing kits, approval or standing-order plans
Large title inventory
The primary reason a librarian uses wholesalers is precisely for their inventory. If the librarian is, so to speak, going to put all or most of the library’s eggs (dollars) in one basket, then the basket had better be a good-sized one. Ideally, any wholesaler should maintain an inventory that includes a substantial percentage of those titles that fall within its purview. Grandiose claims to the contrary, even the largest wholesalers cannot possibly stock all titles published within most categories, given the fact that more than 60,000 new titles are published each year and that approximately 1.9 million titles are in print in any given year. In actuality, according to the Book Industry Study Group, only about 20 percent of current in-print titles account for 80 percent of most wholesalers’ sales volume, so a stock of the proper 20 percent – one that will best meet the needs of its library customers – is what makes a wholesaler good enough to stay in business.
Two caveats are in order here, though. First, the librarian must be very leery of any wholesale book dealer who claims to provide “any book in print,” or “any book published in the United States,” or even, as one vendor claims to be able to do, to obtain “any book published in the English language”. Such claims are arrogant nonsense; no wholesaler can do this simply because some publishers, such as most encyclopedia publishers and publishers of certain major reference works, don’t allow their books to be distributed by wholesalers. It is far more important for the wholesaler to be honest enough to let the library customer know which publishers’ products it can or cannot supply so that the customer is not continually wasting time and money sending orders to the wholesaler only to have them unfilled. Certain of the larger wholesalers will, on request, supply the library with regularly updated lists of the publishers whose wares they cannot supply; this saves everyone, vendor included, much time and money. Respectable wholesalers are happy to provide such information; shysters are not.
Second caveat: be sure that the prospective wholesaler actually does have some book inventory on hand; certain wholesalers practice a quaint practice called drop shipping. The wholesaler who drops ships takes a library’s order and transmits it to the appropriate publisher or publishers. The publisher in turn fills the orders and ships the books to the library – but bills the wholesaler, who then bills the library. Note that drop shippers do not warehouse any books.
This is an absurd practice at best. Why pay someone to do practically nothing, or at least nothing more than add to the time it takes to receive the books? Any wholesaler who drop ships should be avoided like the plague. (It should be noted that Literary Market Place is a useful tool for determining who the few book drop shippers are; it lists most wholesalers, their specialties, the number of books and titles they stock, and whether they drop ship.)
Prompt order fulfillment
When dealing with a reputable wholesaler who maintains an adequate inventory, librarians can reasonably expect receipt of an initial shipment of 75 to 80 percent of the materials ordered within two weeks. Anything lower than this fulfillment percentage is, as a rule, unacceptable and should not be tolerated. On certain occasions, however, a library may send a special order for books that are not likely to be stocked regularly by the wholesaler, perhaps to create a special collection or to give greater depth to an area of the collection; in a case like this, it may be understandable for the vendor to take longer to fill the order, but this should be the exception, not the rule.
A few really good wholesalers guarantee shipment of most or all of a library’s order within forty-eight hours of receipt, and more often than not achieve that goal; for the rest, two weeks is more realistic. Then the vendor has time to obtain the unfulfilled balance of the order – the books not in stock or the more esoteric titles – within the library’s stipulated ship or cancel period, usually ninety days. Consistently failing to meet this standard, however, should mean that the vendor be dropped, because such performance is inexcusable and serves only to alienate frustrated library patrons who can’t understand why a book ordered two or three months ago is still not on the shelf.
Accurate order fulfillment
Just as librarians have a right to expect promptness in order fulfillment, they have the right to expect accuracy. There is no reason why a wholesaler should constantly err on titles or editions shipped, particularly when ISBNs are given, or in number of copies shipped. Returns, claims, and debit/credit procedures are a very costly part of the acquisitions process for both libraries and vendors, because they require a lot of staff time. Any vendor whose fulfillment error rate exceeds 1 or 2 percent should not be in business; any library book purchaser who accepts each shoddy performance should be doing something else. Certainly errors will and do occur, but again, they should be the rare exception to the rule. Careful monitoring of vendor performance is the only way for the acquisitions librarian to determine which vendors take the library’s business seriously enough to fill orders accurately as well as promptly.
