The Fair Share model - a fair go for everyone
The Fair Share Model starts with the publisher setting a realistic, viable and fair retail price for the title. The publisher negotiates a fair author royalty and negotiates the distributor discount. The distributor then sets its base discount and volume discounts to book stores. Finally, books stores sell the title at or near MSRP, focussing on differentiation from their competition through quality of service and specialisation rather than the “race to the bottom” of price competition.
The book trade has some very unfair discount structures, creating a playing field that is greatly in favor of the huge online book superstores.
What margin are you really getting? MSRP less your discounted price is the standard calculation for margin. If your customers are able to find the title heavily discounted online with a quick search, then your realizable margin is more realistically your competition’s sale price less your discounted price.
Many of the titles available through American book wholesalers & distributors have very poor realisable margins, in some cases we have even seen negative realizable margins. In that case the price to the book store from the wholesaler is higher than the price a customer can order the book from online with delivery to the door.
The distributor sets one of the key factors that recreates a level playing field in the Fair Share Model, the base to volume discount margin and the volume discount threshold.
Base to volume discount margin is simply the volume discount less the base discount and represents the advantage offered to the biggest players over the smallest. In the Fair Share Model the typical volume discount is 37% and the base discount is typically 35%. The threshold for bulk discount is moderate, rewarding bulk purchase but not so high as to exclude all but the biggest online superstores. Very high base to volume discount margins and very high bulk discount thresholds have created a hugely stratified book retail sector. With just a handful of the top players having such huge discounts, smaller bookstores are having to battle to stay afloat.
The Fair Share Model aims to level the playing field and return you a fair realizable margin. As an example, if you search for RetroSuburbia in Google, most sellers offer the title at or close to MSRP so you can too. With a 35% discount on RetroSuburbia, and a MSRP* of $65 the bookstore has a significant realizable gross margin of $22.75!
*MSRP will fluctuate with the exchange rate as it is based on the Australian retail price.
Now if we look at a book coming from a different supplier, such as The Art of Fermentation. Let’s say you get a 50% discount from the distributor after some good sales and hard bargaining. With an MSRP of $39.95 that gives you $20 gross margin, but what’s the realizable margin? The example below shows it available for $28.76 with free delivery. That gives you a realizable gross margin of less than $8.04, effectively reducing your 50% discount to a 29% discount. The situation is actually worse than that of course as the retailer is offering free delivery at that price too!
Our model is here to return you a proper realizable margin and give everyone a fair go.
One size doesn't fit all
Melliodora Wholesale also supplies titles from other Independent Publishers. They tend to use Print on Demand (POD) and make short digital print runs at a high unit cost. These approaches offer the publisher access to the BIG online retailers, who often discount their titles. This is why we offer larger discounts for these titles.
We are committed to building the Fair Share model and we are super excited to have your support on this journey. Together we can recreate a fair and sustainable book trade.
MSRP in a globalized market
MSRP has been used to set the retail price of books in Publishing. If a Publisher offered a title in a foreign market and it cost a bit more to do so then a higher MSRP might have been set in that market. Due to glabalization and the internet revolution, country specific pricing has become very difficult to manage. Customers can simply find the cheapest country and have it shipped to them. To overcome this challenge, we set MSRP in the country of publication and then adjust the “current MSRP” in foreign markets whenever exchange rates fluctuate outside of predetermined parameters. This is the best solution we have to a difficult problem. Thus some titles prices will vary with exchange rates and others will not depending on which country they are published in.