[Morlac]

Thanks for the karma, emellaich!

You make excellent points. I do think that previously it was stated that the discount big pubs offer to the retailers/distributors is 60%, so the pub is only keeping 40% at that point. (Not being my area, I can't say for sure which is correct.)

The warehousing cost of physical books varies, but it will vary quite a bit depending on the setup and how it's accounted for.

One of my previous employers owned their own warehouses outright. So long as they weren't full, the additional cost to store more books was close to zero. You might argue that the places cost money to purchase initially, plus ongoing utilities and taxes, of course. But certainly, someone who's directly paying by the pallet-load stored is going to feel the pinch of excess inventory more acutely. And even there, assuming that your books have a decent value compared to their size and that you're not renting space in the middle of New York City to store them, it's manageable.

The bigger issue to me at least is waste. It's been discussed in the thread that publishers may remainder to get rid of wildly excess inventory. They may also have to take back large quantities of slow moving stock from the retailers. In my own niche, individual state standards and curricula and even test formats change periodically. While they usually try to do so in an orderly way, budgets and politics often force changes off-cycle. That can get expensive for any publisher, but particularly so for a small one like me. That's one of the big attractions of e-publishing to me -- I *hate* having to shred "obsolete" books. Both because it's a financial hit and an environmental one.

Putting some wildly guesstimated numbers on those statements:

Assume that a publisher can fit something like 1,500 softcover books into a pallet, give or take several hundred. Assuming that he's using a third-party warehouse that charges in the neighborhood of $10 to $15 per pallet per month. Use the high end of that to make the numbers easier -- that makes it 1 cent per book per month in storage fees on average. (Of course, you don't get billed by the book, you get billed by the pallet, so if you have one book left on the pallet, you still have to pay the full pallet charge of $15/month!)

Assume that the publisher prints a very short run -- only 3,000 books. He stores those books for a ridiculously long time. Say that he sells half his books in the first year and then doesn't get rid of the rest until the end of year 4. So in year 1, he pays $360 in storage fees (two pallets per month at $15/month). In years 2 - 4 he pays $540 total in storage fees (one pallet per month x $15/month x 36 months). That's a total of $900 storage.

But now let's say instead that the publisher has to destroy the unsold inventory at the end of year 2 because it's not moving fast enough or because the books are obsolete. He's paid $540 in storage fees and -- assuming he sold 500 books in year 2, he has 1,000 books left. So he's out the $1,000 it cost to print those books as well.

That's why personally I would rather keep books in inventory so long as they are not actually made obsolete by changing markets.

Personally also, I think the cost of actually fulfilling a physical order is usually greater than the cost of warehousing. (But on the other hand, you don't have to pay that fulfillment cost until you've actually got an order that should more than pay for it!) In any case -- that's certainly another advantage of properly set up e-book distribution. The cost of shipping and handling to fulfill a physical order is pretty high. But on the (what is it now, fourth or fifth other hand), unless you're offering free shipping, you usually get most or all of that covered by the customer. My impression is that some outfits even come out ahead on the shipping and handling charges! Whereas customers (rightly) don't want to pay a shipping and handling charge for a downloaded ebook!