Accurate order-status reporting
A few years ago at an ALA conference, a very large wholesaler was exhibiting its wares and touting its long tradition of excellent service to libraries. At a meeting nearby on vendor/library relations, an author of several children’s books was speaking; she complained that one of her books was being reported as out of print by that same wholesaler. Not only was the book still in print, however, but copies of it were also displayed at her publisher’s booth only a few dozen feet away from the wholesaler’s display.
To say that the audience was incensed was an understatement, and rightfully so. This incident confirmed what a lot of astute librarians have long suspected: that status reports from some wholesalers do not reflect reality but what wholesalers would like librarians to believe is the reality. Accurate status reporting is essential so that the acquisitions librarian can decide whether to reorder the book from another wholesaler or directly from the publisher. Since reordering is both costly and time consuming, the decision is not made lightly. And it is extremely frustrating to be unable to obtain needed items for the library’s collection, but when this happens not because such items are truly unavailable but because a vendor is either careless enough or venal enough to mislead its customers, then it is intolerable.
Two decades ago I wrote an article on the pros and cons of dealing with wholesalers. In preparation for writing it, I asked the staff to carefully monitor the wholesalers’ status reports submitted to our system. It turned out to be a time-consuming but very revealing process. The results were as follows:
- For books reported as out of print (OP), wholesalers’ reports were accurate approximately 60 percent of the time.
- For books reported as out of stock (OS) with the publisher, wholesalers’ reports were accurate less than 20 percent of the time.
In other words, fewer than half of the status reports received from some of the major wholesalers with whom we were then doing business were accurate; one of these vendors was at that time the largest book wholesaler in the United States.
Why do vendors report so poorly on book status? They say it is because the information they receive from publishers is inaccurate. But my study based its validity on calling publishers directly to confirm the status data reported to us by wholesalers, and publishers indicated that the wholesalers’ reports were rarely valid. It follows, then, that either certain wholesalers are incredibly careless in their reporting, or that some wholesalers deliberately misreport in order to increase profit by selling only what is in their warehouse (I use the present tense here because the problem still exists, although some not all – of the worst offenders have gone out of business).
It takes both time and money to fill nonstick orders. When a library orders a book that the vendor does not have on hand, the vendor must go through all the same steps of ordering, processing, shipping, and billing that the acquisitions librarian goes through acquiring a book. It takes a lot less time (and money) to simply report that the book is OP or OSI, or simply that the vendor cannot supply the title and cancel the library’s order – with the near certainty that most librarians will accept this report in good faith and spend the money on something that the wholesaler does have in stock. The wise library purchaser will monitor wholesaler status reports as carefully and consistently as all other aspects of vendor performance. There is no excuse for continuing poor performance in this area, and vendors who persist in this less-than-savory process should be dropped.
Reasonable and competitive discounts
This is and should be one of the areas of greatest concern to astute librarians, because the discount is something that can be easily manipulated and abused, especially for the more naïve members of the library profession. We have already seen that publishers’ discount policies in dealing with libraries can be capricious and arbitrary, ranging from the eminently fair and reasonable to the downright discriminatory and totally absurd. The same is true for wholesalers, except that their actions are not always so obvious.
The wisdom of Daniel Melcher’s statement at the beginning of this chapter becomes clear when one carefully examines the various discount structures employed by wholesalers and begins to ask the right questions. The answers to those questions can affect a library’s purchasing power in a very positive way by ensuring that the library is not paying more than necessary for its books:
- What is a reasonable discount?
- What is discriminatory discounting?
- What kind of discounts am I receiving, and how do they compare with those given to other libraries with similar book budgets and buying patterns?
In Melcher on Acquisition, Daniel Melcher states that effective book buying depends on a good working knowledge of the economics of wholesaling – not what wholesalers would like you to believe about wholesaling economics, but what the facts are. And those facts are simple: book wholesaling is a business with a rather low profit margin or return on investment (estimated at an average of 3 to 5 percent; food supermarket profits are about the only others that are lower, at only about 1 percent). Because the profit margin is low, wholesalers must, like other businesses, sell a lot of books that were sold to them on a high discount basis, enough to ensure maximum profit from sheer volume, or sell fewer lower-discount books. Those who ignore these simple facts do so at their peril; the demise during the 1970s and early 1980s of a dozen major book wholesaling companies – Campbell & Hall, Ancorp, Richard Abel, Charles Clark, Imperial Books, Huntting, and Dimondstein, among others – revealed to librarians just how difficult the business is. And although the market today is dominated by Ingram Books, Baker & Taylor, Blackwell, and a few midsized, specialized, and small firms, even they have had rough times over the last few decades. (A selective list of currently operating wholesalers appears in Appendix A at the end of this book.)
