Booksellers: what profit margin is reasonable?

I know there’s a turnover time question, but I’m just talking about buying a book that you’re planning to sell later. If the book normally sells for $100, would you pay $80 for it? $60? Or how much?

Or is this a stupid question?

IIRC, a bookstore marks up a book about 40%. So if the book sells for $100, they pay $60.

Wouldn’t a 40% markup on $60 be $84? Or am I misinterpreting what you mean by “mark up 40%”?

I sell on Amazon. I like to sell for at least ten times what I pay for a book. I have not paid more than $5.00 for any one item, and that one I sold for $350.00.

That doesn’t happen often enough.

Sort of. The standard wholesale discount on books is 40%. So the price printed on the jacket is $100 and the bookseller pays $60 for it.

Wrong.

Right.

Right.

Markup is a percentage of the wholesale cost, which is added to the wholesale cost to arrive at the retail price.

Discount is a percentage of the retail price, which is subtracted from the retail price to arrive at the wholesale cost.

In this case, where wholesale = 60 and retail = 100, there’s a 66.67% markup and a 40% discount.

If you bought something for 10 and sold it for 20, you’d have a 100% markup and a 50% discount.

I can’t tell whether the OP is asking about bookstores or collectible/rare-book operations.

For bookstores, like most other retail enterprises, the cost of the stock is only a portion of the cost of operation. A brick-and-mortar bookstore has a profit margin in the single-digit percentage points; here’s a table of data for several chains in 2003, in the 2-5 % range, and here’s the Retail Owner’s Institute data for independent bookstores 2005-2009 (click the “profit” tab for profit margins); for 2009 the average pre-tax profit was 1.7% (up from a miserable 0.4% in 2008).

For rare and collectible books, especially if you don’t have a physical store, your margin is to a large extent defined by you; your rules for buying things, how long you are willing to hang on to them before you sell, what sort of expenses you have. If you are trying to make a living at it you may have to deal in large numbers of low-profit transactions.

You are talking net margin; the OP is referring to gross margin. A brick-and-mortar store will probably need a gross margin in the 40% region to end up with a net margin of 2 - 5%

It wasn’t clear to me what exactly the OP was asking about. If he was talking about bookstores, then cost of stock isn’t the only expense.

In any case, the distributor’s book price to retailers, as stated abovethread, is on the order of 60% of the cover price. With rent and labor and other operating costs, I imagine the average gross margin must be significantly less than 40%.

You are misunderstanding the difference between gross and net margin. In your example the gross margin is 40% Things like rent and labor are operating expenses which are then deducted from the gross profit to get the net profit.

Revenue - Cost of Goods Sold = Gross Profit. (GP x 100/Revenue = Gross margin%)

Gross Profit - Operating expenses = Net profit.

JR is correct. I’ve worked in bookstores. The reasons only the huge megachains can offer such drastic discounts is that for an independent bookstore, a markup of 40% still only nets an overall profit margin of around 2% for the store.

Yes, there’s a difference between net and gross profit, but that’s the complete answer. Overhead’s a bitch. In the pet industry–well, when independent stores existed, before the megabox chains put almost all of them out of business–markup on livestock was 300% to 500%, for around the same 2% profit margin.

Typical me, not enough detail. I’m talking used booksellers here, and I’m hoping there are some out there, along with DrFidelius and myself, who do the on-line-only bookstore thing.

I’m not patient enough to do the “sell for at least ten times what I pay” thing that the Dr. does. I specialize in Terry Pratchett books, particularly 1st edition and signed copies. I’ve only been selling for a year, and I don’t make a living at it–not even sure I’d want to, as it’s a bit chancy and I’m having a lot of fun right now. If it was my main source of income I’d worry too much.

Anyway, I’m wondering if there’s a “Business School” sort of answer. Right now I’m doing the “For rare and collectible books…your margin is to a large extent defined by you” sort of thing articulated by JR Brown. Sometimes I get a bargain and sell it for 250% what I paid, sometimes it’s more like 10%.

I guess I’m looking for something along the lines of “if you paid 80% of what you’ll list it for, you’re wasting your time” or similar. Of course it costs about 20% to sell on-line, so that statement is already true. :slight_smile:

For a used book:

  • Get on Bookfinder.com and monitor listings for the book
  • Keeping monitoring until you have a clear sense of the book points that define retail value (e.g., edition, key points, condition, etc.) - you may need to correspond with dealers to clarify certain points that determine value that they mention in their descriptions - this is not easy or clear
  • If, after doing that, you have a sense of the book’s retail value -
    > Then assume that the bookseller might be willing to get haggled down by as much as 20% in giving a consumer a deal - but they typically won’t go down there for just anybody unless you are bringing cash and making a big purchase
    > The seller would sell to another dealer at 20% off - i.e., typical dealer discount
    > A dealer would pay about 50% - no more than 60% - of that value to buy the book wholesale from a scout…

I have a LOT of experience doing this - these are solid…

Does that help?

