Just yesterday Galleycat referenced a Bloomberg article, "As Books Fill Dumps, Publishers Target Return Policy" by Edward Nawotka.

The article is a good overview of the book publishing industry's return policy -- or a good overview of how wasteful and insane it all appears to outsiders.

Here are the basics, for those unschooled in returns:

• All books are sold to bookstores on a returnable basis. Books can be returned at any time, for any reason, for full credit.
• Today the industry-wide return rate is about 30 percent. That means 30% of books that are shipped to stores are eventually returned to the publisher. (Returned product may be resold, remaindered, or destroyed.)
• When thinking about book sales, authors should always think in terms of "sell-in" and "sell-through." Publishers sell the books INTO the stores, but those books haven't actually sold until they sell THROUGH the register into the hands of a consumer. Book authors may see reassuring sales figures on their royalty statements during the first 6-12 months of release, but those sales figures may actually DECREASE if returns are heavy. Some publishers even reserve the right (in an author's contract) to withhold royalty payments as a reserve against anticipated returns.

What particularly caught my eye in the Bloomberg article was a quote from a Publishers Weekly editor, Jim Milliot. He comments on an effort by Robert Miller at HarperCollins (run by publishing genius Jane Friedman!) to create a new imprint that will work on a nonreturnable basis, among other innovative things. He says:

"It would require Random House or HarperCollins to develop an entirely new business model, and that is not going to happen."

Aside from the fact that the book business is undergoing tremendous change due to advancing technology and digitization of content, is publishing's current business model exactly a desirable or profitable one? Isn't it about time that we found a way to do business that actually makes sense and doesn't waste millions of dollars?

We have to develop an entirely new business model—fast—if we want to keep readers (even grow readership?), if we love books, if we love our jobs. (To see another publishing company that knows how to transform a business model, see my previous post about Thomas Nelson cutting back its list.)