Frequently Asked Questions about Textbooks

This paper has been adapted from a compilation of FAQ's to the National Association College Stores (NACS), in response to ongoing inquiries from reporters, researchers and students about textbook related issues.

Please click on the question(s) below that most interest you:

1. Why are textbook prices so high?

2. Why do students think textbook prices are too high?

3. What is "Sticker shock"?

4. Why doesn't the use of textbooks meet student expectations?

5. Don't students believe that, since college stores have a "captive market", they are overpricing textbooks?

6. Have students changed their book buying habits?

7. What are college stores doing about students' concerns about prices?

8. Isn't the used book market a major reason for the increase in textbook prices?

9. Do publishers and authors get any royalties from the sale of used books?

10. How does the publisher decide on the cost of the book to the bookstore?

11. What are ancillary materials?

12. How important are faculty in the issue of textbook cost?

13. What other roles do faculty play?

14. How do bookstores set the retail (selling) price to the student?

15. How expensive can it be to return unsold books?

16. How much profit does a store make on a textbook sale?

17. What happens to bookstores' profits?

18. How much profit does a publisher make?

19. Why do college stores sometimes cover the publisher's pre-printed price with a higher one of their own?

20. Why is it that sometimes the same textbook may be priced differently in two different college or university bookstores at the same time?

21. Aren't some students saving money by buying directly from publishers?

22. Do publishers change book editions every few years just to eliminate used books?

23. Do frequent edition changes help or hurt college stores?

24. How much do used books cost bookstores?

25. Are used books more profitable for stores to sell?

26. Why does it cost more for a store to buy used books?

27. How are the buyback prices determined?

28. What happens to books not being used on campus?

29. How much is paid at buyback when no instructor has ordered the book?

30. How can a book a student sells to the store at the "wholesale" price still end up on the shelf in their college store for sale the next semester?

31. Students have reported that some used books are stamped "free copy", yet are sold at the same price as other used copies...

32. How can students maximize their investment in textbooks?

Textbooks are a valuable resource for students. They supplement and enhance classroom instruction, provide a common intellectual platform, offer additional references and perspectives, and are excellent review tools.

While we understand that students are concerned about the price of textbooks, the real issue is not price, but value. When textbooks are integral to a course, and faculty teach and test from them, the book is seen more as an investment and less as an unnecessary or forced purchase.

Textbook prices reflect real costs and a reasonable return on investment for authors, publishers, distributors, and college stores.

The two most significant reasons are (a) sticker shock and (b) frustration when books aren't used in class in the way students expect them to be used.

Textbooks are free for most students until they reach college. If their book buying experience is limited to paying $9.95 for a paperback, having to buy three or four $70 or $90 texts is a shock. After paying a substantial tuition bill, families are often unprepared for an additional $300 to $600 textbook expense each term.

In high school, most, if not all, of a textbook is required reading. After paying $60 or $80 or more for a college text, students expect the book to be used the same way, and the time spent reading it to be a factor in their grade. However, some college faculty use textbooks to supplement or reinforce lecture content; students may only be assigned 50-60% (or less) of the text to read.

Yes, they do. In fact, in focus group interviews with dozens of college students, NACS found that many believe stores try to take advantage of a textbook sales "monopoly". The fact is, most college stores make very little money or no profit on textbooks, and there are a growing number of ways for students to get textbooks.

While it varies significantly by discipline and course level, an increasing number of students are trying to get through classes without purchasing the required texts either from the store or from other students. Others share copies with classmates. College stores find that, even when class enrolment is predicted accurately, the number of textbooks the store will sell is uncertain.

Because they interact with students face-to-face, no group is more aware of students' concerns about the cost of textbooks than college stores. Most stores agree that the important issue is value, not price. However, stores know that it is the perception of price they must address today; changing students' perception of the value of their textbooks is a more difficult and longer process.

Making used books available is the single most significant way college stores can reduce students' textbook costs. We estimate that, through the sale of used books, our members have saved college students more than two billion dollars in the past ten years. This has been at significant cost, since used books are more expensive for college stores to buy and sell than new books. Unfortunately, our industry hasn't done a very good job in promoting this fact to our customers.

Publishers rightfully argue that the college store initiative to expand the sale of used books has caused significant increases in the price of new textbooks. The effort to bring more used books to the market is good for students in the short term, but bad in the long term, since it causes increases in the price of both new and used texts.

However, most students (like most consumers) care about how much they have to spend today, and in that case, used books seem to be a terrific value.

No, and this is a major point of contention in the industry.

