Discount protocols for book dealers

By Kevin Mac Donnell author of article
Source: Interloc News, December 1997

In bookselling, where there are no hard and fast rules, discounting practices vary considerably. How can one determine what is acceptable and what is not? Here, one dealer offers his observations on this sticky subject. Of all the protocols that have evolved in the book trade, discounts generate as much fractious debate as any topic. They're a hot-button issue, and are continually evolving. And why not? In the book trade, unlike many other trades and professions, there is no licensing or certification, no universally recognized final authority, code of conduct, or professional standards. For these reasons, I had serious doubts about tackling the subject. Besides, anyone foolhardy enough to put into writing what is—at best—a loosely followed set of behaviors influenced by a constantly shifting consensus, runs the risk of being accused of "laying down the law." That is certainly not the intent here. That said, and with no angels in sight, I'll rush in.

NOT ALL DISCOUNTS ARE THE SAME

WHOLESALER/MANUFACTURER TO RETAILER — The oldest and most common discounts in business exist between wholesalers and retailers. The wholesaler offers a discount on bulk purchases to a retailer because he does not have to meet the considerable additional overhead expenses required in maintaining a retail outlet: sales staff salaries and benefits, lease space or mortgage, utilities, advertising, additional bookkeeping for numerous small transactions, etc. Many used or antiquarian booksellers keep a small shelf or section of new books, usually reference books or books on book collecting, but otherwise have little regular exposure to wholesale book trade practices that include long and short discounts schedules, return policies and procedures, and problems of competition with larger retailers who deep discount to the public. The rationale behind wholesale discounts is mentioned here as a way of putting other kinds of discounts in their proper context.

RETAILER TO PUBLIC — Discounts by retailers to the public are prompted by entirely different reasons: a need to reduce inventory for tax purposes, to reduce inventory to reduce storage costs, to move out slow-selling or discontinued merchandise, to generate cash flow, or to create a "loss-leader" that will entice buyers into a store who might purchase other products that have not been discounted. Unlike wholesalers, there is very little incentive for retailers to offer discounts on bulk sales since all of the overhead expenses associated with a retail outlet are fixed; the only overhead that is reduced by bulk sales is the cost of invoicing and bookkeeping. The rationales behind such discounting sometimes apply to the used and antiquarian book trade.

RETAILER TO RETAILER — Discounts between retailers are where things get interesting, especially for the book trade, because, like any other retail trade that handles secondhand merchandise, fellow retailers can be one of the major sources of supply, just as wholesalers are the major source of supply for retailers of new merchandise. For this reason a set of commonly accepted protocols is vital to a stable marketplace. The traditional rationale for discounting between retailers is that discounts will be reciprocated. This well-established trade practice allows retailers to buy a book for a good customer on small margin. Most trade discounts range from 5% to 30%. In the book trade, the traditional discount has long been 10%, and less often, 20%. Like many trade protocols, discount practices depend entirely on the honesty and goodwill of those in the trade. Let's examine some common book trade discount protocols and take a look at some of the problems that can arise.

THE EVOLUTION OF COMMON TRADE DISCOUNTS

STANDARD COURTESY DISCOUNT — At least as far back as the turn-of-the-century in America, the most common book trade discount has been 10%. Until about fifteen years ago, 20% discounts were uncommon. The expectation with this discount has always been that the bill would be paid on time or the discount would be rescinded, and that the discount would be reciprocated. For years this was understood, but in more recent years, as the marketing venues for rare books has expanded, more and more older booksellers have felt compelled to explicitly state these terms in order to avoid misunderstandings with booksellers new to the trade. Until very recently, many booksellers learned the trade by working for one of the larger established bookselling firms, but most of those firms have vanished, and more and more new booksellers have entered the trade without serving such an apprenticeship where they would have had prior exposure to established protocols.

BOOK FAIRS — At book fairs, the general practice has been that the books purchased at the fair must be paid for at the fair, regardless of the usual terms of the seller. The rationale behind this commonly accepted protocol is that book fairs are primarily a retail setting; and that booksellers who discount their books to fellow booksellers in such a setting deserve the courtesy of immediate payment. Those who have less than twenty years of book fair experience might chuckle at the thought of a modern day book fair being "primarily a retail setting" but antiquarian book fairs twenty years ago were few and far between, they were a relatively new venue, they were much cheaper to participate in, and retail sales predominated. Today book fairs are commonplace, they are a well-established venue, they are more expensive than ever, and most are marked by frantic activity between booksellers. More than a few booksellers joke that by the time the doors open to the public, the book fair is over as far as they are concerned. The rationale behind participation may have changed (the higher cost of doing book fairs) but the protocol has survived.

CATALOGUES — Because of the expense of printing and mailing catalogues, discounts from catalogues have usually been restricted to 10%, although a small number of booksellers mutually agree to reciprocate higher discounts from each others' catalogues. Cheaper venues like the various Internet services and trade journals follow this pattern, although the relatively lower costs associated with marketing books in such venues would justify a more relaxed attitude. Certainly, booksellers who request discounts when buying in one venue, but deny discounts when selling in a different venue, risk alienating their fellows.

IN-SHOP PURCHASES — Traditionally, the "standard" courtesy discount applied to booksellers buying in person rather than by mail or at book fairs. But over the last fifteen years it has become more common to see a 15% or 20% discount offered for purchases made in the shop of a bookseller who otherwise offers only a 10% discount.

CONSIGNMENTS — Traditionally, discounts have not been given on consignment books because the commission on such books is seldom large enough to allow a discount, or else the consignor will not agree to any discounting. To avoid misunderstandings, the common practice has been to circle the price on such books to indicate that the price is net, or segregate them from their general stock.

