Just mention the word "returns," and most booksellers get a pained expression on their face. Many regard them as a necessary evil, difficult to deal with and costing too much in time, salaries, and freight. Yet returns do pave the way for new inventory and prevent stores from being overbought—the flip side of ordering. As Jay Weaver, buyer at University Bookstore in Seattle, Wash., put it, "Returns are a nice thing that publishers allow us to do."
To find out how publishers' returns rates translate into dollars and shipping cartons on the bookseller side, PW talked with a variety of independents. They shared their tips on how they manage returns, how they've changed their buying strategies, what alternatives they've found to returns and how they decide what to send back and when.
The High Cost of Shipping
"We do 150 author events a year," said Vivien Jennings, co-owner of Rainy Day Books in Fairway, Kans., who ranks events as the leading cause for running up returns rates at her store. The problem, as she sees it, is that "there's a fine line between having enough stock and having to return 200 books. The idea that if it doesn't sell you can return it is deceptive in terms of profitability. If you look at the UPS draw every month, it's pretty expensive if you don't control your returns." One of the things Jennings has done to cut costs is make a trucking arrangement with a nearby manufacturing company that is willing to wrap skids and truck returns for her. "It's like night and day," said Jennings. "It's shocking to see the difference between a truck load and UPS."
At the same time, Jennings has tried to find an alternative to returns. Last year she created a Going, Going, Gone section in the back of the store for adult titles, children's books and gift books that were overbought or had pages that had yellowed or were about to be superceded by a new edition. "Even though the markdown percentage is a little bit higher than what you get for returns, when you factor in all the return costs, you're still ahead," said Jennings, explaining how she decided on a 50% discount for the section. "Plus, you get your money right away." To prevent price-conscious customers from waiting for books to move into the discount area, she is careful not to include bestsellers that the store overbought. "We don't put everything in there; we want it to be a serendipitous situation. You want to make sure those people who are willing to buy hardcovers buy hardcovers," said Jennings. A lot of Going, Going, Gone titles tend to be big fat hardcovers, which are expensive to ship back, as well as small press books, which may be more complicated to return. So far the section is working; between April and December 2002, $40,000 worth of books were gone.
Given her store's location in the Pacific Northwest, Chauni Haslet, owner of 20-year-old All for Kids: Books & Music in Seattle, also has reason to worry about cutting shipping costs. "When we order from a publishing house, our minimum is two and our maximum is 12 to 18. We don't want to spend the money sending things back," Haslet said. With the exception of holiday-specific titles, which she returns as soon as Christmas, Easter or Kwanza has passed, Haslet would rather try to sell a book than ship it back. For example, when Haslet hosted Gary Paulsen for one of six nationwide events in February, she ordered a mix of 900 backlist and new books. Afterward, she had 300 unsold books and commitments from local organizations for two-thirds of them. Of the 100 remaining, said Haslet, "we'd rather work for three months and sell those books, because we can't afford to send them back. We have a tendency to hold on to things longer. We'll do anything we can to sell them."
Much further down the coast at Adventures for Kids in Ventura, Calif., "We've gotten much more aggressive about inventory management," observed owner Jody Fickes Shapiro, who relies on an outside inventory firm to go through her stock every month, department by department, to prevent her from being overbought. For Shapiro, "returns is a fairly continuous process. We're pretty committed to it; we're constantly running reports. An easy return is the stack of 12 that you thought would win the Caldecott. Sometimes you say, 'That book is so good, I can't return it.' If it is, then handsell it."
Even with a combination of returns and handselling, there are still some books that need to be pruned from the shelves. For those titles, Shapiro has developed a three-tiered system of markdowns and giveaways. "First," she explained, "we sell them at 50% off for our birthday sale, which we do one or two times a year. Second, we mark them down to 50¢ for our parking lot sales. And then after that we donate a box of books to each area school."
