Waterstone's m.d. Dominic Myers has called for a streamlining of the supply chain, claiming the current system is slashing £150m off margins and is "madness".
Speaking during the "Question Time with the Retailers" panel at last week's Independent Publishers Guild conference, Myers said the industry needed to make changes to its "static" distribution model. He said: "There's an excess of supply chain infrastructure. Given the physical book market will only go in one direction, that situation hasn't got any better. In fact, it's gone completely static."
He continued: "My calculation is that there is 3.7 million square feet of book distribution space [in the UK]. We have 150,000 of that in our hub. If we need that for one-quarter of the book market, why do we need 3.7 million square feet of space in total? You take an average cost per square foot of £50 for that space, it's actually gone up to £150m that the book industry is now subsidising in one way or another, and that feeds through in terms of the margins that you generate and we generate."
Myers made the comments during the panel discussion on discounts in the industry, and said: "Why are we talking about discounts when there are large costs in our industry about which we are doing precisely zip? Look at this panel. We have a shed, as do Smiths and Amazon. It's madness. As an industry we need to do something about it and quick."
Also on the panel was Blackwell's c.e.o. Andrew Hutchings, W H Smith senior trading controller Toby Keir, Amazon books category director John Gahagan, Foyles c.e.o. Sam Husain and Patrick Neale, co-owner of independent Jaffé & Neale.
Questioned about the ideal returns rate, Myers said: "Returns should be much, much lower than what we have currently," adding: "Our desire is to have returns significantly lower. Last week it was 12% but it should be in single digits. We're recycling around 20% of returns through the hub." Explaining the reasons why returns can be large, Myers said: "The reason why stock is coming back is because it's the wrong stock that has been ordered, or in the wrong volume. Some of those titles are no longer justified space." Keir largely supported Myers' viewpoint on returns, and said: "Returns are getting better but from quite a high starting point. How we solve that conflict is a big issue for us."
However, Blackwell's Hutchings disagreed with Myers' single-digit stance, saying a decent rate of returns would be 10% to 15%. He said: "If we have to get to a point where the returns rate is so low then it means we are not taking enough risks, or getting behind new titles we début."
Amazon's Gahagan said the internet retailer's returns rate was "at a lower level naturally", but it wanted to improve on this as well as focusing on increasing availability.
Reacting to the panel's comments, Osprey Publishing m.d. Rebecca Smart said talks lately with Waterstone's on returns had been about balancing cost and display, and said: "We are finding them [Waterstone's] really, really supportive at the moment, more so than ever."
Myriad Editions m.d. Candida Lacey said it was "so hard to cope with returns". She said: "I just feel they should be more realistic [with orders] . . . [Myers] said he was aiming for single figures and that's about right, I would much prefer to see it lower."
However, Steve Connolly, New Holland m.d., said "very cautious frontlist ordering has been more of a problem than returns".