Retail margin is basically difference between your book’s wholesale price and your book’s retail price. For example, a book with a cover price of $10 and a wholesale price of $5 has a 50% retail margin.
Wholesale price is cost of your book to a retailer. To use same rudimentary example, a book with a cover price of $10 and a retail margin of 50% will be sold to a retailer for $5.
Retail price is same as cover price or selling price. This is cost of book to end consumer (the reader). The retail price is typically printed on cover of book and also “embedded” within barcode on back. For example, a book with a wholesale price of $5 and a retail margin of 50% will have a retail price of $10.
As you can see, retail margin, wholesale price, and retail price are interconnected. By having two figures, third can be calculated.
The fourth definition to be aware of is trade discount, which is percentage off retail price that a wholesaler or distributor pays for your book. Since retail margin is a portion of trade discount, trade discount always exceeds retail margin. Distributors typically expect between 50% - 70% in order to provide an acceptable margin to retailer.
MAKING DISTRIBUTION WORK FOR YOU
It should come as no surprise that amount of distribution your book enjoys rests largely upon its trade discount. Generally, higher discount, greater distribution.
Think about it - distributors want to make money, too. So do retailers.
While your book's trade discount is but a piece of your pie (albeit a big piece), it is entire cake for distributors and retailers, who together must split take. The greater number, greater incentive they have to distribute your book, sell your book, and market your book, etc.
The proper trade discount depends upon each author's intentions, and can vary from author to author just as readily as from book to book. Obviously, higher retail margin, higher cover price, so authors interested in maintaining lowest cover price possible will often opt for a lower retail margin.