How Returnability Works; Or: Why the DM is often a better system

Brian Hibbs

I knew I said I was done with the debate, but since this has come up many many many times in the last week, and I answered this for one of the comments threads below, I figured maybe I should put this up where everyone can see it.

A lot of armchair pundits who are not involved in the production or sales of comics have been saying a lot of fairly nutty things about how the real problem is the non-returnable system that the direct market operates within. Poppycock!

I wouldn’t trade 5-10 points of discount on EVERYTHING to absorb publisher misbehavior on one occasional thing.

Think of it this way: I buy 10 copies of of Publisher X’s new book non-returnable for 50% off a $10 cover price. $100 retail, my cost is $5 per book, $50 total, my profit is $50.

Returnable, at 40% off, my cost is $6 per book, $60 total, my profit $40 — only 80% of the non-returnable. I’ve given away 20% of my profit for the CHANCE that I might not sell as many copies.

Basically, I’m betting against my ability to judge my market for how something will sell, AND PAYING FOR THAT PRIVILEGE. Yikes.

OK, let’s say I only sell 9 of those 10 copies because the publisher presold it at a con.

In a non-returnable purchase, my profit is now $45 — note that this is STILL a LARGER profit than had I sold ALL 10 copies under the “returnable” discount.

In the returnable purchase, my profit is now $34 — 75% of what it was in non-returnable, a SMALLER relative percentage than it was when I sold 10 of 10, even though I’m theoretically dealing returnable in order to save money (!)

Here’s the other really important bit: RETURNABILITY ISN’T “FREE”.

I *still* have to pay for the incoming shipping charges. I certainly have to pay for the manpower in actually processing the returns, not just counting and tracking them, but in boxing them up, taking the bus to the post office, etc. Then I have to pay the shipping costs BACK too. (Plus I HAVE to pay for insurance and tracking, because if I don’t, and the books get lost in the mail, I’m TOTALLY boned)

I’ve just paid TWICE to ship a product, and I have NOTHING (except loss of opportunity costs! I had to PAY for it in the meantime, and returns aren’t credited overnight in any case) to show for it.

Finally, for whatever it is worth, “returnability” is only for a small portion of your orders — up to 20% max, so its certainly nothing like a universal panacea.

Also: many things aren’t offered competitively through returnable channels. LOST GIRLS went to the bookstore market at least 6 weeks after the DM (they got nothing but 2nd printings, if I recall correctly?), and BONE ONE was NEVER offered (initially) through anything but Diamond.

Seriously, the DM certainly has several major flaws, there is no doubt, but if you have any idea of what you’re doing, trading discount for returnability is nearly always a catastrophically stupid idea for single store operation. If you’re a chain, there’s an economy of scale which can make the math a lot better, but for the Owner/Operator model the math on returns just doesn’t work if you have ANY idea of how to order.

There are most certainly times to order via returnable channels — there are some publishers where the discounts are equal in both channels, some where they’re actually higher direct, sometimes non-returnable won’t have a book in stock, and a lower discount on a sale is better than a higher discount on no sale, and so on, and so forth; but as a general rule, the money is better than the possibility of returns.

Hope that helps some of you better understand for the market works (though, that’s a pretty qwik & shallow explanation of all of the math and variables and moving parts involved, so don’t write up your business plan based on it!)

-B

(who swears the next time he posts, it will be to review something)

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