Why is the profit margin in book wholesaling so slim? The answer lies in the rigid discount schedule that publishers give their wholesaler customers, which defines (in most cases) what the wholesaler can charge their customers. A look at a typical trade-book discount schedule (see Table 8.1) gives some idea of what wholesalers pay for books.
Discounts to wholesalers
|Number of copies*||Discount from publisher|
|2-4 copies||24-33 1/3%|
* Do not have to be all one title; can be assorted.
** On occasion, the discount for more than 1,000 copies can rise as high as 56 percent, but 46 percent is the norm.
Source: ABA Bookbuyers Handbook (1997)
Since the bulk of a wholesaler’s book orders for trade-book purchases fall into the 40-46 percent discount range, the smart wholesaler will try to accumulate orders for any given publisher to attain the maximum discount possible.
But the real problem for the wholesaler is this: if a wholesaler wants library business, the company must compete with discounts that the books’ producers – publishers – give to libraries that buy direct from them. In most cases, these publisher discounts are lower, usually 10 to 25 percent for their library customers, but some will be 40 percent or higher – mainly for larger libraries with high-volume purchase. If every book the wholesaler buys is discounted by the publisher at ?? percent, this leaves the wholesaler only a 6 percent margin. Out of that 6 percent come all the customary business expenses that must be met before a profit is earned, such as buildings, salaries, heat, light, telephone, and freight. Clearly, wholesalers must do everything possible to minimize cost and maximize profit in order to stay in business.
There are a number of ways to do this, some of which are proper and others which smack impropriety. Cutting costs is the most obvious, and this certainly has been successful for some vendors. However, cost cutting often is at the expense of service to library customers in the previous example of reporting books not in the warehouse OP or OSI.
Reducing warehouse inventory is another way to reduce costs, again service suffers when the library does not receive books on a timely basis because the wholesaler has to order them from the publisher. Decreasing their discounts to libraries may also reduce wholesalers’ costs, but it also may alienate library customers and ultimately result in the loss of valuable business. Imposing exorbitant “shipment and handling” charges may bring in some wonderful pure profit: a wholesaler sold the library where I worked six videocassettes at $7.00 each, and charged the library $45.00 each for postage and handling, a total of $270.00 over and above the $450.00 cost of the material (that was some handling).
It should be noted that wholesalers are not alone in using this process. In 1987, the R. R. Bowker Company announced that henceforward a flat 5 percent of the invoice total would be charged for “shipping and handling”; this meant that on a $10,000 order for the Bowker reference books, a library would pay $500 in shipping costs – even though the actual cost of shipping the books by common carrier was only almost $140. Even worse, however, was the fact that the customer who chose to buy the reference materials in CD-ROM format would pay the same amount for shipping and handling – even though the actual cost of shipping a few compact discs by first-class mail or UPS amount to less than $20 – leaving Bowker with a pure profit on just this invoice of $480. Needless to say, library customers were irate, and after some months of pressure, Bowker rescinded this absurd policy.
While all these cost-cutting, profit-increasing tactics are somewhat questionable, at least they are very straightforward. But wholesalers have found a number of other ways to increase profits by playing not-so-straightforward games with discounts. The most common of these are
- inflating book prices or reporting phony discounts from publishers
- overcharging for certain bindings
- offering outlandishly high discounts to libraries that require bids for their business
- establishing “across-the-board” discount structures.
Each can be illustrated very simply and each is an actual incident that occurred.
Not long ago a library ordered several copies of a paperback title from a major wholesaler. The books were back ordered and eventually arrived with the invoice. The library had planned to pay $6.95 for each of the books. The wholesaler charged $8.95 each, however, - even though the printed cover price was still $6.95. The discount given on the wholesaler’s invoice was 10 percent, and the code indicated the reason for this was that this was a short discount title from the publisher. However, someone at the wholesaler’s warehouse had inadvertently left the invoice that was sent to the wholesaler in one of the books. It showed that the net p rice of the books was $6.95 each, and the publisher’s discount to the wholesaler was a whopping 52 percent – not exactly a “short” discount. Another wholesaler of art books offered the library a flat 10 percent discount on his titles, since he got “only 20 percent” from the books’ publishers. The library’s business relationship with him came to a rather abrupt halt when an astute staff member discovered a copy of one of his publisher invoices at the bottom of a carton; the document indicated that he was receiving a 56 percent discount on each and every book ordered. Understandably, his company went out of business once the word got around to a few of his bigger customers. And in case anyone doubts that this kind of thing still goes on, Publishers Weekly reported in its February 10, 1997 (p. 17) issue that a small publisher had “been trying for more than two years to learn why books he sold to B&T at a trade discount were being sold to stores and libraries at only a 5% short discount.” Apparently he never did find out.