It depends on a variety of factors, including the initial cost of the book's development; the potential size of the market; the complexity of the graphics, illustrations, and use of color; the cost of marketing the book to potential faculty users and sending out "complimentary" copies; and, increasingly, the number of ancillary materials provided with the text.

Ancillary materials are additional support material publishers provide to faculty, such as videos, laser discs, software or other expensive support tools. The complexity and number of ancillaries provided by publishers to instructors has contributed significantly to the rise in text prices over the past two decades.

While faculty don't have a role in determining the retail price of a book, they are very important in other ways. For instance, the date when the bookstore receives the instructor's book request has a substantial impact on the store's opportunity to reduce the cost of books to students through the buying and selling of used copies.

At every buyback, textbook buyers hear students say, "...this book was worthless, I never had to open it ...". Faculty are the single most important factor in determining students' perceptions of the value of their textbooks. The more they integrate texts into courses, promote their value, and let students know the time and energy put into their selection, the more students will believe that they've made a good investment by buying, and using, their textbooks. Publishers and college stores are becoming much more active in encouraging faculty to regularly refer to and test from textbooks.

While most "trade" books are sold to stores at a list price less a discount, most major publishers sell textbooks to college stores at a "net" cost. College stores then apply a standard "gross profit margin" to the cost of the book to arrive at the selling price. According to our most recent research, over 87% of college stores use a gross profit margin of 25% or less on textbooks.

No, not at all. A typical college store pays approximately 75% of the retail price of a new textbook to the publisher and uses the remaining 25% to pay for the expenses of selling it.

Expenses include freight costs; the cost of the personnel needed to collect and research faculty textbook requests, and to order, receive, price, shelve, sell, and return (where publishers permit) unsold textbooks; and the cost of facilities, insurance, utilities, equipment, and other items. What's left over, about 3.9%, is actually the store's profit.

Various studies have determined that for every dollar of new textbooks returned to the publisher or other distributor, the college store (on average) pay .20 cents (actually 20.2%) to process and ship them. And the costs to publishers to accept return shipments, return the books to stock, and process store credits are similar. No one benefits from excessive returns, especially students, since the cost of returns indirectly influences textbook prices.

It is very hard to separate "profit" on textbook sales from other product sales. NACS has tried to estimate profitability on text sales, and has concluded that the average college store applying a 25% gross margin on net priced textbooks achieves about a 3.9% before-tax profit. This is a small profit compared to other businesses. In many institutions, the Bookstore makes no profit on textbooks at all. In these stores, the textbook operation is often subsidized by the sale of discretionary merchandise. Communicating this fact is a difficult challenge for college stores.

The way the money is used depends on store ownership. Stores owned by the college or university often devote a portion of their profits to a bookstore funded scholarship and return the rest to the school to support institutional priorities.

Most textbook publishers are publicly owned companies with shareholder expectations for a return on their investment (prepublication investment in a textbook can range from the hundreds of thousands to over a million dollars).

Just because a product is being sold in an educational setting doesn't mean that the manufacturer (or publisher) should not be able to make a fair profit on its sale. On average, textbook publishers make an after-tax profit of 7.6%, or 7.6 cents, on each dollar of textbook sales.

Almost universally, when a bookstore reprices a book it is because that book came from the publisher with one price on the cover and a higher price on the invoice.

A publisher may have several cover prices in stock at any one time. When the books are sold to the store, they are sold at the most recent (and usually highest) price. This is a difficult customer relations proposition for our industry, since stores are faced with either losing money or potentially creating a bad perception on the part of customers.

The "net" price for a new textbook is the same for every store, regardless of store ownership or the size of the order. However, that doesn't mean that there won't sometimes be a retail price difference on the same book from store to store. In some markets, competing stores may price some texts as loss leaders, or the stores' pricing policies may differ. Prices may also be lower if a store purchased inventory before a publisher's price increase took effect.

There are thousands of publishers, and some will sell directly to the consumer at the same price as they sell to bookstores. However, virtually every major textbook publisher has credit and business policies that act to prevent individual students from buying from them at the same prices as bookstores, because it simply isn't cost effective for publishers to sell to individual students.

Every year some students set themselves up in "business", establish credit, and order quantities of textbooks from all types of publishers. This is a legitimate practice for both students and publishers. However, student efforts to research, order, sell, and return textbooks don't happen often, nor because of the work involved, do they usually last very long. This is not a widespread national trend.

While business issues are clearly a factor in determining the life of an edition, primarily the average edition-life of a textbook has shortened because the exponential growth of information has necessitated a shorter revision cycle to keep books current.

