• Skip to main content
  • Skip to after header navigation
  • Skip to site footer

The Steve Laube Agency

Helping to Change the World…Word by Word

The Steve Laube Agency

The Steve Laube Agency

Helping to Change the World Word by Word

  • Home
  • About
    • Who We Are
    • Frequently Asked Questions
    • Interview with Steve Laube
    • Statement of Faith
    • Terms and Conditions
    • Privacy Policy
  • Guidelines
  • Authors
    • Who We Represent
    • Awards and Recognition
  • Resources
    • Recommended Reading
    • Christian Writers Market Guide Online
    • Christian Writers Institute
    • Writers Conferences
    • Freelance Editorial Services
    • Copyright Resources
    • Research Tools
    • Selling What You Write
  • Blog
  • Contact
  • Twitter
  • FaceBook
  • RSS Feed
  • Get Published
  • Book Proposals
  • Book Business
  • Writing Craft
    • Conferences
    • Copyright
    • Craft
    • Creativity
    • Grammar
  • Fun Fridays
Home » Economics

Economics

Bookstore Economics 101

By Steve Laubeon May 3, 2021
Share18
Tweet
15

It will be interesting to see what the physical retail bookstore landscape looks like a year from today. Mark your calendar. We’ve had over a year of varying degrees of physical store closures and limitations. Much optimism is circulating that a form of shopping in stores will return. But how much and will it be enough?

To help understand the economics of bookstores, I’ll take a quick look at some of the things that make selling books out of brick-and-mortar stores difficult. So put on your math cap, and let’s take a ride.

This article focuses on the bookstore, not the publisher or writer. I spent over a decade in the Christian bookstore business; and while that was a long time ago, the economic principles are the same.

Let’s start with a $10 book (retail price). I’m using $10 because it will make the math a little easier to follow. [Yes, books retail for more these days; but doing math for retail prices of $13.99 or $26.99 is harder to illustrate!]

The bookstore buys the book for $6.00 (or 40% discount off the retail price) from the publisher (who calls that $6.00 the net price). Note that this discount varies between 40% and 50%.

When the book sells to a customer, the store then makes a $4.00 profit ($10.00 – $6.00 = $4.00).

(Still with me?)

If the store discounts the book during a 20% off promotion, they have to sell two copies to make that same $4.00 profit. But often a 20% off sale is not enough to double the sales volume. Why? Because a high-volume operation like Amazon.com is happy to sell that $10.00 book for $6.50 (35% off) every day. They can do this because they plan on selling 10 copies at the discounted price and clear $5 in profit. This pricing strategy has a chilling effect on the ability of the local store to compete. The industry calls this a “volume” business model.

An operation like Amazon can do this because they have a different expense structure than your normal store-front bookstore.

Remember, the publisher is obligated by law to offer the same discounts to the same vendors based on the volume of their purchases. So don’t believe the myth that Amazon is buying the above book for $3 and selling it for $6.50. (This law is the Robinson-Patman Act of 1936.)

In my heyday as a bookseller, our store did nearly $2 million in annual sales. That sounded like a lot until I discovered that the local Price Club (a precursor to Sam’s Club and Costcos) did $1 million PER WEEK in sales. High volume, low prices. Their sales crushed the local independent stores because they simply didn’t have the volume in sales to compete solely on price. And Price Club was not reliant on a single type of product line to generate their sales. They did not care if they sold a Bible or a set of new tires. Now we have Amazon that carries all the same products found in the bookstore (not just ten bestsellers) but also sells nearly everything imaginable (including a $31,000 safe). A one-stop-shop.

Let’s go back to that store that made a profit of $4.00 for the sale of a $10.00 book. Here is a list of some expenses that the $4.00 in profit covers:
Rent
Salaries
Utilities
Telephone
Advertising
Office supplies
Shrinkage
Bank charges
Taxes
etc.

Shrinkage? That fun line-item is about 3% of sales. It includes shoplifting, employee theft, and paperwork errors. Believe it or not, one of our Christian bookstore’s biggest areas of “shrinkage” was leather-bound Bibles.

Bank charges include the percent that the credit-card company charges to process your purchase. This can range from 1% to nearly 3% of every credit-card sale.

