FAQ:  Why are textbooks so expensive?

1. Why are textbook prices so high?

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

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

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

5. Have students changed their book-buying habits?

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

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

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

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

10. What are ancillary materials?

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

12. What other roles do faculty play?

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

14. You mean that college stores make a 25% profit on textbooks?

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

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

17. How do college store margins compare to average retail margins?

18. What happens to bookstores' profits?

19. How much profit does a publisher make?

20. Can textbooks be purchased for less money at national chain bookstores?

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

22. Do the contract management companies, such as Follett, Barnes & Noble, and Wallace's, get lower prices on textbooks than independent college stores?

Why are textbook prices so high?

• 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.
• Click here to see a graphic representation of where your textbook dollar goes (PDF file, ).
  

Why do students think textbook prices are too high?

• 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 $80 or $120 texts is a shock. After paying a substantial tuition bill, families are often unprepared for an additional $200 to $500 textbook expense each term.
  

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

• In high school, most, if not all, of a textbook is required reading. After paying $80 or $120 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.
  

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

• Yes, they do. In fact, in focus group interviews with dozens of college students, NACS (National Association of College Stores) 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.
  

Have students changed their book-buying habits?

• 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 enrollment is predicted accurately, the number of textbooks the store will sell is uncertain.
  

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

• 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. NACS estimates that, through the sale of used books, college stores have saved students more than $2 billion in the past 10 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.
  

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

• 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.
  

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

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

How does the publisher decide on the cost of the book to the college store?

• 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.
  

What are ancillary materials?

• 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.
  

How important are faculty in the issue of textbook cost?

• 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 college store 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.
  

What other roles do faculty play?

• 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.
  

How do college stores set the retail (selling) price to the student?

• 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.
  

You mean that college stores make a 25% profit 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 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 before-tax profit.
  

How expensive can it be to return unsold books?

• Various studies have determined that for every dollar of new textbooks returned to the publisher or other distributor, the college store (on average) pays 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.
  

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

• 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. Communicating this fact is a difficult challenge for college stores.

How do college store margins compare to average retail margins?

• It’s important to remember that college stores are not traditional retailers.  College stores are unique in that they do not select the bulk of their inventory (textbooks).  Also, because college stores are service driven, they attempt to provide the lowest possible prices for students as opposed to trying to make the largest profit.
• The Annual Benchmark Report for Retail Trade and Food Services: January 1992 through March 2003, by the US Census Bureau, US Department of Commerce, April 2003, [Table 7, page 41] estimated annual gross margin as a percentage of sales by kinds of retail business range from 25.0% to 42.9%.

What happens to college stores' profits?

• 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 scholarships and return the rest to the school to support institutional priorities.
  

How much profit does a publisher make?

• 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 more than $1 million).
• 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.
  

Can textbooks be purchased for less money at national chain college stores?

• Unless they are old editions being sold as remainders, it is unusual for textbooks to be available at regular college stores or superstores.
• However, many books used in classes are not traditional textbooks. Courses in the humanities and social sciences, for instance, often use trade books, most of which are prepriced by the publisher. While there can be price differences between stores on these books, often the books are not really the same. For instance, there are dozens of editions of Shakespeare with different editors, illustrations, annotations, or even paper quality. There can be significant price differences between editions.
• See the FAQ: Purchasing your textbook from an off-campus merchant or over the internet for additional information about buying your textbooks somewhere other than your college store.
  

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

• Almost universally, when a college store 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.
  

Do the contract management companies, such as Follett, Barnes & Noble, and Wallace's, get lower prices on textbooks than independent college stores?

• 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 be a retail price difference on the same book from store to store. 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.
  

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