In their good books
One of the lesser known links in the publishing industry food chain is the book distributors. They are the middlemen between publishers and stores, who promote sales and get a sense of what is happening in the field.
Nevertheless, it is a rule of thumb in the industry that no publisher is happy with its distributor. Others claim the secret is in distribution, and if the publisher would just switch distributors, its sales would double immediately. This rule applies more than ever in our current age of stiff competition. It is no wonder, therefore, that the industry is now experiencing quite a few changes.
Most large publishers, including Am Oved, Keter, Yedioth Ahronoth, Modan, Matar and Schocken, distribute their books themselves. Other publishers, big and small alike, use outside distributors. The service provider can be part of the distribution network of a large publisher or an independent, outside distributor who specializes in distribution. Lior Sharf, the distributor of Kinneret-Zmora Bitan Dvir books, is the biggest independent distributor in Israel. There also several other distributors who distribute for many small publishers, such as Beit Alim, Dani Sefarim and independent publishers who distribute for themselves and for others.
Several publishers recently decided to part ways with their distributors. Ahuzat Bayit publishers switched to Lior Sharf (which meanwhile parted with Mapa); Masmerim and Aryeh Nir are switching to a new distributor that just opened, all recently left Keter's distribution network.
The new company was established by Momi Haramati, who until a year ago was Keter's marketing manager. A year after he left the publisher in July 2007, he opened an independent distribution company and has welcomed Aryeh Nir, Yanshuf Publishers and Karin Goren. Haramati is now negotiating with other publishers.
Book distributors are responsible not only for sending the books from the printers to the warehouses and from there to the stores, but also for their marketing and sales. The distributor negotiates the financial terms with the stores and reaches an agreement on the discount rate and the discount prices.
Roughly speaking, the publisher gets 40 percent of a book's catalogue price (less VAT) and the rest is divided between the store and the distributor. In other words, the store gets 50 percent and the distributor takes in around 10 percent. However, in practice, the situation tends to be different: The large retailers receive higher percentages than the cost of the book, which could also reach 65 percent, and then the publisher and the distributor split what remains depending on the agreements between the distributor and the store.
The distributor is responsible for arranging the books in stores, making sure they are displayed prominently, promoting the books he is responsible for, persuading sellers and store managers to maintain bigger stocks, developing good relations with the large retailers and the independent stores, and obtaining as many orders as possible. In return, he usually gets between 4-10 percent of the book's catalogue price (the greater the expenses, the less the distribute gets).
Distribution companies also have quite a few expenses: the cost of warehouse maintenance and workers, agents, vehicles, administrative and secretarial staffs combined can total 60 or 70 percent of the business turnover - of the distributor. But even then, so it seems, he is still left with a fair profit. In the past, industry executives say, it was easy to get rich from distribution deals; today, given the market conditions, which see a lot of books returning to warehouses after the end of special deals, it is harder.
The publishing crossfire
Three years ago, Keter entered into a partnership with Steimatzky and began working with Steimatzky's publishers, which were known to be the geese that lay golden eggs: Ram Oren's Keshet Publishers, Aryeh Nir and others. But then a crisis surfaced between Keter and Steimatzky (which recently ended in a separation). Keter's veteran marketing manager, Momi Haramati, left, and his successor also left after a short time. Shortly thereafter, Keter and most of its publishers suffered from poor sales.
"The mess with Steimatzky also affects Keter's marketing," says one publisher. "In the last year, anyone who was distributed by Keter was affected, because Steimatzky is still the biggest retailer in the market and when you fight them, you have a problem. For a long time, there was a sense that Steimatzky ordered small quantities of the titles Keter distributed and something like that can kill a book. Meanwhile, since the split, things have changed for the better."
Industry people refer to Keter's management problems in the last year, which also affected the quality of its distribution. Some industry executives say that Hakibbutz Hameuhad is also not satisfied with its current distribution.
Two years ago, Hakibbutz Hameuhad left its distributor of 14 years, Alberto Sapak of Sifrut Akhshav, and moved to Keter's distribution to benefit from the new arrangement with Steimatzky. Keter had a made a serious dent in Sapak's sales, but still, as mentioned, sales at Steimatzky did not meet expectations.