It's not only smaller specialty stores that commit to giving books a chance. At University Bookstore, which stocks 120,000 trade titles, Jay Weaver said, "It bothers me to return something you thought would be really big. I'll hold on to it. Generally, we do try to give books nine to 12 months." Despite the longer shelf time, University Bookstore systematically removes books that are past their prime. Section heads pull small publishers and university press books once a month; larger houses like Random House are pulled twice monthly. It's up to the returns coordinator to decide whether or not to return the books, which can be costly from the West Coast, or mark them down and sell them at the next semiannual sale.
Enough Is Enough
Barry Rossnick, trade buyer for all eight Books Inc. stores that feature new books (there's also a bargain book outlet and gift store), has no qualms about moving out books that just don't work. Last November, when the store was flooded with books that weren't selling as anticipated, he took the untraditional step of making a large pre-Christmas return, which freed up space for the books that were selling. "We return pretty quickly," Rossnick told PW. "Because we have small neighborhood stores, we want to keep books fresh. A lot of our customers are in two or three times a week." In addition to the store's usual post-holiday stock purge, Rossnick cycles through each section every two months.
Returns rates for Books Inc., like those of most independents, are lower than industry averages, closer to 15%—18% across the board. "We buy very much just-in-time," Rossnick explained. "Even though we're buying frontlist, we only buy a week's worth." For new nonfiction, he is ruthless about sticking to the two-month schedule, although he cuts fiction a little more slack for word-of-mouth to build. "If a nonfiction book doesn't sell after somebody has their Dateline, Fresh Air or 20/20 appearance, it's not going to," Rossnick said. "There's too much interchangeable product out there. If you pull something from the parenting section, there's going to be something exactly like it coming in the next week."
To make returns more efficient, each store is responsible for boxing up its returns and sending them to the warehouse, where staff pallet them and ship them back by truck. Books, Inc. has a variation of Vendor of Record with Ingram for smaller presses. Rossnick prefers to pay the 8%—10% penalty and return those books directly to Ingram. "We make that tradeoff all the time," he said.
At Merritt Bookstore in the village of Millbrook, N.Y. (population 1,300), returns rose in 2002. "Our increase in returns was equal to our loss in sales," explained owner Scott Meyer, who questions whether returns are really the nemesis many of his colleagues make them out to be. "If I didn't have returns, I wouldn't take as much chance with new books," he pointed out. "I've tried to cut down on returns at the front end by buying less." Meyer prefers to keep his initial buys small— one to five copies—and to reorder from the publisher if a book takes off. He likes to make sure that his buys get credited to his sales reps, because he looks to them for so much help with the store, including what to return. "Often reps will walk the store with you and pull books for you," said Meyer. "Some publishers have a program where they'll create a returns list for you."
For Daniel Goldin, trade book buyer at Harry W. Schwartz Bookshops, with six stores in Wisconsin, the dieting approach to buying (i.e., keeping frontlist purchases lean), doesn't work. "A lot of times a buyer will say, 'I'm going to buy a lot thinner,'" said Goldin, "but it's a lot easier to be stricter about your returns criteria than your buying criteria. My goal is 20%, which is higher than a lot of independents. Any publisher I do any promotion with is 25%." The higher rate accounts for his more aggressive buying to support newsletters and events. Similarly, publishers with large lists also experience higher Schwartz returns. "I'm not skipping that many Random House or that many Penguin books," said Goldin. "The stores are about 10,000 square feet and if I think the book has a chance of getting in the New York Times Book Review, I'll try it. I tend to see my buying from publishers as a partnership."
Tightening the belt on inventory at Schwartz stores means pulling returns by vendor in January, May and September. In addition, Goldin does spot returns when a promotion or author event has ended. To make way for calendars in the fall, store managers will decide which sections to cut back on, which often translates into more returns. In general, though, Goldin decides what will be returned. "The problem with section coordinators determining returns is that people emotionally attached to a section don't want to let go of the books." Rather than intersperse buying and returns, Goldin prefers to keep each part of his job separate. "You have to have a different mindset for returns," Goldin said. "When I'm buying, I have to be optimistic."
