Penny selling


Fall 2003 (Vol. IV, No. 3) Table of Contents

If you put ‘Charles Dickens’ into the booksearch search engines, lowest price upwards, the first 19 entries cost one penny. Only at the 166th entry does the price finally reach $1.

If you repeat the experiment with ‘John Grisham’, you have to go to entry 390 before you get above one penny! And you have to almost reach the 1,000th entry before a whole dollar is charged!

What on earth is going on? Are these people making money?

The answer is no, they are not. They are deluding themselves that they are making money, as against actually making it. They are deluding themselves that ‘making a bit on the shipping’ and ‘making a bit on follow on sales’ are leading to a profitable business. They will have a long wait.

But you, dear reader, are already virtuously saying that you list nothing under $3, or $5, or even $10.

The point of this article is to make it clear that you, too, are deluding yourself.

With an apparent 20,000+ ‘book dealers’ on the web, ranging through ABE, Amazon, Half Com, and eBay, they cannot all be real.

Having followed BookFinder’s ‘Insider’ for some time, it has finally dawned on me that the vast majority are not real book dealers – they do not understand bookselling and, more importantly, they do not understand business and probably never will. What it shows is that any fool can become a book dealer, but relatively few understand the business.

Before I get masses of hate mail from people challenging this arrogant posit, let me say that if you are a ‘book dealer’ for any of the following reasons, do not bother to read on – this article is not for you:

  • I’m lonely, and need the emails and ‘contact’ that my ‘business’ gives me.
  • I’m just doing this for fun.
  • Its only pin money and my day job is my real income.
  • I love books and I don’t care whether or not it makes money.

But if you genuinely want to understand why you are selling masses of books but not making any real progress, read on.

The root of the problem lies in business, not in bookselling. The harsh realities of business permeate everything and bookselling is no exception. And there seems to be a limitless capacity for people to delude themselves into thinking they are making money when they are not.

So they spend countless hours cataloging thousands of books at 1c or 50c or $1 or $3 or $5 and so on.

After a year, or two, or more, they wonder why little progress is made – they are selling lots of books, then why are they not making any real money? After all, in addition to their $1 sales, there were quite a few books that they sold for $20 or $30, and even the odd one at $200, where they made a huge ‘profit’.

The clue may come from our own findings. We are established book dealers with a seven-figure annual turnover and, after careful research, we have come to the conclusion that listing any single book under the $30 mark causes us to lose money in real terms – the cost of the sale exceeds the genuine profit within that sale.

Having said that, we have thousands of books on our catalogue under $30, but they are all multiple-copy books where one catalogue entry (and just as importantly, a standard email template reply for automating the sale) covers many sales. Even then, anything under $10 starts losing money, but that is another (allied) matter and this article is focused on single-book catalogue entries.

The key to any successful business is margins. The key margin is the net margin – the total annual income less the total annual costs. This is where most people seem to fall down, by deluding themselves into conveniently ‘forgetting’ many costs in their drive to convince themselves that they are ‘making’ a ‘profit’.

So now we come to the meat of this article: The real costs of selling books on the web.

Although the headings are obvious, the notes to each heading are the crux of the matter, for these are the areas where people delude themselves most.

  • The cost of the book itself.

The basic cost you know, because that is what you paid for it, but the subsidiary costs are just as real. These include the time and cost you spent negotiating, valuing, sorting, researching, packing, collating, transporting, etc. And don’t forget to include the time spent on abortive purchases – these have to be paid for out of actual sales just like anything else. As have books on which you spent the same amount of time but never actually sell.

  • The cost of selling the book.

Many seem to cost the time it took to catalog the book and perhaps add a small amount for the listing fees and commissions and think that that is it. Oh no, it isn’t! Every book you list has to be paid for whether you sell it or not. All the time it takes to conclude some sales – sending scans, condition reports, answering questions. And don’t forget the time-wasters, intentional or otherwise: The cost of servicing enquiries that do not result in sales – once again, scans, extra information, answering questions, etc., – can be considerable, with no return whatsoever. All the hardware and software costs. All the uploading time and problems, database corrections and adjustments, emails sorting out problems, research, experimentation with different listing sites, website development – all have to be paid for.