Our store did a training video to show new employees how this all worked. We started with a $10 bill in the palm of a hand received for the sale of the book we mentioned above. When all expenses were deducted (cost of the book, rent, salaries, etc.) there were two dimes left in the palm of the hand. There is very little room for error for the storefront retailer.

See why your local stores are having a tough time in this online age? A good friend of ours had her bookstore for 32 years. When the economy soured in 2008 and the city built a light-rail track in front of her store, her sales during Christmas plummeted 40% compared with her previous year. She went bankrupt.

To counter the online pricing wars, some stores are becoming boutiques where books are not as critical to their profit margin. A store may have a larger gift or greeting-card section–items with which they do not have to compete with Amazon. Others create community spaces with coffee shops and hold local events to draw people to the store. But it is a huge struggle because it is hard when the profit margins are thin.

Another friend of ours had a store for nearly 30 years, but a competitor moved close by that was part of a large chain. And then the landlord wanted to increase their rent by 30% with escalating rates during the life of the lease. They had survived the economic struggles of 2008-2009, but this lease was the last straw; and they could not continue operating.

Will the bookstore industry fade away as the computer stores have? Will we find fewer places where we can browse for selections, or will book sales move entirely online?

Time will tell!

But if you see this as a downer of a post, remember that book sales themselves are just as healthy as ever. Publishers have found new places to sell their books. And many authors have seen the need to be authorpreneurs to get their books into as many hands as possible.

Leave a Comment
Category: Book Business, Book Sales, TrendsTag: Book Sales, Bookstore, Economics

Show Me the Money!

By Karen Ballon June 7, 2017
Share67
Tweet
48

I’ll never forget the Sunday I was getting ready to leave church, and the pastor’s wife came up to me and touched my arm. “Karen, my son can’t find a job, so he’s decided to make some fast money by writing a book and having it published. Do you have any counsel for him?” I’m so proud of myself that I didn’t guffaw in her face. Not so proud that I fixed her with a hard look and replied, “Do me a …

Read moreShow Me the Money!
Category: Economics, Money, The Writing LifeTag: Economics, Faith, Money, The Writing Life

Family Christian Stores Closes All Locations

By Steve Laubeon February 27, 2017
Share351
Tweet
53

Last Thursday Family Christian Stores (FCS) announced they will be closing all 240 locations in 36 states, liquidating their inventory, and laying off over 3,000 employees. It is a sad day for Christian retail. In this case, the only surprise is that it came so soon after their previous bankruptcy reorganization. In February 2015 FCS suddenly declared bankruptcy and it was not until June of that …

Read moreFamily Christian Stores Closes All Locations
Category: Book Business, Economics, Legal Issues, Publishing History, Publishing NewsTag: Book Business, Economics, Family Christian, Publishing News

Ned Ryerson and the Startled Rodent

By Dan Balowon February 2, 2016
Share20
Tweet
15

Much has been discussed about the growth (or shrinking) of digital book content delivery. I figured today was the perfect day to put in my two cents. Here is what happened in the last few years, explaining why digital sales have slowed, as told through a little story I conjured up. Avid book reader Barbara got up early one morning, made coffee and sat down to read with her e-reader. She noticed …

Read moreNed Ryerson and the Startled Rodent
Category: Book Business, Economics, TrendsTag: Book Business, E-Books, Economics, Trends

A $100,000 Threshold for a Worthy Book?

By Steve Laubeon July 20, 2015
Share47
Tweet28
22

Recently Brad Martin, the President and CEO of Penguin Random House Canada, was quoted as saying the following: “I’m not interested in a book that is going to generate less than $100,000 in revenue unless the editor or publisher [division] has a compelling vision for the book and/or the author…If the person that’s championing that book in the acquisitions meeting doesn’t have a compelling view of …

Read moreA $100,000 Threshold for a Worthy Book?
Category: Book Business, Book Business, Economics, MoneyTag: Book Business, Economics, Money

Happy Birthday iTunes Store! Thanks for the Warning…

By Steve Laubeon April 27, 2015
Share22
Tweet14
12

Twelve years ago this week (April 28, 2003) Apple announced the launch of a new way to buy digital music. The iTunes Store. (Click for the original press release.) It started with 200,000 songs available for purchase. (Today there are more than 26 million songs available for sale.) The iTunes software had been introduced a couple years earlier, but now it became a commercial venture. A place where …

