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The Growth of the Bargain Book Business

By Edited Nov 13, 2013 2 1

During the late 1960s and early 1970s, when I worked in bookstores, the book business consisted of dozens of independent publishers; small, medium, and very large; and probably thousands of locally owned, independent bookstores. Many of the stores sold other merchandise in addition to books, but the publishers did not--no big conglomerates yet owned the biggest ones. The book business had no significant bargain book segment, but since then it has changed dramatically.

Formerly, every bookstore sold books at the same list price, as set by the publishers. Although publishers did not make a profit on every book, they kept most titles in their backlist until all copies were gone. At that time, they could either decide to print more copies if there was still reasonable demand, declare the book out of print and delete if from their catalog.  Sometimes, publishers decided a title was not worth keeping and sold remaining copies to remainder companies for pennies on the dollar; the remainder companies marketed the books at deeply discounted prices.

Two big challenges hit the book business in the late 1970s. Crown Books opened its first store in 1977 and challenged the publishers' right to impose their prices on all the stores. It sold everything at discount prices. Although not a direct challenge to publishers, Barnes & Noble and Borders soon started their own nationwide chains of very large bookstores.

A 1979 Supreme Court ruling, Thor Power Tool Company v. Commissioner of Internal Revenue, caused an even bigger challenge.  The company had reduced the value of its unsold inventory according to "generally accepted accounting principles." The IRS refused to accept this reduced value and demanded taxes on the original value. Thor Power Tool company sued, claiming the IRS had acted improperly. The Court sided with the IRS, ruling, "There is no presumption that an inventory practice conformable to 'generally accepted accounting principles' is valid for tax purposes. Such a presumption is insupportable in light of the statute, this Court's past decisions, and the differing objectives of tax and financial accounting."

Since publishers had routinely written off the reduced value of unsold titles according to "generally accepted accounting principles," they could no longer afford to maintain even successful their most successful backlist titles  until they sold out. Publishers found two ways to adjust. They made their initial print runs smaller in order to keep less inventory in the first place. They also took titles out of print much faster than before, including successful ones that were only a few years old. Remainder books therefore became not only a much larger segment of the book business, but included many more attractive titles.

Another shock came when Amazon.com began its Internet book sales in 1994. Its business model did not require a physical store or a warehouse for inventory. Therefore it had no limit on the number of titles it could offer. Eventually Amazon and other online booksellers began to offer used books as well. The bargain book business soon followed Amazon to the Internet.

Online sales of remainder books follow two basic models. Some companies sell in large quantities either to stores (for example, as the chain bookstores' source of bargain books) or home-based Internet businesses that take possession of  the inventory, sell it to individuals through their site, and accept responsibility for shipping it.

Others deal with individual buyers, either directly or through affiliate marketing. Anyone with a monetized web site can sign up as an affiliate, link directly to the remainder company's web site and receive a commission on each sale. All-Purpose Guru offers remainder books among other products.



May 31, 2011 10:36am
I a book fan and it is pleasing to learn how things worked before the Internet :-)
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