In the process of books getting to the marketplace, there are three ways that books are distributed – wholesalers, book distributors and fulfillment centers.

There are some very significant differences between these service providers. It is much easier to understand someone’s motivation when you understand where and how each of these providers generate income. So, let’s follow the money trail and see where it leads.

1. Wholesalers

Let’s begin by defining what a Wholesaler is and how they work. Wholesalers buy books from publishers and distributors for resale to retail stores, libraries and other book trade locations. Normally, the publisher’s relationship with the wholesalers is non-exclusive. The value proposition for the wholesaler is finding books of interest for their retail trade stores, libraries and book trade stores. Larger wholesalers, such as Ingram or Baker & Taylor, act like order takers, while smaller wholesalers have sales reps and create catalogs to sell books into the trade stores. In both cases, success for a wholesaler is having a book that will sell with little or no marketing efforts.

The wholesaler buys books from the publishers at a discount of 50% to 55% off the list price. In many instances they will want the product on consignment until the product is actually sold. Wholesalers will only accept a very limited inventory, hoping to turn that inventory 4 to 6 times per year. In turn, the wholesaler will offer the books at a discount of 20% to 30% to their clients. If the books are on consignment, you can expect to be paid about 90 days after the sale with about 10% held back for potential returns.

The main thing to remember about a wholesaler is that their mindset is that there are plenty of books available, so they are only interested in product they believe they can sell easily. The author and the publisher are responsible for marketing the books. The wholesaler earns their dollars by selling to retail stores, libraries or other book trade locations.

2. Book Distributor

A Book Distributor acts as a link between the publisher and retailer in cases where the publisher does not want to be involved in the direct selling process, or they do not have a list large enough to sell directly into the trade. (Unfortunately, some larger book retailers will not even purchase books directly from small publishers.) The value proposition for the book distributor is offering a ready-made, outsourced sales force and the ability to get books into the large chain stores.

The fees charged by a full service distributor will generally run between 20% to 30% of the list price, but can be as high as 35% to 40%, depending upon the distributor. In turn, the distributor will offer the book to their clients at 40% to 50% off the list price. Normally, the distributor requires an exclusive right to sell the publisher’s product. They have sales reps, create catalogs and sell books into the trade. The distributor will warehouse a limited amount of books (maximum of a 1 year supply before charging extra).

Some may try to make the argument that a distributor takes the place of your in-house sales operation. However, sometimes you need to take a step back and look at the bigger picture. It is still the publishers’ responsibility to market the book and create demand through advertising, promotion, author tours, etc. The distributor simply fills the orders that result from those marketing efforts. Many distributors handle thousands of books from several hundred publishers. There may not be enough time for the distributor to give each publisher a lot of individual attention.

While the services provided by a distributor can be quite costly, they are almost essential for a small publisher who wants to sell books into the book trade across the country, or in a different country. When you calculate the fees discussed above, it’s easy to see that there may not be much income left for the publisher. It’s no coincidence that as a publisher grows and becomes large enough, they find it more economical and more effective to have their own sales force representing their books. After all, who cares more about your books than you?

When you follow the money, the wholesaler and distributor will look very similar. They receive all their money from the bookstores, wholesalers, libraries or other book trade partners that buy books and that is also where their loyalty lies.

3. Order Fulfillment Center

An Order Fulfillment Center…

• stores the inventory
• accepts orders via telephone, email, web, EDI or USPS
• bills and collects from the end buyer
• packs and ships the books
• processes returns but does not market or sell books

An order fulfillment center is an extension of the publisher. Most publishers lack the storage space to house massive quantities of books and prefer to focus their energies on the acquisition and publishing of manuscripts rather than on the back room activities of warehousing and fulfillment. The value proposition for an order fulfillment center is offering the most economical method to market. For a publisher who can handle their own sales, a tailored warehousing solution offers a high degree of professionalism while maintaining brand identity for the publisher.

Fulfillment centers have evolved past just offering pick and pack services. Some provide publishers help with web design, setup of e-commerce sites or shopping carts, website management, ebook solutions, sales report generation, royalty reports, sales commissions, sales campaign tracking, outbound sales calls, inventory management (including POD), assembly of POP displays, trade show representation, and many other services. The best part is that all of their loyalty lies with the publishers they represent.

A fulfillment center charges a fee for these services. Some fulfillment houses charge a share of net revenue, while some charge on an activity base for particular services. Generally, the activity base is more equitable for everyone. You should not have to pay a higher price just because your books are more expensive. It’s the labor to perform the task that you are paying for. When you follow the money, the fulfillment center receives its money from the publisher.

Finding the Best Fit for You
Each of these three methods offers a unique value proposition and it’s your responsibility to understand which offers the best value for your publishing house. As you evaluate each option, keep in mind how the dollars are earned and select the provider that will best fill your needs.