Sunday, 8 July 2012

Wholesale Discounts

We mentioned in our post the other day wholesale discounts, and we've had a few slightly confused questions from people about this.

To clear things up, here's how the numbers break down.

The industry 'standard discount' for wholesale is 40% off for the bookshops involved. Anything less than this is a 'short discount' and becomes less likely to be stocked. To get there you have to give the distributors their cut too, and this is 15%. That means you need a wholesale discount of 55% to meet the expected norm.

Createspace work on their discount as follows:
  • Createspace eStore - 20%
  • Amazon - 40%
  • Everything else - 60%.

Now, Createspace only take 20% on eStore sales giving a very healthy profit per unit, but it isn't a proper store. No one can stumble across your title. They have to be explicitly given the link. The buying experience is awful, and they charge shipping.

Most users prefer Amazon. It's quick, it's simple and it feels good. Amazon own createspace so there is no incentive to compete with themselves, thus the poor store front. This is done at 40% margin. Amazon are createspace, so there is no distributor to take a cut so Amazon get the full whack (which is split between Amazon and Createspace, but the breakdown of that split is immaterial to the author).

Everything else is essentially expanded distribution (which costs $25 in setup), and here the set discount is 60%. This looks like a fair discount. The problem is Createspace take 20% for themselves here too. Then another 15% off for the distributor. This leaves a mere 25% for the bookshop, a short discount. This is why few books will get stocked in bookstores if printed through Createspace. It's their major downside in my opinion. Unless they get an order in person, or over the internet which is a guarunteed profit, the risk of losing money if the book doesn't sell will prevent habitual stocking. Remember: Createspace do NOT allow variable discounts, and ALL books are non-returnable.

So, my apologies if the 60% number if my previous post threw a few off - despite being a sizeable chunk off for authors, it isn't good enough for most bricks and mortar stores. You'll get listed by plenty of vendors online which could lead in to you (which includes a lot of Amazon marketplace sellers who undercut Amazon by a penny which is bad as the author gets a much better royalty through Amazon directly).

LightningSource lets you set your own discount. If you set 55% and allow returns, the same happens. 15% goes to the distributor (which rather cheekily is Ingrams for the most part, the parent company of LSI) and the remaining 40% goes to the shop. If you offer the standard 55% then you may well get stocked. Also, as we said in our last post, a short discount of 20% can be offered here to get Createspace eStore level royalties from all online sales - a very significant margin increase especially at volume.

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