Read moreHappy Birthday iTunes Store! Thanks for the Warning…
Category: Book Business, Economics, TrendsTag: Book Business, Digital Books, Economics, iTunes

It’s a Flat World After All

By Dan Balowon April 21, 2015
Share57
Tweet23
38

As a preface to this post, let it be known that I really enjoy hitting my thumb with a hammer, pushing forks into electric toasters and tripping over things in my bare feet in the dark. It is that very masochistic tendency that prompted me to write this blog. _____ A favorite book for me in the last decade was Tom Friedman’s The World Is Flat, published in 2005. It simply made me think differently …

Read moreIt’s a Flat World After All
Category: Book Business, Economics, Marketing, The Publishing LifeTag: Economics, The Publishing Life

J is for Just-in-Time

By Steve Laubeon November 4, 2013
Share22
Tweet
9

by Steve Laube

The economics of bookselling are complex and ever changing. There is a method of inventory control called “Just-in-Time” (or JIT) that has revolutionized both the retail and manufacturing industries.

When I began as a bookseller there was no such thing as computerized inventory, at least not in the Christian bookstore business. We used a method call “Stack ‘em high and …

Read moreJ is for Just-in-Time
Category: Book Business, Get Published, Marketing, Publishing A-Z, SteveTag: Book Business, Economics, Publishing A-Z, Technology

Author Accounting 101

By Steve Laubeon April 8, 2013
Share
Tweet
8

by Steve Laube

You are a published author. You must be rich!
You are an agent. I know you are rich.

If it only were true.

A couple weeks ago we peered at the bottom line for the brick & mortar bookstore, now let’s attempt to do the same for the author. Please remember this exercise is generic, your mileage may vary. As before we will use some round numbers so we can all follow the …

Read moreAuthor Accounting 101
Category: Book Business, Career, Contracts, E-Books, Economics, Get Published, Money, SteveTag: Author, Economics, Money

Sidebar

Get Blog Updates

Enter your email address to get new blog updates delivered via email. You can unsubscribe at any time.

You have Successfully Subscribed!

Grow as a Writer


Find Out More →

Popular Posts

Top Posts on Book Proposals
  • Hints for a Great Cover Letter
  • The Keys to a Great Book Proposal
  • What Steve Laube is Looking For
  • Book Proposals I’d Love to See – Tamela Hancock Murray
  • What I’m Looking for – Bob Hostetler
  • What I’m Looking for – Dan Balow
  • What’s the Best Way to Submit My Self-Published Book?
  • What Is the Agent Doing While I Wait?
  • God Gave Me This Blog Post
Top Posts on The Business Side
  • When Your Book Becomes Personal
  • The Myth of the Unearned Advance
  • How Long Does it Take to Get Published?
  • What Are Average Book Sales?
  • Can You Plagiarize Yourself?
  • Never Burn a Bridge
  • Who Decides to Publish Your Book?
  • That Conference Appointment
  • Goodbye to Traditional Publishing?
  • Who Owns Whom in Publishing?
  • Ten Commandments for Working with Your Agent
  • Writers Beware! Protect Yourself
Top Series
  • Book Proposal Basics
  • Publishing A-Z
  • A Defense of Traditional Publishing
Top Posts on Rejection
  • The Slush Pile: Enter at Your Own Risk
  • Even the Best Get Rejected
  • Five Reasons Why You May Never Get Published
  • The Unhelpful Rejection Letter
  • Writers Learn to Wait

Blog Post Archives by Month

  • Home
  • About
    • Who We Are
    • Frequently Asked Questions
    • Interview with Steve Laube
    • Statement of Faith
    • Terms and Conditions
    • Privacy Policy
  • Guidelines
  • Authors
    • Who We Represent
    • Awards and Recognition
  • Resources
    • Recommended Reading
    • Christian Writers Market Guide Online
    • Christian Writers Institute
    • Writers Conferences
    • Freelance Editorial Services
    • Copyright Resources
    • Research Tools
    • Selling What You Write
  • Blog
  • Contact

Copyright © 2023 · The Steve Laube Agency · All Rights Reserved · Website by Stormhill Media