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New Self-Publisher’s FAQ
Manufactured Goods and Discounting
Often, I talk to would-be and new
self-publishers who get
riled about the fact that a
discount
is expected on our books. Many think that's unfair. Having worked in
retail a big chunk of my life, I am a bit mystified by this. You can't
expect to get anywhere near the list price if you are offering
manufactured goods for sale along a chain that contains
wholesalers and other
middlepersons. That's so in books or any other material.
For homework, I suggest those who are a little unclear about the whole
business thing to watch
Food TV's "Recipe for
Success" on Tuesday evenings. Mostly what they show are folks
trying to operate a restaurant and all the troubles thereto (I used to
have "open a restaurant" on my Life To-Do List, but after I've watched a
few episodes, I scratched it off). Occasionally, they feature someone
with a food product.
Recently they had some people who decided they wanted to market their
frozen marinara sauce. Instead of investing money in a physical plant
before they were established, they went with a commercial kitchen, a
packager and a grocery wholesaler (any resemblance to a
subsidy press, a
printer and a
distributor
in the book world should be noted).
This group (all women. I think it was Grandma and a couple of
daughters), spent $20,000 for the packaging alone. They showed it to
their target grocery store buyer who told them about fifteen things they
thought were *terrible* about the
cover—oops,
I meant package—and would prevent consumers from buying it. (I couldn't
help but think of Barnes & Noble's Small
Press Department.) They spent another $15,000 creating a new
package design.
Their product sells for $6.95 (It's a fair amount of sauce). Their
actual ingredient cost is $.60. After they pay the kitchen, packager and
wholesaler, they get $.20
profit per unit. They think that's pretty good. And it is. Why? They
expect to sell *volume*. That's the key to most manufactured goods.
They are starting to make headway with grocery store chains (one major
buyer, who rejects 80% of the products he's shown every year, signed up
because the sauce tasted just like his Granny used to make. (Never
underestimate the power of the personal in business.)). They hope to
ship 50,000 units next year. Now they have to find a
loan to build up the
physical plant they skipped over in the initial stage, so that they can
lower their per unit cost (did anyone hear an echo of "change from
POD or
subsidy to
offset printing" there?).
The book business is like any other manufactured-goods business. If you
can sell directly to the customer at full—or near full—list
price, glory halleluiah! Otherwise, there are
discounts that apply and the
way you sustain the company is volume. The way you get volume is
marketing. That's so for marinara
sauce just as much for books.
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