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Selling Dismally?

April 2000

Subject: Selling Dismally?
Date: Sun, 16 Apr 2000 14:13:37 -0700
From: "Tim O'Reilly" <tim@oreilly.com>
Organization: O'Reilly & Associates, Inc.
To: list@studiob.com

On Sat, 15 Apr 2000 15:00:55 -0400, "Laurie A. Ulrich" wrote:

I currently have a book that's selling pretty dismally, about 1000 copies a month, and someone is returning that many or more every month as well, so I'm netting nothing on the book. If more are coming back than are going out, how does (does that) affect rank? It has a fairly nice rank (between 2000 and 5000) on Amazon, so I'm wondering how it can have such a number while it's being returned in droves?

There are two issues here:

  1. Returns, and how they can disguise actual sales
  2. What is a "good" figure for monthly sales

Let me talk for a moment about returns, and one of my biggest beefs with how our industry typically does business. (I've ranted about this in the past, but it's been some time since I've done so, and it may be time for another outburst.)

The typical sales pattern for books involves selling in as many copies as the publisher can possibly persuade the channel to buy. The idea is that if you stock up the shelves, the books will be visible to end customers, and authors and publishers won't lose sales when customers can't find the book. This is true in theory, but like a lot of things, can have some real drawbacks in fact. Due to the realities of bookstore budgets, a book that is heavily stocked must sell heavily, or be returned. Due to the realities of buyer psychology, a book that is heavily returned is less likely to be reordered, even if it would continue to sell.

The net result is an industry that's always "fishing for bestsellers." That is, publishers try to sell in tens of thousands of copies. In most cases, 30-50% of those copies will be returned, and if the book meets expectations (i.e. has that high return rate), the book will eventually disappear from the shelves as retailers and publishers look for a book that outperforms, that sold in heavily but didn't return heavily. That is, a book has to exceed (not meet) expectations for sell through in order to become a standard.

By contrast, a book that is sold in appropriately has a much stronger chance of staying on the shelves and being reordered. As I've often said, if a store stocks two copies, and both sell, they'll be happy. If they stock ten copies, and three sell, the book is considered a failure. You might argue (as many do) that it's better to sell three copies than two, but I would argue that in the latter case, three is all you're likely to sell, while in the former, you'll sell two, and two, and two and two, till the tortoise has far outstripped the hare.

Appropriate sell-in, by a publisher whose sales force is not incented to push in as many books as they can (e.g. to make end of quarter numbers and bonuses, or whose bonuses are measured on gross sales rather than net sales), can make all the difference in the world. This is how O'Reilly could build our line with books that sold (in our early years) 5-8000 copies a year, but kept selling year after year, so that books with initial sell in of 2000 copies could go on to sell hundreds of thousands of copies over their lifetime, while books with initial sell in of 15000 copies had lifetime net sales of 10,000 copies. (Nowadays, we get big sell in, but I cringe every time it looks too big, since I worry that a great book may be tarnished by too much early enthusiasm.)

The reason why many people prefer heavy sell in to a slow and steady approach is because they don't have long term expectations for most books. They are experiments, to see what outperforms and should get further backing.

The point is that this system can be made to work for a publisher, but it works *against* most authors. Yes, there is that wonderful hope of winning the bestseller lottery, but the odds are against you. Just as in gambling, where the house rakes off a portion regardless of whether you win or lose, most publishers are still profitable even when the books they publish only meet expectations, are returned in high numbers, and die. If you're working with one of these publishers, you should realize that you are likely in many cases to see only your advance, or advance plus a few quarters of royalties. Authors, of course, are complicit in this system, writing "me too" books that are simply cannon fodder for the system.

At any rate, while the industry wisdom is that if you don't sell in heavily, you aren't maximizing your profit opportunity, I believe the opposite. I believe that you're better to undersell a good book than to oversell it, since word of mouth will get the buyers to order (or reorder), while even a very good book can be lost once it is bought in numbers larger than the market will support, and then heavily returned.

How can a book be be ranked high on Amazon even when it is being returned so heavily, you ask? The answer is simple: real end users are buying the book. They just aren't buying it fast enough to keep the number of copies on the shelf that were originally sold in.

This is a death spiral, unfortunately. The buyers tend to see the large returns, and not notice the sales, since the net is negative. The publisher does the same, and stops supporting the book. After all, when a book is selling "negative" copies, it tends to fall off the radar really fast. Personally, I always try to look at the top line first: how many new sales are there to offset the returns? If there's a good top line, I'll try to wait out the returns, or lobby buyers to keep the book longer, or do more to support the book with marketing. Only if the top line is dead on a monthly basis is it time to throw in the towel. Unfortunately, the same psychology that leads amateur investors to buy stocks when they are hot, and sell them when they are cheap leads authors, publishers and retailers to notice only the net sales at the bottom.

All that means, as I've suggested above, is that your publisher sold in too many (or the retailers bought too many) copies in the beginning. You are "repaying" that debt with returns. The problem is that your "credit" may have gotten besmirched in the process.

BTW, I am probably being too harsh in my indictment here. It's very hard to get the numbers "right" so that a book sells in perfectly. However, I do think that there's a lot of players complicit in a system that treats books as fungible products, tries them on for size, and discards them too easily. The industry would be better off if we published fewer, better books, and supported them longer in the marketplace.

Now, as to your second question, and the comment that first caught my eye. You said: "I currently have a book that's selling pretty dismally, about 1000 copies a month." Alas, this brings up my second big beef, the inflated expectations that pervade our industry, and the real disconnect between the expectations of publishers and the expectations of authors.

For a publisher, 1000 copies a month (leaving aside the returns issue) is a decent seller. They hope to do better, but it sure isn't the bottom of the barrel. If you think 12,000 copies a year is dismal, you're in for a lot of disappointment in your career as a writer. I'll lay odds that when most writers are producing their opus, they are hoping for the big time, the success of a John Levine (Internet for Dummies et al) or a David Flanagan (Java in a Nutshell, JavaScript: The Definitive Guide, et al.), who sells hundreds of thousands of copies of his books, year in and year out. But the fact is that most publishers expect that *most* books will sell 10-20,000 copies in their lifetime. They are putting out those books not because those numbers are all they hope for, but because they can make a little money at that level, while fishing for the big wins. So authors should be prepared to consider a book that sells in that range as a modest success, just as their publishers do. Dismal is when you sell 10,000 copies, and 6000 of them come back, and your ongoing monthly sales are a few dozen copies a month.

If you can wait out your returns, a book that is still selling in a thousand copies a month (even if the net number after returns is close to zero) is one you should still be rooting for!

P.S. on returns: I'm noticing an increasing trend among some retailers to "manage to a returns target." Buyers are forced to return books even if they are selling, in order to meet internal financial goals. They will often return books, and then reorder the same book, sometimes the same day. This resets the company's payment clock with the publisher, and they get another 90 or 120 days to pay for the books on their shelf. Of course, there's a huge overhead for the publisher in this practice. It's usually a sign that a retailer or wholesaler is on a downward spiral when they resort heavily to this practice, and its greater prevalence in the past year gives me some concern about either the financial health or the management morality of some companies that I once thought fairly highly of. I won't mention any names, but you know who you are.

P.P.S. The buyers at these companies are not responsible for this practice. They often despise it as much as their publishers do. It's the management that's to blame.

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