"At the moment, we are continuing with Keter," says Nahman Gil, Hakibbutz Hameuhad's marketing manager. "There were great expectations that did not materialize. There is constant turnover in the industry, every one thinks the other distributor is better, but the problem is not the distributor but the discount sales that hurt the publishers and the owners of Tzomet Books, who prefer their publishers."
Keter CEO Yiftah Dekel says the market conditions have changed and are also forcing Keter's distribution network to change. "Because the bargain sales have increased, our margins as publishers have dropped. Because of the discounts given to the stores, we as distributors were affected. There are today many books returned because of the bargain sales. You send a store loads of books, and they remain piled up until the offer ends and then they go back to the distributor. If up until a year and a half ago, out of 100 books you sent, you sold 90 and 10 came back, today the proportions have changed and out of 100 books you send, 30 come back.
"The result is that you set up a collection in the warehouse and pack and ship [them off] and afterward, at your expense, pick up the books from the stores and spread them around your warehouse - and you don't make anything on that. Moreover, the percentage of damaged books returning has increased."
A profitable venture
Dekel speaks of a process of "concentrating on the essence" as far as everything connected to Keter's distribution. "Recently we checked who it is worthwhile for us to continue working with," he says, "and we realized that it is worthwhile to continue with publishers who are big enough, such as Hakibbutz Hameuhad and Ram Oren."
Quite a few publishers have recently left you.
"Everyone has his considerations, everyone wants to sell more."
You now have a competitor who used to work at Keter.
"I welcome his arrival in the market. It is preferable that the small publishers who are between the hammer and the anvil find a good home with him. It is a process that was coordinated and done with understanding."
Will Hakibbutz Hameuchad stay with you?
"Their sales have declined, the question is only one of the commercial terms between us. That's part of the standard commercial dialogue."
Book distribution is known to be a profitable venture, another way to bring in money for the publisher. That is what, for example, Opus, a medium-sized computer book publisher did when it gradually became a publisher that also publishes prose. The founder and owner of the publishing house, Gil Tagar, decided seven years ago to expand the publishers' operations to distribution. Opus also distributes Shalgi, Friedman, Hod Ami and other publishers of computer books, travel books and coffee table books.
"We have two agents who cover the whole country and a warehouse on Salameh Street in Tel Aviv," says Tagar. "The big distributors go with publishers that have a catalogue the size of the Encyclopedia Ha'ivrit. We have a catalog that you can memorize and we can devote attention to each book."
"We went into this between 2001 and 2002, exactly when the high-tech bubble burst. Computer books that were a main source of income disappeared off the market, then I started distributing our books by myself, and as a result our sales did not drop. We are constantly expanding our distribution and turnover. That is something in this world - to survive 20 years as a small publisher, with no canonical catalogue that everyone knows; it takes a lot of imagination and creative thinking."
Glory Publishers, which specializes in sports books and light reading for young people, decided to distribute its book after a bad experience with an outside distributor. It also distributes the books of a small publishing house, Gordon.
"We have a distribution line, agent and warehouse, and on the line we distribute for ourselves we also distribute for them to around 400 stores," says Mordy Alon, of Glory. "When we worked in the past with a distributor, many of the books came back to us in catastrophic shape, the payment ethic was terrible and the distributors did not sense the pulse of the stores. A distributor has to know what the status of each book is in each area at all times. In the end, we decided to distribute on our own. It's not easy work, but the advantage is being connected to the field and I collect the money myself."
Still most of the new publishers have to work with a known and experienced distributor in order to get their books into the stores, and especially the large retail chains. Distribution companies tend to work with many publishers to benefit from the advantage of scale when dealing with the stores. The disadvantage is their inability to pay attention to each book and therefore many publishers feel neglected.
"Every publisher that can distribute on its own, should do that," says Alon. "True it's not pleasant to schlep books and get returns, and it's a big headache, but the reason we are surviving is because we distribute ourselves."
Like us on Facebook and get articles directly in your news feed