Sunday, April 19, 2009

Determining the profit margin of a bookstore

The demand for good quality books from the modern society is increasing every day. Books are closely related to the development of human intellectuality. It supports one's education and effort to succeed in his or her life.

007-secret.JPGOn the other side, books are part of printing industry where general principles of business have to be applied to book business. People who are involved in printing business need money to keep their business running. They need money to pay authors and print more new titles. If book business does not make profit, people who are involved in that business will leave it.

Now the question that we need to know is how much profit we can apply. A bookstore usually charges 30 percent net profit from the initial cost of the books. If the price of a book from a publisher is 10 US dollars then the shipping cost will be 1 US dollar (10% of the book cost). A business is usually run on bank loan. The monthly installment plus the interest is 10% to 20% depending on the amount that a bookstore pays to a bank. The operational cost (building rent + utilities and labor cost) is around 15%. So, the final price of a book will be 10 USD + the percentage of (Shipping cost + bank installment + operational cost).

It means that the total percentage added to a book will be around 40% to 60%. If the bookstore does not pay any loan installment to a bank then the final price of the book should be lower, around 30% to 50% added to the initial book cost. Giant bookstores like Barnes and Noble or might apply different percentage due to their large volume of book selling. For independent bookstore, a reasonable percentage of profit is needed to keep the business survive and growing.

Finally, how much is the retail cost of a book if the initial price from a publisher is 10 USD? It will or should be between 13 and 16 US dollar. Is it such a high margin? Yes, book business is a very profitable business. by Charles Roring in Manokwari of West Papua - Indonesia

1 comment:

monica.ang said...

This article of yours is very useful! Thank you!
Is there such a thing as sort of a consignment model between a seller and a publisher? Meaning, if a book can't be sold, can it be returned to the publisher in exchange for different books? If I opened my store in Manila, Philippines, from where should I get my books? Is there such a thing as a particular country where books are sold cheaper to sellers? Ex. Will prices in the US be lower than if I were to buy from Australia or Singapore? Sorry if my questions sound stupid. I have no idea about the book business. How many titles should a specialty bookstore have (sci fi and fantasy) - how many copies are usually stocked for each title?
I would really appreciate anyone's feedback. Thanks!

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