Calculations…Why you must cut out the middle man

Running some numbers on book sales, retail price, wholesale discounts and production costs. I encountered a stunning reality that many of us know too well – the large book retailers are a powerful force, an empire, towering monuments of profit surrounded by impenetrable rivers of cash and little guys like us are the peasant villagers starving in massive mobs hoping the big guys drop a few chunks of change into the crowd for us to fight over. It’s depressing.

Here’s how the numbers break down

Standard wholesale discount on a book is 55%. This means if your book, say The Cigar Maker retails for $19.95, a bookstore like Barnes and Noble will buy it for $8.98. They turn around and sell it for full retail price. Meanwhile, if my production cost for unit is say, $7.07, the per-copy profits end up like this:

Profit for Barnes and Noble: $10.97

Profit for Author: $1.91

That just ain’t right. But what if you run into a Mom & Pop store that allows you to negotiate a better discount…say 30%. Then the situation improves…

Profit for Mom & Pop: $5.98

Profit for Author: $6.99

Much better. But what if you don’t deal with a bookstore at all and sell directly to the public, or through your website? That’s where it looks best…

Profit for Author: $12.88

But you’re not going to ignore bookstores and you’re definitely not going to ignore Amazon. Amazon (as well as any big guy) will probably discount your book to make it more attractive, say by 25% for a retail price of $14.95. This reduces their profit a bit:

Profit for Amazon: $5.97

Profit for Author: $1.91

There’s an easy way to beat this, but it requires careful watch and a little hands on work. Once Amazon lists your book, with the 25% discount (at $14.95) you throw your own brand new copy up there for $14.94. One cent less but yours is the copy that show up at the top. They’ll take their commission (looks like anywhere between 25 and 35%)…but it works out much better for you, the author…

Profit for Amazon: $3.75

Profit for Author: $4.13

No matter which way you do it, you’re getting screwed, unless you can sell directly to the buyer. Take these numbers and blow them up to assume you’ve sold 1,000 copies through each of the 4 avenues presented.

Barnes & Noble (55% Discount): $1910 profit

Mom & Pop (30% Discount): $6,990 profit

Sell Your Copy on Amazon (Discounts and Fees): $4,130 profit

Sell Directly to Buyer: $12,880 profit

Let’s say it costs $4500 to produce and market your book (a very modest budget) it doesn’t even make sense to sell through a major retail chain or Amazon. You’re better off doing it yourself….the problem is, can we live without the big guys? We’re like peasants fighting for scraps of bread tossed from the White Tower.

Grab what you can…then head on over to the The Cigar Maker Official Site and pre-order the book….It should be ready to go in about 3 weeks!

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3 Responses to Calculations…Why you must cut out the middle man

  1. Daniel Olson says:

    Very interesting Mark. Obviously the “big guys” are going to be taking a HUGE chunk of the margin due to overhead costs, etc. However, I never even THOUGHT of performing a little bit of trickery by discounting your book after listing. Very clever.

    You’ve hit the nail on the head with selling directly to the customers, except that, if you’re traveling, you have to keep those expenses in mind as well.

  2. John Yeoman says:

    Absolutely right. Going direct to the customer is the only way to make a sensible income. But there’s also another good reason, retail margins apart. If you, the author, sell to the customer the chances are you have captured the customer’s address – snail mail and/or email. With the customer’s permission, you can then offer them your next book. And the next.

    Or even something at a higher price.

    Because you now have no marketing cost, that’s where the profits really lie. In the after market…

  3. Frances Hunter says:

    Mark, I agree with what you’ve said. After the huge discounts, you just don’t make any money selling books through Amazon, Barnes and Noble, or Baker & Taylor. With a pretty hefty cost per book for a short print run, you have to price your books high just to break even…which certainly doesn’t encourage people to buy them!

    What these sites do offer is exposure–it’s hard to get that kind of traffic to your own website or through personal selling–and familiarity. Some folks would rather buy from Amazon than direct from the author’s site. That’s a good idea about offering your own book through Amazon marketplace and getting a bigger share of the pie.

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