Co-op Fees

I can’t talk about this using my real persona because everyone will stop doing business with me. So — a business rant today!

Every once in awhile, I run into somebody who defends the co-op fee scheme for indie bookstores.

I’m a publisher, I have a catalog of 30 books, I have two dozen hungry authors who are dying to beat the street and sell their merchandise and make everybody money. For 20 years, I worked in an indie bookstore, and eventually managed it. I’ve seen every angle of the co-op fee. I’ve charged them, I’ve paid them, I’ve been part of that world, in one way or another, since 1991.

And I can tell you — it’s bullshit.

So here’s the defense: An indie bookstore hosts a book event. A reading. They have to promote this reading to get butts into seats because most indie publishers are really numbnuts when it comes to marketing. So the store charges a co-op fee. This fee is very important for advertising. It helps everyone. It’s there for the author, the publisher. The bookstore is suffering for you! If you prick me…do I not bleed? Co-op fee apologists say that all is right in the world and the fees are required to save lives and keep the Earth aligned on its axis.

So, okay. Fine. Advertising’s cool. Let’s do it! And if you’re going to make me spend money on this book event, then I have 1001 ideas for how that money can be spent effectively.

Oh, but, wait a minute. The bookstores don’t want you involved. Nor do they let you know what they’re doing up front in a way that encourages, you know, dialogue and cooperation. Here’s how they do it:

So, Publisher X contacts Indie Books Inc. Publisher X wants to book a reading. Debut Author Y has a novel coming out on May 15th.

75 emails later, Indie Books Inc. finally responds and says sure thing! We can do it. We’re free and clear for the date you desire.

Well, hot damn, says Publisher X. We’ll get that all set up.

The date approaches… Indie Books Inc. orders 50 copies. Wow. Publisher X tops off their gas tank and buys an Egg McMuffin in a fit of wasteful, wanton madness.

Publisher X (who, in this scenario, is me and not a lamebrain idiot) does tons and tons of groundwork to get people to the reading. Maybe about 50 or 60 hours goes into this, a few paid ads, an intern consumed with nothing but promoting the event. All in all, Publisher X spends a few hundred bucks in sweat equity and actual cash to make this happen. Lo and behold, 60 people show up.

Now a bit of background. Indie Books Inc. bought 50 copies of the book. They get the same discount that Amazon gets — 50%. Don’t let them lie to you. I’ve been watching this happen for 15 years. In fact, sometimes they get a better discount than Amazon.

They mark the books up 50-60%. By the way, that markup is why Amazon can offer such huge discounts. Why don’t indie bookstores do the same? Sure, they have to pay insurance, and heat, and electricity, and teenagers to stand at the cash register. I guess it makes sense for them to say they can’t compete with Amazon. But…well…that’s still a big markup, yes?

Anyway, the deal is that any unsold books — and their condition doesn’t matter — can be returned for a full refund or (sometimes and) credit.

So, just to be clear, the bookstore’s only stake in this is 50 books, purchased at half price, which they will then sell at an obscene markup. Any that do not sell can be returned for cash on the barrelhead. It literally is a win-win scenario for them.

So, the day of the reading comes. 60 people show up. It’s awesome. But…most of those people already bought the book for a deep discount online. Why pay the markup when you don’t have to, right? So the bookstore sells maybe 20 copies. Of course, then only put 30 of the 50 copies out on the shelf anyway. (On average, 25% of whatever the bookstore orders for an event never even gets unpacked.)

After the event, the bookstore sheepishly returns the 30 extra copies.

So let’s say the book retails for $20. Indie Books inc bought 50 copies at $10 each. They sold 20 copies at $20 each, and returned 30 copies for a $10 refund per copy. The publisher has to swallow that refund — $10 — plus a 10% returns fee. So the publisher ends up paying $11 per returned copy. The initial payday for the publisher was $500. Minus all the various fees and so on, it’s actually more like $350. But then $300 worth of merchandise comes back, debiting against the publisher’s earnings. So now we’re down to $50 profit for the publisher. Minus those return fees, so…$20 is what the publisher made. Debut Author Y — remember her? — walks away with around $2. Indie Books, Inc. cleared a solid profit of $200 and didn’t have any losses whatsoever.

