What is a Trade Discount?

When self-publishing, it is important to understand industry terminology. “Trade discount” is one of the terms you need to understand because it impacts your book’s price and distribution. Here is what you need to know.

What is a trade discount?

A “trade discount” is also known as a distributor discount. It is the percentage off your retail price that you offer to the publishing trade for distributing your book. The “publishing trade” consists of wholesalers, distributors, and retailers. Everyone who handles your book takes a piece of the trade discount.

The larger the trade discount, the more money there is to split up among the parties involved. Standard trade discounts range from 50% – 70% although you can choose to go lower for online only distribution.

Who determines my trade discount?

This depends on your publisher. Some publishing companies don’t disclose their trade discounting policies upfront and don’t give the author any say in the matter. However, some cutting-edge publishers, such as Outskirts Press, offer their authors the flexibility of setting their own trade discount. Flexibility varies by publisher.

The ability to choose your trade discount can be beneficial because you can choose your trade discount based on your distribution goals — online, offline, or both.

How does trade discount affect price?

Publishing companies who allow you to set your trade discount also give you the flexibility to choose the price of your book.

When thinking about pricing, it is important to remember that a trade discount is different from a retail margin. Wholesalers receive the trade discounted price. Then they turn around and distribute your book to a retailer for a retail margin they set. If the trade discount and retail margin were the same, the seller wouldn’t make any money and would go out of business. For this reason, the retail margin passed to the retailers is always lower than the trade discount you set.

To learn more about trade discounts and book pricing, contact your self-publishing company.

ABOUT JODEE THAYER: With over 25 years of experience in sales and management, Jodee Thayer works as the Director of Author Services for Outskirts Press. The Author Services Department is composed of knowledgeable customer service reps and publishing consultants; together, they all focus on educating authors on the self-publishing process in order to help them publish the book of their dreams. Whether you are a professional looking to take your career to the next level with platform-driven non-fiction or a novelist seeking fame, fortune, and/or personal fulfillment, Jodee Thayer can put you on the right path.

Top Four Reasons to Self-Publish: Part 4 – Rights

Last month, I did a series on the most popular questions self-publishing authors ask. The posts were such a hit, I’ve decided to do another series this month. Each week in August, I will discuss one of the top four reasons why you should self-publish your book.

This week, I’ll discuss book rights. (In case you missed the last three reasons, be sure to go back and view those posts: Control, Money, and Trade and Distribution.)

As a self-publishing author, you maintain all rights to your book. This gives authors the freedom to sell or keep the rights as they see fit. However, it is important to note that self-published books will be considered “previously published” if the author later chooses to sell the book to a traditional publisher.

Owning book rights such as translation rights and film rights can have a significant impact on an author’s profitability.

Authors who use traditional publishing firms often give up most of the book rights but are usually entitled to a small percentage of the profit if the firm sells the rights to someone else. Self-publishing authors have the opportunity to choose if and how to sell their book rights to ensure they are getting the best deal possible.

I’d love to know, how has owning the rights to your book influenced your publishing decisions?

ABOUT JODEE THAYER: With over 20 years of experience in sales and management, Jodee Thayer works as the Manager of Author Services for Outskirts Press. The Author Services Department is composed of knowledgeable customer service reps and publishing consultants; together, they all focus on educating authors on the self-publishing process in order to help them publish the book of their dreams. Whether you are a professional looking to take your career to the next level with platform-driven non-fiction or a novelist seeking fame, fortune, and/or personal fulfillment, Jodee Thayer can put you on the right path.

Top Four Reasons to Self-Publish: Part 3 – Trade Discounts and Distribution

Last month, I did a series on the most popular questions self-publishing authors ask. The posts were such a hit, I’ve decided to do another series this month. Each week in August, I will discuss one of the top four reasons why you should self-publish your book.

This week, I’ll discuss trade discounts and distribution. Unlike traditional publishing, self-publishing allows authors to choose the type of distribution that is appropriate for their material and marketing goals.

When thinking about distribution, it is important for authors to understand how the process works. For starters, “trade discount” is an industry term for profit margin. This rate impacts who buys and sells your books as well as the profits you will make off of your book.

For instance, shelf space in a brick and mortar chain bookstore has very specific requirements: the books must have a very high trade discount (50% to 55%). Therefore, if you buy a book at one of these bookstores  for $14.95, 55% of the retail price ($8.22) is divided between the store and the wholesale distributor for their profit. When you subtract the $8.22 from the $14.95, you are left with $6.73. This remainder covers the cost of the actual book. The balance that is left after the price of the book is the author royalty. Typically, authors receive very low royalties in these scenarios.

In addition to needing a high trade discount, authors also need to provide the bookstore with a “Retail Returns Program.” This program allows the bookstores to return books to the wholesaler and get their money back if the books do not sell. You must provide this program to the retailers, but having it is no guarantee that they will agree to stock your book.

Conversely, authors that elect to focus on internet sales may select a much lower trade discount as the internet book sites do not require as large of a profit margin. So that same $14.95 retail priced book under a 25% trade discount would look like this mathematically: $14.95 – $3.74 (25% of the retail price) = $11.21 – the actual cost of your book = your royalty. Obviously, $11.21 is a larger number than $6.73. Therefore, your royalty will be greater if sold by an online distributor, assuming the cost of your book remains the same in each equation.

Freedom to choose your trade discount and distribution center is just one of the many perks of self-publishing. To learn more about trade discounts, check out Cheri’s post titled Trade Discounts 101. It provides a great overview of industry standards and questions to ask yourself before setting your discount.