SALES TO NON-DEALERS — Customers who ask for discounts risk offending booksellers who price their books fairly, and booksellers who frequently grant discounts to non-dealers risk be perceived as unprofessional by many of their peers. In special instances, such discounting may be justified for one of the reasons outlined in my introductory remarks, but dealers who routinely practice this habit undercut their own pricing credibility, and don't win friends among their peers when one of their customers argues for a discount from another bookseller by saying, "well, so-and-so gives me 10% off everything I buy."

COMMON PROBLEMS

BOOK FAIR DISCOUNT SALES — It is not uncommon to see an exhibitor at a book fair hang a giant "50% OFF" sign over his booth toward the end of a fair. This never fails to inspire wicked squibs and scornful glances from fellow exhibitors, and many book fair promoters have now banned the practice. Most of us understand why car dealerships have sales toward the end of the model year, or why grocery stores constantly have some kind of produce on sale. But can you imagine the reasons why somebody would slash their prices the last day of a book fair? Because they brought junky books? Because their prices are too high? Because nobody else would buy their books? Any savvy advertising executive will tell that if you are going to have a sale, pick your time and place carefully and say WHY you are having the sale. Otherwise, you risk undercutting your credibility and people will imagine the worst. Why sacrifice long-term public relations for short-term profits?

NET TO ALL — This is not a problem as long as the person who sells under these terms does not expect to get discounts from others. Too often, this is not the case, and therein lies the rub.

CATALOGUES — A very small percentage of the booksellers who issue catalogues mail all of their catalogues at the same time, but make all prices net for thirty days or some similar period. In this way the bookseller maximizes profits by offering the commonly accepted discount only on material that remains unsold after thirty days. The rationale is that fellow booksellers should give up their discount if they wish to be able to have an equal chance at the material as retail customers. Other booksellers simply delay mailing catalogues to booksellers until a week or two after they have mailed catalogues to their retail customers. The rationale is similar, but the method is sneaky, since few who do this readily admit that they do it. There is no problem with this, as long as those who do it expect to be treated likewise. A few do, but they are notable exceptions. Once again, why sacrifice long-term public relations for short-term profits? Happily, these practices have become less common over the years.

FALSE DISCOUNTS — Dealers who deliberately overprice their material in order to give "great" discounts are quickly spotted by their peers, and get a reputation. An example of this is a bookseller who regularly raises his prices by 100% before book fairs, and then offers 50% discounts to anybody who thinks to ask. Anybody who is paying any attention sees through his ruse. People who fail to ask for a discount pay double his normal retail price. Those who did ask for his discount were actually paying his usual retail price, and many who are given one of his 50% discounts, then expect it from other dealers who have priced their wares fairly. Finally, when this particular bookseller approaches other booksellers asking for 50% discounts, he is simply putting the last nails in his coffin. Even on Interloc transactions, have you ever bought a book for, say, $50, received a 10% or 20% discount, and when the book arrived, found it priced $35? Likewise, have you ever walked into the shop of a person who lists his stock at net prices on Interloc and found that his "net" prices on Interloc matched the retail prices in his shop? The dollar amounts are small, but the reputation gained by such antics is far more costly. Oh, what tangled webs they weave.

BONAFIDE BOOKSELLERS — In recent years it seems that everybody is a bookseller. This feeling is felt the strongest by those who have been longest in the trade. In the old days anybody who did not maintain a storefront was considered a book scout. These days veins bulge and faces redden as booksellers debate (the nicest word I know for it) who is or is not a bona fide bookseller. I'll suggest that on the matter of discounts, reciprocity would seem to be the logical criteria. If a self-proclaimed bookseller—and aren't we all thus, since nobody assigned us this role in life—allows you to buy from him or her at the same discount, maintains some sort of inventory to which you are granted some sort of access, and clearly prices his or her books for retail sale, then (s)he is able to reciprocate. It seems irrelevant whether the dealer has a printed letterhead, printed invoices, business cards, a tax resale number (although I will charge tax if (s)he doesn't have one), business checks, a storefronts, bad hair, and a nubile assistant. (These just happen to be what I personally consider to be the essential telltale signs of a bonafide bookseller).

PRICING — A bookseller who shall remain nameless used to leave his entire stock unpriced, but put what looked like a cost code in each book. The usual practice with this bookseller was for a buyer to stack up what they wanted. The dealer would then go through the stacks and give his "net price." I broke his code (a hobby of mine) and discovered that his code was a price code—not a cost code. I also learned that this bookseller changed his prices, depending on how much money he thought a particular client might pay for a book. Leaving material unpriced is pushing the ethical envelope—and the law in some states—and makes it impossible to know if you are being treated fairly, or even getting a reciprocal discount. Once again, why sacrifice long-term public relations for short-term profits?

DEMANDING DISCOUNTS — Booksellers often get an order from a "bookseller" demanding "their" 10% discount to which they are "entitled." Frequently, this demand comes from an individual who does not issue catalogues, exhibit at book fairs, list his inventory (if any) on the Internet, or advertise his books for sale in any trade journals. How can the bookseller ever expect this demanding person to reciprocate if the bookseller can't buy from him? And since when did buyers set the terms of sale?

So Whataya Gonna Do?

The answer to that question is one that every bookseller must answer for himself. In formulating your own policy keep in mind that these protocols did not grow in a vacuum or become widespread for no good reason at all, and remember two guiding principles that will overcome almost any misunderstanding or confusion over discounts: 1) The seller sets the terms—not the buyer—and the buyer must respect that. 2) Reciprocity rules, aka The Golden Rule.

Kevin Mac Donnell is the owner of Mac Donnell RareBooks, which specializes in English and American literature, first editions, and manuscripts. You may contact him at Mac Donnell Rare Books, 9307 Glenlake Drive, Austin/TX 78730, (512) 345-4139.