At BookPeople Bookstore in Austin, Tex., returns rates for major publishers vary from 9% to 25%. Inventory manager John L. Barton's biggest concern is tracking down small publishers whose books were special-ordered. "There's no returns information when a special order is being placed," explained Barton. Currently the store requires a cash deposit for all special orders over $50, but Barton is considering one for smaller orders as well.
One full-time person works with Barton on returns; the buyers are responsible for pulling returns from their sections, which can be problematic. When buyers are backed up with too many other duties, returns can sometimes lose priority. Buyer Jill Bailey, whose specialties are children's and gardening , noted, "It's very hard for me to find time to do returns. All my reps say, 'Your returns are down. They're almost too down.' Mostly I find returns when I do reorders or when I'm looking at new books and check how the previous books have done. Ideally, I'd like to be a buyer that doesn't have to return."
A Better Way
Unfortunately, returns are a reality in today's less than perfect world. "We think about returns a lot," said Arsen Kashkashian, inventory manager at Boulder Book Store in Boulder, Colo. "We do a significant amount more than we did five years ago." Although he estimates the store's average at 20%, he notes that certain sections, like Buddhism, which has almost no returns, bring the figure down. The store does mark down some books, mostly from smaller publishers that it doesn't want that much credit with.
As at most bookstores, buyers at Boulder Book Store are responsible for pulling their sections, usually two or three times a year. For Kashkashian, that's a good thing. "You'll have a better idea of what's selling. The buyers have some hands-on experience," he commented. However, because Boulder uses a list of 60 publishers to pull from, the system does have its Achilles' heel. "You could end up with new books from bigger presses and books from five years ago by smaller presses," said Kashkashian, who plans to remedy that problem this year.
Unlike many booksellers, Kashkashian doesn't subscribe to the money-pit theory of returns. Instead, he pointed out, "returns on the big presses are paid for by exempt co-op [money earned on buys for specific titles, above and beyond a store's co-op pool]. If I have to buy 10 books to get $100 and I return five of them, we've already made that decision. We'll get $2,500 for exempt co-op from a buy with Random House, which is going to come out to roughly $1 a book. Sometimes it works—you get the money and you sell the books."
80/20 Rule
Bob Hugo owns three carriage-trade stores in Massachusetts, including Spirit of '76 Bookstore in Marblehead, and co-owns two more in New Hampshire. He looks to the 80/20 rule of retail when it comes to returns: 80% of sales come from 20% of publishers. Rather than the post- and pre-Christmas binge and purge of January and July, he does returns for big publishers like Random House and Simon & Schuster every month. "Returns have to be on an ongoing schedule. Every single month you have a budget for Random House, and you should return to Random House," said Hugo. "If you do, then you'll pick up 80% of your returns."
Hugo said that he prefers to work "hand-in-glove with our computer. Returns are a way to really pay attention to the sad side of inventory: poor receiving, misfiling, missing books. We're starting to do rolling inventories of sections. I print out all the biographies and have someone start circling books, where the computer says two and we have one. The big thing about rolling inventory is your staff knows where the books are."
Of course, the biggest issue with returns is cash flow. Hugo does not advocate using returns to pay monthly bills, but he does consider it part of the buying process. "With just-in-time buying and the speed of wholesalers like Bobby Koen," said Hugo, "what's right for us is to buy five. If that whole five sells, Koen will get it on our doorstep the next day, so our exposure, or money tied up, is five. For a big book, if you buy the display dump, you have a three-month supply, but you have to pay in 30 days."
Despite all the philosophizing, Liz Murphy, who has owned the 2,300-square-foot Learned Owl Bookstore in Hudson, Ohio, for the past 20 years, may have summed it up best. She said, "I don't think returns are under control anywhere." In fact, many booksellers employ her similar seat-of-the-pants returns policy: "When I sit at the counter," said Murphy, "and see that my fiction and my nonfiction sections are sitting there spine out, I grab someone and say, 'let's do returns.' " And like Murphy, many booksellers do buy small press titles nonreturnable. But they're glad to know that for most books they take a chance on, if it just doesn't work out, they can send it back.