ABOUT JODEE THAYER: With over 20 years of experience in sales and management, Jodee Thayer works as the Manager of Author Services for Outskirts Press. The Author Services Department is composed of knowledgeable customer service reps and publishing consultants; together, they all focus on educating authors on the self-publishing process in order to help them publish the book of their dreams. Whether you are a professional looking to take your career to the next level with platform-driven non-fiction or a novelist seeking fame, fortune, and/or personal fulfillment, Jodee Thayer can put you on the right path.

Trade Discounts 101

The price of your book is an important detail. It impacts which readers will purchase your book as well as how much money you will make on royalties. The price of your book is based on a variety of factors; one of the most essential elements is the trade discount. This is also referred to as  the distributor discount. To new authors, this concept can seem confusing, but it is as simple as the 5Ws.

What is the trade discount?

The trade discount is the discount you offer to the distributor of your book. This includes retailers, wholesalers, and online distributors. This discount can range from 0% (no distribution) to 100% (highly unlikely).

Who sets the trade discount?

Sometimes the discount is set by the publisher; other times it is set by the author. This usually depends on the publishing company, and your agreement with the company. Self-published authors usually have more freedom in this decision. For instance, Outskirts Press allows authors to set their trade discount based on their goals and needs.

When do I select a trade discount, and can I change it later?

The trade discount is typically determined prior to publication. While it can be changed at anytime, it is not recommended. This can disrupt the author/distributor relationship and may result in additional expenses for the author.

Where will your book be available when choosing certain discounts?

Different distributors expect different discounts. For instance, the minimum trade discount for online distribution is 20%. Retail stores, however, expect a 40-55% discount. They also expect the book to be fully returnable. Wholesale Clubs, such as BJ’s and Sam’s Club, expect a 60-75% discount. It is important to consider your goals as an author. Where do you want your book sold? Where do your readers purchase books? Understanding your target audience will help you determine the best strategy for your book.

Why do I offer a trade discount?

This discount determines the price the distributor pays for your book. It is typically referred to as the wholesale price. The distributor then sells your book at a higher price and keeps the profit. Distributors must be able to make a profit on your book or they won’t carry it. The trade discount also impacts your royalties. The higher your discount, the lower your royalties. Therefore, it is important to set a discount that is beneficial to both you (the author) and the distributor. The goal is for both parties to sell books and make a profit.

When setting your trade discount, be sure to consider your goals as an author, and don’t forget to analyze your target audience. For instance, if your readers buy the majority of their books online, you may not want to focus on retail stores. Also, make sure you do plenty of research before setting a trade discount. Find out what other authors are offering and what your target distributors expect. Also, factor in the number of potential sales and your royalty rate. And always remember, the publishing industry is about both the author and the retailer. Don’t be afraid to negotiate and compromise.

Cheri Breeding ABOUT CHERI BREEDING:
Since 2005 Cheri Breeding has been working as the Director of Production for Outskirts Press. In that time, she has been an instrumental component of every aspect of the Production Department, performing the roles of an Author Representative, Book Designer, Customer Service Representative, Title Production Supervisor, Production Manager and, Director of Production. She brings all that experience and knowledge, along with an unparalleled customer-service focus, to help self-publishing authors reach high-quality book publication more efficiently, professionally, and affordably.

The 5Ws of Trade Discounts

To get the best understanding of your book’s price, you have to first understand that there are many individual entities that make up the pricing equation. One of those entities is the trade discount. That term can confuse authors at time, though the concept is not as difficult as it may initially seem. To give you a snapshot view of what trade discounting is, I’ve prepared a list of the 5Ws (Who, What, When, Where, Why) of Trade Discounts:

  • Who sets the trade discount? Sometimes the publisher sets the trade discount. At Outskirts Press, we allow authors to set their own discount.
  • What is the trade discount? The trade discount is the discount you extend to a retailer that is carrying your book. The discount you offer can range from 0% (no distribution) to 100% (highly unlikely).
  • When do I select my trade discount, and can I change it later? You select your trade discount before your book publishes, and while you can change your discount at any time, we don’t recommend it. Some retailers may not recognize the change for a while, and most likely you will incur additional costs for revising your book. It’s important to research trade discounts beforehand in order to make sure you are making the best decision for you and your book.
  • Where will your book be available when choosing certain trade discounts? The minimum trade discount is 20% for online-only distribution. If you want to penetrate most retail stores, you will want to offer a discount of 40-55% (your book must also be fully-returnable). If you’re targeting wholesale clubs (Sam’s Club, Costco, etc.), you will want to offer a discount between 60-75%.
  • Why do I have to offer a discount at all? Your discount determines the price retailers pay for your book (wholesale price). They then sell the book for more (in most cases) and keep the profit. If the retailer can’t make any profit, what’s the benefit of carrying your book? Keep in mind, though, the higher the trade discount, the lower your royalties. In order to make the transaction go smoothly for both parties, you must choose a happy medium from both perspectives (the retailer and you).

What trade discount have you set for your book? Has it allowed you to penetrate your target market?

Cheri Breeding ABOUT CHERI BREEDING:
Since 2005 Cheri Breeding has been working as the Director of Production for Outskirts Press. In that time, she has been an instrumental component of every aspect of the Production Department, performing the roles of an Author Representative, Book Designer, Customer Service Representative, Title Production Supervisor, Production Manager and, Director of Production. She brings all that experience and knowledge, along with an unparalleled customer-service focus, to help self-publishing authors reach high-quality book publication more efficiently, professionally, and affordably.