That’s the kind of thing I’m looking for.

> - Get on Bookfinder.com and monitor listings for the book
I also have been tracking final sales price on eBay, altho’ those tend to vary a lot more.

> A dealer would pay about 50% - no more than 60% - of that value to buy the book wholesale from a scout…
That’s 50-60% of the already 20% discounted price? Not that I buy anything wholesale, I’m small fry. But one can make eBay offers and wait, and sometimes I DO have that much patience. (Not often.)

Question for you personally WordMan, since I know you buy first editions as investments. How do you decide when to sell? I remember you sold a few to pay for a guitar project. Do you just hold on as long as possible? Wait until retirement/kids’ college/etc. or, as my Finance teacher once said “Buy and hold, always buy and hold.”

I sell book online too so I’ve been groping around trying to find what the proper price point is.

And my conclusion is that there isn’t any. Each book is different because each book depends on what other copies of that book are available and being sold for.

The only rule of thumb I can offer is to study what all the copies of a book are being sold for, and try to undercut what the closest equivalent in condition is. If you think that’s too low, you can try to be patient and price it higher, hoping that it will sell after the cheaper versions get grabbed. I think that strategy no longer works, because any new copies that come onto the market will also be priced lower.

The Internet is unbelievably good at providing transparency for prices. When you had to physically travel to bookstores, you could price by what you paid. Now you have to price in order to compete side by side with others. What should anyone pay you more for a book in similar condition?

I also think eBay is a bad place to price by, because I seldom see really good condition copies sold there. The real booksellers can be found at bookfinder.com, the meta-search site that WordMan mentioned. That’s who your competition is.

Pratchett may be a special case to hold onto, because when he dies his books will go up in value. Still, if you’re selling at 10% of what you paid, as you said, then you’re in the wrong business.

No, I meant off the original retail price. So if they would sell the book for $100 themselves, they would’ve paid $50 or $60 for it.

I sell when I need money :wink: If I come across a need for money - e.g., helping pay for re-modeling the kitchen (yes, that happened) or getting a new guitar (I am usually shifting my investment between the two) - I basically started out like with a stock portfolio: I got a little bit of seed money and invested it, then when I am trying to get into a better book or flip a couple of books to get a guitar, I figure out where I stand. I check out my books, figure out what I would be willing to part with for the right price and get to work. It’s really that simple.

For one vintage guitar, I was prepared to part with a first edition but the guy I sell to wasn’t prepared to meet my price (he acknowledged it was fair but he had a lesser example of the same book in stock and didn’t need two). So I was on my wait out of the store and noticed that he had a copy of Conrad’s The Secret Agent for WAY above what I thought it was going for - I had sold mine for far less years ago. He mentioned there was a resurgent interest in Conrad - so I asked him if he had Youth, which features 3 novellas including Heart of Darkness - he didn’t and he wanted it and yes, it had appreciated like Secret Agent had. I brought it in a week later, sold for 8x what I paid for it and went and funded the guitar. Yay! But the point is that I went there to sell one book, couldn’t work the deal and stumbled onto another opportunity.

…drives my wife crazy even though she acknowledges that I don’t lose money and typically make a great return - which I am then re-investing in other books or guitars.

…oh - and one last thing: I don’t buy them as investments, per se - I buy them because I love them (the novel in question or the guitar) - I am just no dummy and, based on my upbringing in an antique dealer’s house, know that I have to take value into account when putting money into things. My parents were always working barters with other dealers so I was trained to understand the value of things and how to flip them to get into bigger things…and haggling is fun! :wink:

I am currently in Business School, so I will try to give you the Business School answer.

If you are thinking about selling something based on what you paid for it, you are thinking about things the wrong way around.

If you have a book that you want to sell, what you paid for it is irrelevant to the selling price. It is a sunk cost. Research the web, as others have said, to find the going price. If you price it higher you probably won’t sell it; if you price it lower then you are leaving money on the table. At the end of the year you can calculate your revenue (amount you got), subtract your Cost of Goods Sold (amount you paid for what you sold, including costs to receive and store it), and other expenses, to get Profit (or loss).

When you are thinking about *buying *something that you plan to sell, then you consider the price you need to pay and the price that you will eventually get. This is the case where you probably want to pay no more than 50% of what you will eventually sell it for. This differential will cover those expenses, plus the risk that you won’t be able to sell it at your expected price.