  • The cost of mail order.

Tremendous scope for delusion here – it’s just the cost of the stamps plus a bit! No its not – it’s the cost of the stamps plus a lot! A common misconception is that by using secondhand materials you are saving money. In reality it is costs just as much in time to mess around cutting, shaping, repairing, and modifying unsuitable packing materials than it does to buy new tailor-made materials in the first place (and you get a more professional looking result). And mail order costs do not end with the packing materials – the time it takes to label and document and achieve actual posting is not inconsiderable, not forgetting the cost of advertising material you may choose to include in your parcel. But even that is not the end of the matter – you have to add on the time taken in subsequent email correspondence when a parcels are late, claims, lost sales, returns, and occasionally a total loss parcel, be it legitimate or a customer being less than honest.

  • Ancillary costs.

This is where all your background costs creep in. (Why should a customer buying a $5 book pay for those? Well, if they don’t pay for it, who will?) All the office equipment, shelving, fixtures and fittings, space rental if relevant, accounting fees, general telephone and transport costs – the list goes on and on and all have to be paid for. All the books you never sell (a major factor in bookselling, be it a bookshop or a virtual bookshop) have to be costed in too.

I am sure I have laboured the point long enough (the list of costs can be extended further!) but when you add then all up, the conclusion can be startling.

We did just that. We added up the entire cost of running our mail order department for one year and divided that cost by the number of actual sales achieved in that year. There are areas where you cannot come up with exact figures, but the figure I am about to give you is pretty exact.

The unit cost for every sale achieved, when you take everything into account, averages out at around $10.

Sure, some individual sales cost less, but that hardly matters, because others cost more and the average keeps coming back to around $10.

Now, when the book being sold costs $100, or $500, or $1,000, this unit cost hardly matters – it can be absorbed nicely into the profit margin (although being aware of the unit cost helps set the margin). But if a significant proportion of the books you sell are under $20, there is cause for concern. And if you are heavily into the $5 area (or, heaven forbid, below) you are totally deluding yourself – your cost of sales is actually exceeding the revenue being returned. Supermarkets can run loss leaders for some of the time but they sure as hell don’t run the overall business like that!

I can almost hear the murmurings of those who do not believe these figures: ‘You’ve costed in WAGES!’ Yes, of course I’ve costed in wages. Just because you do not employ anyone does not mean that you shouldn’t be aiming to pay yourself as if you employed someone – preferably more! In any case, if you hope that your business will grow, sooner or later you will have to pay someone and if you haven’t got your margins and price structures able to bear that, your business will collapse as soon as it has to take that strain – you never had a real business in the first place.

Another old chestnut is the line that it is better to sell the book for a few dollars than to have it sitting on the shelf doing nothing. Wrong! If selling the book is actually costing you money, it is far better that the book waits for the right customer to pay the right price than to be forever reducing your prices just to make your stock move. Yes, you create turnover, but you do not create profit and if it ignores the unit cost of selling a book, you are losing money.

One of the basic realities of bookselling that many people do not seem to grasp is that half the books you have will never sell. Just like advertising, the problem is that you never know which half. It is this reality that is one of the major factors in the need for the apparent high margins needed on the books that you do sell. (The other major factor is the labor-intensive nature of the business.) Which is why you have to make sure that the books that you do sell include a proper profit margin. This has always been true for the B&M bookshop and it is just as true for the virtual bookshop.

If I have convinced you, what can you do about it?

You can do nothing, keep on having fun, and enjoy the fact that you are part of a movement of thousands of others intent on driving the price of every book on the web down to a penny.

Or you can wake up and realise that there is a lot more to selling books than making a few good ‘finds’ and listing them a little bit cheaper than the other booksellers and therefore contributing to the downward spiral.

Start learning.

Start listing upwards, not downwards.

And wait for a future article where I hope to expand the theme further ……
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Stuart Manley, co-owner, Barter Books, Alnwick, Northumberland, England
http://www.barterbooks.co.uk

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