<span class="padlock_text"></span> v27 #6 Between a Rock and a Hard Place: The Realities of Flat Discounts

by | Feb 22, 2016 | 0 comments

by Howard N. Lesser  (President, Midwest Library Service, 11443 St. Charles Rock Road, Bridgeton, MO 63044;
Phone: 800-325-8833)

It’s often standard practice for library consortiums and many libraries to ask for simple flat discounts.  Why shouldn’t they?  Flat discounts are easy to understand and, more importantly, are easy to compare.

As a book vendor, we are often asked about offering flat discounts, and bidding on a state contract often requires a form that only allows a single discount, regardless of the publisher.   Although the single-discount world might appear to exist, the truth is that all flat discounts should require an asterisk.

We work with more than 20,000 publishers.  Each has its own procedures, and discounts vary wildly between publishers.  Some offer flat discounts;  others offer multiple discounts based on a variety of factors; and many offer no discount at all.

Discounts vary because of the publishers’ method of selling in different categories.  For example, publishers supplying trade books to public libraries, major booksellers, and large-scale retailers (e.g., Walmart, Amazon) can afford to offer volume discounts.  Discounts on educational and scholarly books for academic institutions, however, tend to be significantly smaller.

Due to changes in the industry, publishers’ business plans have also transitioned.  Print-on-demand, short runs, and eBooks seldom allow for a discount, and adding yet another layer to the issue are book distribution centers that represent multiple publishers.

It wouldn’t be that difficult for a publisher to adjust list pricing so that a consistent discount could be offered.  But the reality is that publishers have no real interest in changing.  As a result, vendors trying to remain viable are caught in the middle between customers desiring flat discounts and publishers offering discounts that are far from flat.

The question is, how do vendors bridge the gap?  First, let’s assume that no vendor will intentionally offer discounts at an unprofitable level.  Presuming the publisher offers a discount, vendors will seek to offer a discount that will appeal to the customer and allow at least a minimal profit.  To quote a flat discount, the vendor is required to make assumptions on the mix of discounts available from the publishers.  If vendors are honest, they know this could better be described as merely an educated guess.

The publishing industry is clearly mature and well established. Its patterns and practices are set (mostly in stone).  For the sake of comparison, however, let’s consider vendors of other common products.  Suppose there were a fixed price for a car, regardless of size, power, or features.  Imagine a set price for lumber, regardless of wood type, grade, or tensile strength — or for carpeting, regardless of material, density, or durability.

How would car dealers, lumberyards, and carpet manufacturers respond?  Two possibilities:  They could price their products based on an anticipated mix, or they could devise a strategy that required no assumptions regarding the mix.

State contracts or agreements often set a firm discount, without exception, and every state has its own contract requirements.  When bidding, the book vendor is faced with trying to accommodate discounts that vary by state, university, and publisher — or to come up with an alternative.  And here’s the catch…

While the vendor is obligated to sell the books at the contractual discount, the vendor is not actually obligated to provide all of the books that have been ordered.  Any books that can’t be profitably supplied at the agreed upon discount can simply be cancelled as “not available.”

Furthermore, vendors are not obligated to disclose why a book is unavailable, so it’s a no-cost choice to the vendor.  Yes, there is a cost, but it’s borne by the customer.  Often weeks later, the customer is left with an unfulfilled order and must make a choice.  Either accept that the book can’t be found, or reorder from another vendor.  And these actions require staff time.

The discount issue is a challenge for vendors that focus on order fulfillment, and for well over half a century, we have considered order fulfillment an absolute priority.  Our fulfillment rates exceed 95 percent (while other vendors hover in the mid-70-percent range).  For us, this is only possible by using flexible discounts and ignoring the variability of publisher discounts.

Libraries order books, and we believe it’s our obligation to make a complete and honest effort to fulfill their orders.

 

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