Can someone help me understand royalties and revenues?

[jgmes2001]

I haven't printed anything, but from looking around the site and using the calculator, it seems that the way price of a book is determined is to add up the manufacturing cost, and the royalties for the author and Lulu.

Now, if a book costs about 5 dollars to manufacture, and the royalties are another $5, then they suggest putting the list price as $20. Now what I don't understand is what happens to this additional $10, if the author, Lulu, and the book costs have already been paid. Can someone explain?

[Ken Anderson]

There are a number of components.

The manufacturing cost (based on the type of book, binding, colour, no of pages).
Then there is Lulu's commission.

Add those two together and that gives the minimum price you can sell the book through Lulu.

For slaes through Amazon you must also add Amazons commission to the previous two costs so the minimum price must be that much higher.

A real example:
236 pages Quatro sized b/w perfect bound bound book.
Manu=4.58
Lulu= 2.87
Amazon=5.63

Sell at 15.75 gives 8.30 reevnue from Lulu & 2.67 from Amazon

[simonralli]

Hi - my costs are coming out as follows:

Retail royalty: £4

Lulu fee: £1

Manufacturing: £4.23

Retail markup: £9.23

That is 50% markup.  I have not yet published my book, this is what the retail calculator says.  The example in this thread does not show Amazon as 50%.  Is there a reason for this?

Also, many books are discounted on Amazon.  For me I really need my book to be somewhat cheaper, without eating too much into my own sales.  Does anyone know how and when Amazon discount books?

Is there a way to sell cheaper on Lulu?  Would I have to set up a second version of the book?

[kevinlomas]

I have always thought that the term Royalty as used on Lulu is the wrong term. Royalty is normally a small fee, on sales, when your book is sold by a publisher who you have agreed to 'give' the publishing rights to, and they handle everything. On Lulu I subtitute the word 'Profit'. BTW. 50% is a lot to ask to be honest. Amazon set their own prices.

[TheresaMMoore]

You are thinking that Amazon is attached to Lulu as a storefront. It is a different company altogether. Lulu is a supplier to Amazon only and must account for the 50% wholesale discount when setting the list price. Let me elaborate.

[TheresaMMoore]

I think there is a significant confusion with Lulu and Amazon being part of the same creature. When you compute your royalty (net revenue) on sales, you are using Lulu's pricing model only. When you add Amazon to the computation, you must account for the wholesale discount Amazon asks for as a commission on sales, in addition to Lulu's cut of the deal. This actually amounts to 70%, when you lump the two together. When Amazon "sets" its sale price against the original you set, it is accounting for that 50% and also the list price you set. If it is not able to sell at list, it will discount the price until the book sells, but you are paid the same royalty no matter what.

What Amazon does and what Lulu does are two different things. Think of Lulu as a subsidy publisher instead, and Amazon as an end consumer. You have to take all your costs of production into account when setting a list price, and that is only if you want to deal with a bookseller beyond Lulu alone. I even include the shipping cost of a proof copy as part of my cost of production, then set my list price with Lulu. For example, I set my list price like this:

(Cost to print + Lulu commission + cost of proof shipping) divided by 45%.

This accounts for the standard wholesale discount to retailers of 55%.  If it feels like too much and you feel comfortable with less net revenue, lower it, but not lower than cost of production, or halve your cost of shipping. Whatever you do, if you are using Lulu to distribute to other retailers you have no choice but to accept their wholesale discount, or they will simply not carry your book. It's your option.

[kevinlomas]

I also think that there is some sort of Lulu 'Rule' that your price as shown on Lulu cannot undercut the price on Amazon. I think it is to do with Lulu's basic (and upwards) Dist Pack including placement on Amazon.co, automatically.

[simonralli]

I know I hijacked this thread but thanks for the considered replies.

I am of course fully aware of the differences between Amazon and Lulu, it's just that Lulu I feel are not that clear in how it all works.

If I set my royalty at say £1, am I guaranteed that whatever Amazon decide to discount at?

Also, can I create a special edition of my book, not give it an ISBN number, and just sell on Lulu, with another version selling on Amazon?  That way I can just have a private url, and send this to friends who I want to offer the book to at discount?

If this version just sells on Lulu, is it me who earns the retail margin and not Lulu?

Thanks for all advice offered!

[Ken Anderson]

If I set my royalty at say £1, am I guaranteed that whatever Amazon decide to discount at?
Yes, Amazon can give it away - you still get your £1 

Also, can I create a special edition of my book, not give it an ISBN number, and just sell on Lulu, with another version selling on Amazon? That way I can just have a private url, and send this to friends who I want to offer the book to at discount? If this version just sells on Lulu, is it me who earns the retail margin and not Lulu?
No, if they were to buy it from Lulu then the price they would pay would still include Lulu's margin.
A better way is for you to get your friends to pay you directly and then for you to buy from Lulu with their shipping address - that way you just pay the manufacturing cost and shipping.

[donnalgalletta]

Hi Ken

I would like to get into this conversation too!

Also, can I create a special edition of my book, not give it an ISBN number, and just sell on Lulu, with another version selling on Amazon? That way I can just have a private url, and send this to friends who I want to offer the book to at discount? If this version just sells on Lulu, is it me who earns the retail margin and not Lulu?
No, if they were to buy it from Lulu then the price they would pay would still include Lulu's margin.
A better way is for you to get your friends to pay you directly and then for you to buy from Lulu with their shipping address - that way you just pay the manufacturing cost and shipping.

Essentially what you are saying here is that I can purchase my book and have it shipped to an address and ask for payment directly from the person I ship it to. With a book that has no ISBN and is only being sold on LULU the only advantage to this is the saving of the small LULU commission - am I right??

Also, If I sell esclusively on LULU with no isbn number, then my revenues are not subject to IRS witholding and will not be reported to IRS is that correct?

Thanks

Donna