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January 2011

Understanding Bookstores: What Does A Distributor Do? (Part 3)

Authors have a disadvantage in the publishing world because there’s little emphasis on business basics in the product cycle. This series by Angela Breidenbach and Eric Grimm is intended to be the yellow brick road and educate authors in critical unseen elements of their chosen profession. Without this knowledge, a writer’s career may sleep in a field of poppies—a lovely, blissful sleep of ignorance. With these insider secrets, that same career may sparkle like the Emerald City.

Angela: Eric, we hear the word “distributor” but what does a distributor really do?

Distributors provide primarily a logistics service.

Eric: For the purists among us, there’s a difference between distributor and a wholesaler. A publisher contracts with a distributor to receive product from a printer, take orders from retailers, and ship product to fulfill orders for the publisher. Product ownership involves legal responsibilities in case of loss, but typically remains with the publisher until delivery or in transit. Distributors provide primarily a logistics service.

Wholesalers, on the other hand, purchase products and re-sell them at marked-up prices.

Wholesalers, on the other hand, purchase products and re-sell them at marked-up prices. The wholesaler owns the products purchased, so is actually a re-seller. Some wholesalers provide distribution services, such as e-commerce fulfillment, but the wholesale model typically is a re-sale model.

Wholesalers provide a vital function, especially for smaller retailers. They enable retailers to operate leaner because they provide quick stock replenishment with smaller orders and less inventory investment. The payment retailers make for the convenience is usually balanced out by higher inventory turns, meaning better cash flow and less debt.

Retailers who buy directly from publishers or their distributor reps, invest much more cash to meet minimum-order requirements. This gives larger retailers little flexibility in inventory management and often prevents them from adapting to and capitalizing on changing sales patterns.

In retail, inventory turns generate cash. This is also why in the publishing industry there are returns. Publishers sell into stores with shared risk—if a title doesn’t sell retailers can return it with minimum risk/costs (such as re-stocking fees and freight charges).

Angela: Distributors seem ambiguous. What would the actual business of a distributor look like?

Eric: Wholesalers and distributors are usually warehouse operations with some front offices. Ingram probably has more than 1 million square feet of warehouse operations. Ingram carries more than 2 million titles, about 113,000 of them Christian titles, and has four U.S. distribution centers. Anchor Distributors and STL Distributors carry about the same amount of Christian titles. Anchor has one distribution center in Pennsylvania and STL has two, one in Tennessee and one in Nevada.

Angela: Does a distributor have a sales force?

Eric: Because of high costs, most distributors and wholesalers usually depend on in-house telemarketers for customer-service and sales functions. Some distributors provide sales services as part of the total distribution package. Distributor reps sell to all retailers not just Christian stores.

Angela: Does the sales force travel to meet bookstores?

The top reps will help recommend returns, keep inventory fresh, and work with retailers to achieve high inventory turns and sales.

Eric: Because of sales economics, smaller stores usually don’t see many sales reps. Larger, higher-volume store sales reps do much more than take orders. The top reps will help recommend returns, keep inventory fresh, and work with retailers to achieve high inventory turns and sales. They often present product training and sales training to staff. Depending on the size of a store, a sales rep may have a scheduled visit and meet with the owner/manager, buyers, and frontline sales staff on the sale visit.

Angela: Do distributors work with all publishers or certain publishers?

Eric: Distributors typically have contracts with certain client publishers for distribution services. Since wholesalers buy product for re-sale, they would only have purchasing contracts not necessarily distribution contracts. The wholesaler is actually the publisher’s customer and buys from many publishers.

Angela: When do they create the distributor catalog?

Eric: Some have monthly catalogs, some quarterly. Catalogs could be created or planned 60 days before book release dates. They also have specials to promote sales in between catalog distribution.

Angela: How long before a book comes out does the distributor find out about it for their catalogs?

Eric: Very quickly. For big new releases, the distribution is coordinated so wholesalers/distributors have product in house to meet release dates to deliver to retailers in time.

Angela: When does the distributor start selling to the bookstores?

Eric: Usually before a new book’s actual street date. New stock is sold in stores by the release date. Because top-selling authors usually sell quicker, retailers order more stock than usual to ensure they can meet expected initial demand.

The sales cycle for wholesalers is tied closely to demand patterns at retail.

However, the sales cycle for wholesalers is tied closely to demand patterns at retail. These stock levels typically are based on past sales patterns or history. Backlist titles usually have their own demand pattern. If a title “turns” or sells about four times a year, for example, a retailer may only stock one or two copies because replenishment can happen within days.

The goal is to always have stock of best-selling titles on shelves so retailers don’t lose sales, and enough stock for slowing moving titles to minimize out-of-stock conditions. The art is balancing anticipated demand with stocking levels to avoid lost sales.

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