Stores understand the need for textbooks to be kept current. However, edition changes generally hurt the college store industry's relationship with students. It is very difficult to explain at the buyback counter that an old edition of a textbook cannot be re-purchased by the store. In addition, there would be more used books for students, and fewer inventory problems for stores, if editions didn't change as frequently.

Whether the book is bought from a student, or from a national used book wholesaler, most stores pay 50% of the new retail price for a used copy of a textbook adopted for the next term. Almost all stores sell used textbooks for 75% of the new price.

We hear this frequently, yet college stores pay students millions of dollars for used books at the end of each term, a significant percentage of which are bought at 50% of the new price. Unfortunately people tend to remember the $40 book that sold back for $5, rather than those for which 50% was paid.

The numbers may seem to make used books more profitable to sell than new ones. However, the cost of acquiring used books is much more expensive for stores than simply ordering new copies from the publisher. In addition, the actual amount of money a store makes is about the same since the retail price on used books is 25% less than the retail price on new books.

A new $40 textbook, on average, is sold to the bookstore by the publisher for $30. The same book, in used condition, would be purchased either from a student or a used book wholesaler for half of the retail price, or $20. It is then resold for $30. In both cases, after paying the book itself, the bookstore has $10 to cover the expenses of buying and selling it.

The demand for used books significantly exceeds the supply. Stores spend a great deal of time and energy trying to get faculty requests before exams begin because the best source for used books are students on the campus who already use those books. About 50% of the used books sold in a typical college store are purchased from students.

In addition to the expense of creating a buyback list, and running a used book buyback on campus, most stores search extensively for used books from used book companies. Stores looking for a particular book may contact several of these companies four or five times each during the order cycle. Each inquiry takes time and costs money.

Another reason the cost of the used book business is higher than selling new books is that unsold books bought from students have to be sold at a loss on the used book market or even destroyed.

If an instructor has submitted adoption information for the next term for a textbook, and the store doesn't already have enough stock, most stores will pay students 50% of the new retail price, even if the student purchased it used. A few stores pay 50% of the price the student originally paid. In both cases, these books are usually resold for 75% of the retail price for a new book.

The books not reordered by an instructor, or those for which the store already has excess inventory, are purchased by the store for one of the national used book wholesalers as a convenience to students. Or the store may invite a representative from one of these companies to do the actual purchasing in the store.

"Wholesale" prices are based on each individual used book company's determination of a specific book's market value. The prices they pay depend on the age, popularity, and subject matter of the book. Wholesale buyback prices range from 0-20% of the retail price for older, introductory course books, to as much as 35-40% for newer, advanced level texts.

These is a significant risk for used book companies that a textbook will change editions and render their inventory worthless. Therefore, all used book companies have people who specialize in determining the market value for used books, predicting the demand for them, and trying to anticipate when books will change editions.

Stores stop paying half price after they purchase the needed number of copies of a title, so it is possible for a student to see used copies for sale of a title they sold back at the "wholesale" price, but it is unlikely in this case that their specific book would be on the shelf for resale.

In addition, many instructors wait to evaluate their students' success with a book until after exams, and the store's buyback, are over. If an instructor decides then to readopt a text, the bookstore must place an order with the used book company in hopes that the books bought in the store haven't been sold to another store. The store will pay the wholesaler's regular price in this case, since the wholesaler has the same expenses in selling these books back to the store as with any other book.

Sometimes a store receives the instructor's request after buyback, but before the wholesale books have been shipped to the used book company, and pulls them from the shipment. While the students who sold the books did not get the best price, at least students taking the class the next term will have more used books available.

Some books marked "free" do find their way to college stores' shelves, but they were not free to the college stores who sell them. These are called "complimentary" or "comp" copies, sent by publishers to instructors for their consideration for a course. One of the largest expenses in a publisher's marketing budget is developing, printing, stocking, and shipping these books.

Every year many faculty members, especially those teaching large introductory courses, receive comp copies they don't need. Eventually many of these unwanted books are sold to used book companies, a practice which is considered unethical by many members of the academic, publishing and bookselling communities.

When resold to students, these books displace the sale of new copies, and deprive publishers and textbook authors (almost invariably faculty members themselves) of revenues and royalties. To discourage the sale of these books, many are clearly stamped "free" or "complimentary".

Quite a few campuses have policies against instructor sale/bookstore purchase of these books, and some of the major used book companies do not buy or distribute them.

Attached is a draft of material the National Association of College Stores is planning to incorporate into a brochure on textbooks for students.