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2023 Changes: Amazon Categories & Ingram Discount
Keeping up with the industry
Recently, there have been two big changes in the industry that affect children’s book publishers.
In the past, authors could place books into a couple categories and then email Amazon to be included in up to ten categories. Great. Except, there were those who set their books up in questionable categories. The goal was to “work the system” or “get around the algorithm.” Categories were a mess.
A second problem is that Amazon was trying to abide by the BISAC categories. BISAC stands for the Book Industry Standards and Communication. Their committee meets every couple years and updates categories, deleting those not used and adding where needed. A big update a couple years ago was the addition of YA/Teen categories. However, they are slow to update.
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Personally, I’m frustrated that there’s no category for books about social media. Really? My chapter book series, Kittytubers, needs that category! Even Amazon doesn’t have that one yet.
The biggest problem, though, is that Amazon has real, up-to-date information on what books people are buying and the BISAC categories don’t hold up for them. They need stronger, more flexible categories.
Out with BISAC!
In with Amazon Categories!
One change is that some categories are what Chesson calls “ghost” categories. They aren’t included in the overall drop-down menus on Amazon and there’s no way to get there through normal navigation. Worse, some of them are a “duplicate” category. That is, if you put your book into one category, it may automatically be included in a couple others. If you choose duplicate categories for your book, you’ve wasted that choice.
Let’s look at some examples to see why this matters for children’s books. Take animals for instance. This is a screenshot from Publisher’s Rocket, the program that analyzes Amazon and helps you with things like categories. (I am NOT an affiliate!)
Green buttons mean the category can be used, but the dark gray button means it’s a GHOST category. For example, do NOT put your book into both Apes & Monkeys>Fiction and Apes & Monkeys>Nonfiction. Amazon has collapsed the categories and doesn’t care if you write fiction or nonfiction, they will all go into the general children’s book category of Apes & Monkeys.
It’s very interesting! They no longer distinguish between fiction and nonfiction for kids! If you look closely, you can see that the Nonfiction categories were small in comparison anyway.
Let’s say that you tried to put your books into these three categories:
Books>Children’s Books>Apes & Monkeys
Books>Children’s Books>Apes & Monkeys>Fiction
Books>Children’s Books>Apes & Monkeys>Nonfiction
The ghosted categories mean you wasted your category choice, effectively using just one of your possible categories. You must AVOID the ghosted categories because they are a wasted choice. Make a real choice instead of a ghosted-choice.
Even more interesting - When you click on the orange Insights button, you get this for the overall category of Children’s Books >Animals. Sales are down! Overall, children’s books about animals are down! OK, I understand why sales are down in May at the end of the school year, but November?
Of all the categories of animal books, only two were up: Turtles are up 2.
Dinosaurs are up by 17 and remain fairly steady! That’s great for my A LITTLE BIT OF DINOSAUR SERIES.
In other words, this may not be the best time to launch a children’s book series about animals. If you are, then competition will be stiffer - be ready!
Categories are important on Amazon. I’ve updated about half of my books and still need to finish. But I’ll be taking a look at Publisher Rocket as I do so.
Here’s the sticky question: what do you charge for your children’s book?
First, let’s look at the publishing and book landscape.
Legacy publisher’s problem. Legacy publishers are trying very hard to hold the line at $20 for hardcover books. Ten years ago, when they offset printed 30,000 hardcover copies overseas (where labor is cheaper), their prices were close to $1. Cheap transportation made the overseas printing economical.
During the pandemic, transportation costs sky-rocketed. Post-pandemic, the transportation costs are easing. But paper and ink costs are continuing to climb. Those $1 print costs are going up and up.
Still, legacy publishers are reluctant to go past that $20 cost. Are books a luxury item? Would you only BUY a book if you had extra money? Or are they a necessary purchase?
We are asking the wrong questions!
Where do you sell your books? If you are aiming for bookstore sales, then go back a few paragraphs and drown in despair!
But indie publishers of children’s books sell in online markets and to the school/library market. The $20 price has been busted long ago, especially for niche topics. Every schools need a book about every President of the U.S. Those educational books will easily sell at $25/book, because they NEED the book. Otherwise, they aren’t providing an adequate education.
In other words, you need to be very clear about the market for your books. Are you targeting bookstore browsers? Trade books (those sold to the trade, i.e, in bookstores) need to be extremely high quality and have a high concept hook. I consider many of my books as trade books, but I don’t sell into the bookstore market. I sell to schools/libraries/parents.
Therefore - given my target market of schools and libraries - what can I charge for my book?
Our problem: When we use print-on-demand technology to print, it’s printing one book at a time. We can’t get the $1/hardcover book print costs. No. It’s more like $10/hardcover book print costs. It works because there’s no upfront costs of printing thousands of copies. We don’t have to warehouse. We manage our risks by using POD, with the understanding that we will have higher costs to manage. And with the increasing paper and ink costs, it’s been hard. Now, add to that, Ingram is forcing us to accept a higher discount.
