Distributors handle warehousing, marketing, fulfillment, and collection for independent publishers. For small publishers who wish to place their books in bookstores, there is generally no better alternative than signing up with a national distributor.

The Publisher-Distributor Relationship

Distributors generally require the exclusive right to sell a publisher's titles in certain geographical regions--for instance, North America. Distributors take 55-68% of the retail price of each book they sell, depending on terms and services. In exchange, the distributor provides the following:

• Warehousing. The exclusive distributor stores all copies of the publisher's titles.
• Shipping, invoicing, and collection. Invoicing and collection is a time-consuming affair in publishing, and well worth outsourcing for small publishers, who are all too often paid late or not at all by wholesalers and booksellers.
• Marketing and sales. Distributors list their clients' titles in their seasonal catalogs, which go out to wholesalers, booksellers, and librarians. They also maintain a staff of sales representatives, who personally visit bookstore buyers on a regular basis. The publisher is not discouraged from doing its own advertising and marketing; but all sales go through the distributor. With certain exceptions (e.g., author copies, conference display copies), the publisher is not allowed to sell or distribute its own books.

Contract Terms

Publishers need distributors more than distributors need publishers. Therefore the contracts favor distributors. Publishers should be aware of their obligations and risks. The following are some key terms in a typical contract:

• FOB ("Freight on Board"). This term indicates who doesn't pay for shipping. "F.O.B. distributor" means the publisher pays shipping to and from the distributor, the usual state of affairs.
• Kinds of prices. "Retail," "wholesale," "list," and "distributor" price can all mean different things. Understanding exactly which is meant in which instance is very important.
• Discounts and fees. Again the publisher must keep careful track of the above kinds of prices, and also the terms "gross" and "net." Discounts and fees vary according to what services the distributor provides: e.g., favorable listing in the catalog, other advertising, etc.
• Returns. Books are returnable, meaning that what looked like a sale three months ago could turn out to be not a sale. Distributors keep "reserves" to cover anticipated returns--a certain percentage of net sales that they withhold from their payment to the publisher.
• Payment terms. Most distributors pay on 90 days net, meaning that they don't have to pay the publisher for their books until 90 days after the distributor is paid by booksellers. Since booksellers get 30-90 net terms as well, this means, in practice, that publishers sometimes don't see any money for over six months after the books are "sold"--and even that may be significantly reduced by reserves against returns (above).
• Risk of loss. An ugly fact of the distribution business is that distributors occasionally go belly-up. The last thing a distributor in financial trouble will do is let its clients suspect the truth, so there is little or no warning for publishers. Furthermore, and most damaging, under bankruptcy practice all the books in the distributor's warehouse become the property of the major creditors, whether or not they are technically owned by the distributor--meaning that the publisher simply loses them. Other loss, such as damage or misplacement in the warehouse, can be insured against, usually at something like the unit cost of the book (10-20% of the retail price), in the contract. Or not. Insurance and risk of loss are issues the publisher must take quite seriously when dealing with a distributor.

Finding a Distributor

Independent publishers looking for distribution should spend some time doing research. The first order of business is to find distributors who handle the right kind of books, and in the desired territories. One way to do this is to find similar titles in bookstores and ask the buyers who distributes them. Another is to consult Literary Marketplace or American Wholesalers and Distributors Directory (see Sites and Books), and have the distributors send their catalogs.

Publishers should be careful not to sign with a distributor that carries titles that directly compete with theirs.

Once a potential distributor is located, it is important to talk to other publishers it represents and book buyers who deal with its sales reps. How easy is the distributor to deal with? How timely are its payments? Discreet inquiries about the distributor's solvency and cash flow are probably warranted as well. Questions to ask a potential distributor include:

• How many entities (bookstores, wholesalers, etc.) do they sell to?
• What do they think is the potential market for your titles?
• What distinguishes them from other distributors?
• What are their terms (see above)?

The most important factor is the distributor's level of interest in your books. If it doesn't seem enthusiastic about them or their sales prospects, go elsewhere.

Large Publisher as Distributor

Several large publishers act as distributors for smaller publishers. The arrangement is the same as with a traditional distributor. There are potential advantages, however. A large, established publisher may have more clout in bookstores, which couldn't do without its bestsellers and backlist titles. It also may have more experienced sales reps, better catalog distribution, a better understanding of the market, etc. On the other hand, the publisher's own titles will come first, meaning a small publisher's titles may be neglected. This is, however, the same risk one takes with a large traditional distributor.

Literary Marketplace and Book Publishing Resource Guide list publishers that act as distributors.