Overcharging for certain bindings is a scam practiced frequently by wholesalers who sell children’s books. Hardcover children’s books usually have one of three kinds of binding: a nearly indestructible sewn library binding, which is usually discounted to wholesalers at 25 percent because of the added cost to produce this type of binding; a reinforced binding, which is not as sturdy as library binding but stronger than the third type of binding; and the same trade binding used for most adult trade hardcover books. Both reinforced and trade bindings are sold to wholesalers at the standard trade discount of up to 40 percent, depending on the volume. The rub comes when some wholesalers arbitrarily decide to classify reinforced bindings (sometimes called single bindings) as library bindings, and thus are in a position to extend short discounts to their library customers. As a result, the library discount on the reinforced bindings usually end up between 6 and 9 percent, the same discount received on a true library binding, which of course means that the wholesaler’s profit has jumped from a range of 12 to 19 percent to one more than three times that much. The small librarian will not buy reinforced bindings from wholesalers who perform this stunt, but will go to another wholesaler who doesn’t or go directly to the publisher and get the publisher’s full trade discount – which even if it is only 20 percent for libraries, is better than what the wholesaler is offering.
Discounts on bids
Some unfortunate librarians are required by law to obtain bids on their business. Still others get bids because they think they will receive better discounts as a result; these latter librarians are not so more unfortunate as hopelessly naïve, for this is where the less-than-home wholesaler can indulge in hanky-panky of the first order. Keeping in mind the usual maximum trade discount the wholesaler receives, what should the librarian think of the wholesaler’s representative who prefers a 44, 45 or 46 percent discount on trade books in exchange of all the library’s business? What we should think is that this person either is a fool, a knave, or a liar. And the librarian who believes this kind of pie-in-the-sky promise is just as foolish as the sales pitcher in the first place, since most librarians buy a lot of trade books, are we to believe that a wholesaler is going to give up all of nearly all of the profit from trade-book sales? And since librarians also buy a lot of nontrade books, many of which carry smaller publisher discounts trade books, what is the wholesaler going to do about those profits and discounts? What will prevent the wholesaler from simply supplying these books on which a greater profit is to be made, reporting less profitable titles as OP or OSI, and letting orders for those titles sit in a file until the library’s cancellation date is reached?
Simply put, getting bids is unwise, to say the least, whether or not one has to do it. If you must ask for bids, however, get an agreement in writing that spells out all discount terms, minimally acceptable levels of order fulfillment, and specific types of books that the wholesaler cannot or will not supply. Then monitor that contract with extreme care; if you don’t, you’ll end up paying more than you should for too many books, seeing holes develop in the collection where books ordered are not being provided, or both.
At one time or another, just about every wholesaler tries to convince its customers that they’ll be a lot better off if they accept a “generous” blanket discount on all materials purchased than if they got one discount for trade books, another on paperbacks, still another for short-discount titles, and so on. What usually happens with this “generic” discount, however, is that the wholesaler makes out big – with the library paying to make it possible. To illustrate, I received a letter from a large wholesaler (and usually a good one) stating that henceforth all books sold by them to libraries would be discounted at a flat 15 percent rate. What did this mean to us? Simply that buying books from that vendor had just become prohibitive. Here’s why: As a major public library system, the library for which I was working spent more than half of its $6 million book budget on trade and paperback books, all of which were discounted at an average of approximately 36 to 37 percent (since much of this business was done directly with publishers, some of whom offered smaller discounts to their library customers). Only about 20 percent of the budget was spent on limited discount books, those discounted from 15 percent down to no discount at all. In other words, with the wholesaler’s new flat 15 percent discount, the library would be losing up to 22 percent of the discount it had been receiving on 50 percent of the books purchased, and in return would gain 5 to 15 percent on 20 percent of the total books purchased. Even P. T. Barnum would be hard-pressed to find a sucker foolish enough to swallow that one.
