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Ingram Returns – Why Do They Happen?

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by Curt Matthews, Chicago Review Press

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Curt Matthews

In last month’s newsletter, I complained about the propensity of small presses to complain about irritating aspects of the book business that can not be changed. This time I want to take a hard look at what may well be the leading subject of such complaints: the undeniable fact that wholesalers, and in particular Ingram (which since it is by far the biggest, draws most of the heat on this topic), are continually, and even simultaneously, returning and then reordering copies of the same titles. What a way to do business! Why do they do it?

The most popular explanation is that they do it to restart the payment clock; when they have had a batch of books long enough to have to pay for them, they return the stock, reorder, and give themselves another 90 or 120 days to pay. If this is true, it is a serious violation of business ethics and publishers should raise hell about it.

But it is not true. Anyone who has processed returns knows that the cost and trouble of handling returns greatly exceeds any benefit that could be had from delaying payment. A wholesaler in financial trouble might resort to this practice, but as an ongoing business policy it would be self destructive. So why then do wholesalers return and reorder the same titles?

There are three reasons. The first is that the national wholesalers have multiple warehouses serving particular regions of the country. Demand can be strong in one region, declining in another. Since for the most part such wholesalers do not move stock between warehouses, they are often buying for one warehouse and returning from another.

Second, the returned copies that the wholesalers receive from their retail customers are usually sent right on back to the publishers or distributors that supplied them, thus saving the wholesaler the labor of inspecting each copy, restocking the good copies, and returning only the hurt books.

Third-and this gets to the heart of the matter-book wholesaling is currently a hair-trigger proposition. Now that retailers typically stock many more titles, and much smaller quantities of each, than they used to, wholesalers have had to do likewise. Quick inventory turns are the name of the game. Ingram, for instance, used to order a two- or three-month supply of each frontlist title. Now they order only enough to cover the anticipated demand for one month, and they adjust their stock on a weekly basis.

“But wait a minute,” you are saying as you read this. “How can wholesalers get away with not adjusting stock between their own warehouses; with not putting the good returned books back into their inventories; and with not carrying enough inventory of any title to avoid continual small reorders?” I heartily wish that they would take care of all these problems internally rather than passing them on to publishers. Doing so would save all of us a world of trouble and expense. But is this a question of right and wrong? I don’t think so.

Retailers’ insistence on lightning-fast restocking and a much broader selection of titles have forced wholesalers to adopt increasingly sophisticated and costly computer systems and warehousing procedures, and this without much in the way of an increased discount. It is hardly a surprise that they have passed along to publishers as many of the problems as they could. Would we prefer that they put their energy and capital into shuffling returns for us rather than responding to the needs of the retailers? Would we be prepared to offer more discount if they did?

The real question is how this all nets out for independent publishers. Returns, always a nightmare, have gotten a bit worse. On the credit side, however, the new patterns of bookselling, which are the cause of these new difficulties, are highly favorable for us. There is much more shelf space
out there for our books than before. Overall, the trade-off is very positive.

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