A Look at the Bargain Book Business

When I worked in bookstores during the late 1960s and early 1970s, the book business comprised dozens of independent publishers, some very large, and probably thousands of independent and locally owned bookstores. Many of the stores sold merchandise other than books, but the publishers did not. A specifically bargain book business hardly existed at all. The book business has changed dramatically since then.

Formerly, publishers determined each title's retail price, which all the bookstores observed. Although not every title made a profit, publishers kept most titles in their backlist until all copies were gone. At that time, they could either choose to print more copies if there was still enough demand, declare the book out of print and delete if from their catalog. Sometimes, publishers decided a title was not worth keeping and sold remaining copies to remainder companies for pennies on the dollar; the remainder companies marketed the books at deeply discounted prices.

In the late 1970s two big shocks affected the book business. Crown Books opened its first store in 1977 and challenged the publishers' right to set prices. It offered discount prices for everything it sold. While not a direct defiance of publishers, Barnes & Noble and Borders began their own nationwide chains of bookstores, which often dwarfed the local stores.

The Supreme Court delivered an even bigger shock in " target="_blank"> Thor Power Tool Company v. Commissioner of Internal Revenue (1979). The IRS had denied the company's valuation of unsold inventory. The company sued, claiming the inventory's market value had decreased according to "generally accepted accounting principles" and that the IRS had acted improperly in refusing to allow the company to write off its lower value.

The Court ruled, "There is no presumption that an inventory practice conformable to "generally accepted accounting principles" is valid for tax purposes. Such a presumption is insupportable in light of the statute, this Court's past decisions, and the differing objectives of tax and financial accounting."

Since publishers had routinely treated their inventories in the way the court had ruled against, they could no longer afford to keep backlist titles until they sold out. Publishers found two ways to adjust: first, they printed fewer copies in the first place, and second, they took them out of print much faster than before. Remainder books therefore became a much more significant segment of the book business.

Another shock came when Amazon.com began its Internet book sales in 1994. Because its business model required neither a warehouse for inventory nor a physical store, it could offer an unlimited number of titles. Before long, other companies sold books over the Internet, and eventually they started to offer both new and used books.

The bargain book business soon followed. Remainder books have gone online, using two basic models. Some companies serve as middleman either to stores (for example, for the bargain book tables in various chain bookstores) or home-based Internet businesses, which buy the inventory, sell it to individual customers through their site, and accept responsibility for shipping it.

Others deal with individual buyers, either directly or through affiliate marketing. Anyone with a monetized web site can sign up as an affiliate, link directly to the remainder company's web site and receive a commission on each sale. The All-Purpose Guru and All-Purpose Guru Alert both participate in the bargain book business and offer remainder books.