How do we manage our costs so that we make a profit? (We accepted that this is our problem when we chose to manage our risks by using POD: so, let’s manage our higher costs!) What should you charge for your book?
Here’s what I do. Don’t just copy it! Think about your target market and what works best for you and your publishing program.
Short Discount. A short discount is when you set your wholesale discount at less than standard 40%. This has been popular for indie publishers for twenty years because more of the profit flows to you instead of the middlemen distributors.
But apparently some large customers (speculation bounces between Amazon and B&N) have drawn a line in the sand. They need a bigger cut to run their business, they say. And of course - it comes from us, the publishers.
55% Standard Wholesale Discount. But for years, I’ve set my books to a standard 55% discount. NOT because I want to be carried by bookstores (which is the usual reason they tell you to set a 55% discount). Instead, I want to be carried by the educational distributors such as Follett and Mackin. Educators are served by companies who specialize in selling to the education market - and they want to make money. With a 55% discount, Ingram can sell to education distributors: Ingram keeps 15% for themselves, and passes along the remaining 40% discount so the education distributor will make a profit.
Education distributors provide all sorts of services: recommending books for grade specific topics, cataloging information which librarians love because it saves them time, and even complicated library check-out services such as Follett’s Destiny programs. Most schools have accounts set up through education distributors, sometimes several education distributors. Most school book orders will go through those accounts. Yes, they can still order one-off books through Amazon or local bookstores. But largely, orders go through the education distributors.
And those distributors need to make money. They need the publishers to set a 55% discount, so when they order from Ingram Wholesale, they’ll get a 40% discount and can still make a profit. All the middlemen need their cuts. Sigh.
Well, I need to make money, too.
I set my 8.5” x 8.5” full color, hardcover POD-printed picture books to $24.99 or $25.99. Paperbacks are set at $11.99. And I sell books.
Educators NEED my books to discuss certain topics. I take a curriculum topic and create fun books with great illustrations. For example, according to the NextGen Science Standards, every second grade class in the U.S. is supposed to talk about sound. It’s elementary physics. Sound waves. Boring. ZZZZZ!
But what if an Emperor wanted to know more about your science experiments? The story of the Father of Acoustics, Ernst Chladni (Klod-nee) going to the court of Emperor Napoleon to entertain him with science experiments about sound - that’s fun! The basic concepts of sound are included - of course, of course, of course. The book received an NSTA Outstanding Science Trade Book award (See? Science teachers DO need this book!), and was included in a Little Passports STEM box. This humble book sells because the story is way more fun than most children’s books about sound. Teachers NEED my book. Every second grade teacher NEEDS my book.
And teachers and librarians will pay the higher costs for a book they need.
In the end - for me - it all begins with the basic questions: What book will you publish? Who is your reader? Why would that reader buy this book? Whenever possible, I work to create a book that people need.
You decide what your publishing program will look like, you write the best story you can, you produce the highest quality product you can, and then price your books to make a profit.
Here’s the Math
There’s actually a mathematical reason why I set my books for a $2-3 profit margin. In the book, Accounting for the Numberphobic, Dawn Fotopulos explains that to price a product, you take the cost of good sold (COGS) times 1.4 to find the lowest wholesale price. (I am simplifying here! Read the book!)
Here’s where it’s difficult for us because none of the dashboards we are offered provide an easy way to see all the costs and breakdowns we need. They simplify everything so you only look at profit. They never break out the print cost, distribution cost, wholesale price, wholesale discount, retail price. (It’s why you can so easily lose money on ebooks when you don’t SEE the delivery costs.) But we should know all of this.
So let’s walk through the math.
POD print cost (Or COGS) for a 8.5” x 8.5” hardcover picture book: $10.
Lowest wholesale price: $10 * 1.4= $14.00
Retail price at 40% discount: $14 = X - .4X, or X = $23.33. Your retail price should be $23.33 at the lowest.
Retail price at 55% discount: $14 = X - .55X or X = $25.45. Your retail price should be $25.45 at the lowest.
To look at it differently: at our price ranges, it works out that you should be making about $3 profit /hardcover book and $2 profit/paperback books. You can do the math and create a range of prices and see for yourself. It’s “about” right.
OK. I’m NOT a mathematician and definitely NOT an accountant. Once I was satisfied that the math said those profit margins were “about” right, I stick with it. Read the book and decide for yourself.
These things are crucial to understand so you can set your pricing and be confident that you are making the best profit.
We chose this problem. We use POD printing to manage our financial risks; therefore, we must accept the challenge of managing high costs. Let’s just do it.