Strict adherence to library policies
Libraries, like most other institutions, operate in certain ways and within certain parameters that are defined by policy that may be as formal as a written statement or as informal as a set of procedures that everyone understands and accepts. Whether the policy is formal or informal, however, the vendor who does business with the library is expected to follow these “rules of the game” at all times. It behooves the acquisitions librarian to put these policies in writing and to make them available to anyone who wishes to do business with the library, and to monitor how well each vendor does in meeting a library’s requirements.
Vendors, both publishers and wholesalers, frequently complain about the diversity among libraries’ requirements. Library A wants a part invoice arranged by ISBN, Library B wants a three-part bill with titles listed in alphabetical order; Library C wants unfilled orders cancelled in ninety days, but Library D will settle for 120 days; Library E requires that vendors ship all materials by UPS, while Library F specifies that the vendor must use the USPS’s library rate; and so it goes on. It may be true that there is little uniformity as far as library protocol go, but there are often good reasons why such diversity exists. Different governing bodies and agencies at various levels impose certain requirements on libraries, for example, and laws governing purchase vary from locality to locality. A wise vendor accepts this diversity and follows whatever reasonable structures the library mandates.
Some of the greatest advantages in dealing with wholesalers are extra services many offer to their library customers. For small and large libraries alike, such items as catalog cards and nominally processing kits or fully processed books can free staff of other duties and thus become a serious budget consideration. Larger libraries often use services such as gathering plans: lease plans, standing order plans, approval plans, and blanket-order plans. Except for lease plans, which are used primarily by public libraries, the other gathering plans are most useful in university or research libraries and in some special libraries. (Further discussion of the pros and cons of gathering plans follows in Chapter 10.)
A ray of light
While there are a lot of good reasons for library book purchasers to buy many or even most of their books from wholesalers, these vendors must be carefully chosen, constantly monitored, and dropped when and if it becomes necessary. For some reason, librarians loath to discuss the companies that provide them with books, but a discussion of their strengths and weaknesses is the only way to get rid of the rascals and keep the good folks in business.
Earlier in the chapter I mentioned an article I wrote on the pros and cons of dealing with wholesalers. The article was preceded by a survey of 320 libraries of all types and sizes on major aspects of their dealings with wholesalers: discounts, order fulfillment, accuracy, and others. The results of the survey indicated an almost unbelievable discrepancy among libraries as to discounts given. For example, one library with a book budget of nearly $1 million received a 38 percent discount on trade hardcovers from one of the largest wholesalers, while a nearby library with a budget of $12,000 received a 41 percent discount. A very small library in the South was given a 13 percent discount on library editions, while a major school system in the Cleveland, Ohio, area got only a 7.5 percent discount on those same books. With few exceptions, none of the 320 respondents were satisfied with their discounts or felt that they were fair or reasonable, and both those feelings and this sort of imbalance remains today. Nonetheless, most who responded indicated that they would continue to buy from wholesalers and felt there was a real need for this service.
The fact remains, however, that we are doing neither good wholesalers nor our library colleagues a favor by continuing to give library dollars to those companies not deserving of our support. They are the wholesalers who will do anything to get our business; who swear they can supply any book in print the day after tomorrow at less cost than any of the competition. They are the wholesalers whose representatives seem to believe that they deserve our business if they take us to expensive lunches or dinners often enough. They are also the wholesalers who overcharge us, misrepresent their inventories, and fill only those orders that make them the greatest profit. In short, they are the snake-oil salespeople of the book industry and should be avoided like the plague by those who purchase books for libraries, especially when it involves using taxpayers’ money to pay for them, as it usually does.
Good wholesalers do not play games with their library customers based on inflated discount promises; they do not give Library A one discount and Library B another when both libraries’ purchasing patterns and volumes are similar. They may never take you to lunch, but let their good service be their sales pitch. (And is there a librarian out there who really believes that all those “free” lunches aren’t paid for by the rest of us?)
Good wholesalers clearly state their discount structure in their ads for all to see. They give librarians access to their inventory through regular (usually weekly) warehouse-inventory status reports on microfiche, disc, or online. They fill each and every order that is possible to fill. In short, they conduct business with their customers professionally – which is the only way we should accept. The ray of light is that there are a lot of those professionals out there; we just have to find them and support their efforts as best we can.