As an author, one of the terms you may be familiar with by now is returns, but what are they, and how do they affect you, as an author?
Basically, when a distributor or bookstore orders books, they may not sell all of the books they have ordered. Those books are then shipped back to the publisher. These are known as returns. For each book returned, the publisher loses money.
But it doesn't stop there. The publisher may have already been paid for the books that were returned, and they may have already paid the author royalties based on those purchases (or credited their account). When there are returns, they are debited from any future royalties that may be credited to that author's book. So, not only do returns cost the publisher money, but ultimately they cost the author, too. That is why it is imperative that both the publisher and the author do what they can to minimize returns. More often than not, when an author doesn't receive a royalty check for the quarter, it's not because their book hasn't sold. It's because they had returns. Returns are a black hole in which an author's royalties, and a publisher's profits, disappear.
New York Times bestselling author Lynn Viehl shared one of her royalty statements online to illustrate this point. You'll notice that her returns total more than $13,000 for this particular quarter. Her net earnings for the quarter were $0.
Returns will never be completely eliminated. No title sells out of every single copy ever printed. A return rate of 30 percent is considered "normal" in the publishing industry, but again, these returns cost you, the author, your hard-earned money. Publishers try to minimize these returns by not overstocking the distributor and by printing books in manageable print runs. Many publishers are switching to a "just in time" supply method of printing books as they need them to meet demand.
What can authors do to minimize returns and the damage they do to their royalty statements? Here are a few suggestions:
1. Do consignment events. Rather than do all of your book signing events at stores which order from the distributor, do a consignment event, where you provide the books that are being sold. You'll likely earn a higher profit margin, and the unsold books will go home with you, instead of back to a distributor.
2. Encourage the bookstore to order reasonable quantities. I have had authors get angry with a bookstore manager (and me) because the store only ordered a dozen books for their book signing event. They think the store should order at least 100 copies. The reality is the average bookstore signing sells about six copies. Guess what happens to the other 94 copies? That's right, they are returns, and another drain on your royalty statement.
3. Aim to sell out the store's stock at your events. Selling 6 copies at a book signing event might be a great boost to an author's self-esteem, but if the store ordered 30 copies the author actually lost money on the event. Try to find out how many books the store is ordering prior to the event, and then do your best to sell every copy they have ordered. If the store has ordered 30 copies, invite more than 30 people to your event. If the store sells out, that's fine. They can either place an order for the book through the store, or the store may invite you back for another event.
4. Target venues other than bookstores for signings and sales. A lot of these will either carry the books on consignment, or allow you to do a consignment event. Again, this will help you avoid returns.
5. Sell books on a non-returnable basis. Sometimes authors will hook up with a company or a church or some other organization and sell books to them in bulk. The company purchasing the books will typically get a larger discount, but in return they are purchasing them on a non-returnable basis, which means that sale won't come back to haunt you in the form of returns.
Book marketer Brian Jud once said "Bookstores don't sell books, they display them." That is true to certain extent. Nobody at the bookstore is actively pushing books on their customers. Customers browse and if they are interested in a title they may buy it. Or not. It is up to the publisher and the author to create the awareness and the demand to make the book-buying public familiar with a title. It is up to the author, not the store, to get people through the door for book signing events and to move books at those events.
Do your best to avoid returns, and that will be reflected on your royalty statement.