Pop quiz: Who made out on that deal?

But that’s the breaks. Tra-la-la. Authors must get used to empty venues, failed readings, or huge efforts rewarded with little cash. Publishers all know that, in this business, you must spend a large fortune to make a small fortune. Everyone moves on.

Then, after a month or more passes, a charge comes through. The co-op fee. The bookstore’s usual method is to charge the distributor a co-op fee weeks or months (once, for me, it was six months) after an event. The distributor pays because publishers all have to agree to that or else we’ll be sorry. So the money’s out and gone and it shows up on the publisher account as this huge fee from nowhere.

Sometimes it’s small. $150. Most of the time, it’s big — over $300. When I sent one author on a 15 stop tour, the co-op fees came to a total of $15,000.

So what’s a co-op fee? I ask this every time and the bookstores all say — it’s our fee for having the author read at our venue. It’s the cost of advertising.

Hmmm, I reply, I did a shitload of groundwork to get people to your bookstore. So what advertising did you do for $300?

In the last five years, the answer to “where did the X-hundred dollar co-op fee go?” has been:

Online advertising on our blog/webpage
Advertising in our newsletter
Advertising in our subscription print newsletter

So #1 is… Free, right? WordPress. #2 is…free. #3 is a medium that advertises many other publishers. In fact, if everyone is paying for a spot on your monthly mailer to the tune of hundreds of dollars a pop, then the average established indie bookstore’s monthly mailer is earning them anywhere from $5000-$10,000 a month. And don’t roll your eyes — I ran that scheme when I was working in a bookstore in the 90s. Every review, every blurb about an event, and any book listing that was larger than usual or in color earned us more than we would ever earn in book sales.

So, recapping my scenario above: the store cleared $200. They lost nothing, and were never in danger of losing anything. I got them dozens of new customers who love books. And, for my trouble, they charged me $300 so that they could mention the event on their free Mailchimp newsletter.

Indie bookstores and indie publishers are natural allies. We can’t exist without each other. We need each other. We are in the middle of a war for our literary culture, and we’re losing. Every day, we’re losing. Soon, Amazon, and their nattering self-published nabobs will be deciding the next book we all read. How can we possibly fight this war if indie bookstores follow this usurous, exploitive model? This didn’t always exist. This is a thing that was born out of the Big Box era, when indie bookstores feared Crown Books, Borders, and Barnes and Noble. I was working in an indie when the mindset was new, when all the “how does I run my bukstore” documentation was going around and the co-op fee was the new hot thing.

Why do people who mark up their merchandise more than supermarkets mark up Coca-Cola need this money? Why don’t they just ask for it up front? If a bookstore just nutted up and said to my face, “Your author can read here if you pay for advertising,” you know what? I would say yes. I have an advertising budget. Give me a media list and I’ll pour money into it. I’m dying for you to ask for money. I want to give you this money.

And that’s where the pro-co-op argument fails. Because bookstores don’t ask. They don’t want the money to be spent on actual advertising. They don’t want me to spend the money on print ads, or local handlers, or whatever it takes to sell 50 books. They know they won’t sell 50 books. They know that, maybe, they’ll make a couple hundred bucks off the event but….probably not even that. So why throw money away advertising properly when they can simply blackmail the publisher for a ton of cash. Why screw with book sales when they can get $300 or more in funds that they don’t have to account for or explain?

So, publishers have begun to abandon indie bookstores. That’s a fate that that the bookstores made. They’ve traded their position as defenders of our literary culture for quick, easy cash at the expense of people who can’t afford it.

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