Distinguishing between Distribution and Deseret Book

2.24.11 | | 37 comments

Last month the Church announced that it will close about a dozen Distribution stores this year (and more over the next few years) and instead sell materials through Deseret Book outlets. The move continues and expands a two-year-old program that started with Deseret Book stores in Ogden, St. George, and Salt Lake City, Utah, Idaho Falls, Idaho, Las Vegas, Nevada and Portland, Oregon. The Church’s Distribution Services says that the arrangement is more convenient for shoppers and is more efficient.

In general, the move does make sense, just like consolidating competitors in neighboring stores often makes sense. Even if Deseret Book doesn’t make any profit on the church distribution sales, the move could bring additional traffic into Deseret Book stores. Why not add an inspirational book or Greg Olson print to your purchase of garments? Its good for everyone, isn’t it?

Thinking about this, you might ask why there is any distinction at all!

As far as I can tell, at least one of the answers is U.S. tax law. LDS Church Distribution Services is part of the Church’s non-profit operations. In order to maintain its non-profit status under U.S. tax law, the materials it produces and distributes are priced on a non-profit basis, far lower than comparable for-profit materials.But, the Church doesn’t have to pay any taxes on its revenues. As a result of all this, LDS Church Distribution Services charges the same amount to consumers as it does to retailers (i.e., to stores), meaning that stores either don’t make any money on distribution materials they carry, or they must increase the price they charge for distribution materials to more than what the Church charges.

In contrast, the book publishing operation of Deseret Book is a for-profit operation whose products are priced normally. As a result, Deseret Book (the publisher) can give stores a discount that allows them to make money while charging consumers a price based on the book’s list price. Deseret Book, or is parent company, Deseret Management, pays taxes on the profits it earns before turning those profits over to the Church.

As near as I can tell, Deseret Book’s stores are not making any money on the LDS Distribution materials they sell, and are instead getting just whatever benefit might come from additional traffic in their stores. Perhaps the company may also get some kind of recognition from the Church for the benefits the Church gets from not needing as many LDS Distribution outlets and volunteers. For what its worth, this also means that there is little keeping other LDS bookstores from carrying most LDS Distribution items, except for, perhaps, garments. The books and videos that LDS Distribution sells can be purchased at the same price that Deseret Book pays. Like Deseret Book, however, these stores would either have to sell the items at cost, and not make any money on them, or mark up the items and charge more than distribution. [This has long been the case, as  understand it.]

What becomes confusing in all this is any distinction between the materials published by LDS Distribution and those published by Deseret Book. In general, the materials published by LDS Distribution are those that are part of regular worship in the Church—Scriptures, manuals, etc. And those published by Deseret Book are more commercial in nature.

But I’m not sure that this line is clear to everyone. When consumers purchase materials at a Deseret Book, is it clear what materials are published by the Church? and what isn’t? Is that important?

When I talk to most consumers, they have little or no idea of who the publisher of a book is. They connect to the text, and usually recognize who the author is, especially if the author is well-known. I must admit that even I, as involved as I am in the industry, I often don’t know who the publisher of a book I own is.

Distinctions between publishers are then more important to those in the industry—booksellers, reviewers, etc. Inside the industry, employees use the distinction as a way of comparing who has done what, and who is more successful. The information is, of course, necessary for booksellers to determine where to purchase a book, and who to contact if there is a problem or if the book needs to be returned. But even some of this is of little importance in the case of LDS Distribution.

Still, despite all this, there is something uncomfortable about this agreement. I can’t help feeling that this increases the likelihood that anything sold in a Deseret Book store is somehow approved by the Church, giving Deseret Book an advantage over other stores. I believe that this is already a wide-spread belief. In addition, I have to wonder if this same policy is also available to other LDS stores. Can I sell garments also in my store?

I suspect that its not quite as simple as being willing to sell garments at cost. The Church wants some control over who sells garments and how they do it. And there may be a consumer perception that it wants to maintain. Still, I wonder about the perception of fairness and of Deseret Book’s role. Should those perceptions also affect this policy?

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37 comments: “Distinguishing between Distribution and Deseret Book

  1. Michael

    Kent,

    In my opinion, Deseret Book intentionally keeps the line between itself and the Church blurry because it needs that perceived “mantra” in order to continue to justify its existence. For the same reason, it needs to also keep itself sheltered from having to compete directly with other LDS retailers to be able to sustain the exorbitantly high prices it charges for its mostly bland and banal product offerings.

    I would love for you to post your thoughts on the upcoming Deseret Bookshelf digital app and why it is needed instead of just making more offerings available through Kindle or the iBookstores at reasonable prices.

  2. brandt

    From a business standpoint, it makes sense. LDS Distribution reduces the number of brick and mortar stores, reducing the fixed costs that keep the stores running, and makes things more efficient. Buying things online, even garments, has become a way of life for many people. Consolidate, keep things “at cost” for Deseret Book, and I get it.

    My problem is similar to yours. It’s the blurring of the lines. Deseret Book is a separate business entity, yes, but where does it stop? Should DB carry garments? If I were to open my own brick-and-mortar store, would I be given the same business deal that DB was given? It just seems a bit…..I don’t know….unethical…… :-/

  3. Sarah Dunster

    Yes. I can see how this presents potential for ethical difficulties in thw future. It almost feels like, (as somebody who has submitted there) that there is some kind of additional intimidating review process that a manuscript would have to squeeze through to be approved. It’s probably just me being silly, but I hate the feeling.
    I understand a little better, after reading this , some of the possible practical reasons. But there is something about this that really bugs me.

  4. Mojo

    I would love for you to post your thoughts on the upcoming Deseret Bookshelf digital app and why it is needed instead of just making more offerings available through … the iBookstore at reasonable prices.

    If Apple stays the course with its 30% “tax” on anyone buying anything through an app, I’ll bet that won’t be an issue.

    Then again, there are the Android and webOS tablets…

  5. Michael

    Mojo,

    Oh my gosh! I could never bring myself to support those telestial inferior products after experiencing the Apple celestial pieces of art. It would be like abandoning the fullness of the Restored Gospel for an inferior evangelical Christian substitute gospel.

  6. Mojo

    Welllll…sort of. I have a vested interest in gadgets that will run ebooks, how, and what it takes to get them to look good on all those gadgets.

  7. Kent Larsen Post author

    Michael, you said Deseret Book uses the blurry line to “be able to sustain the exorbitantly high prices it charges”

    I know this is a common perception, but, since I don’t shop very often at DB, I’m not sure where it comes from. The publishing company’s list prices seem, to me, pretty normal for the book industry in the U.S.

    Can someone tell me where this perception comes from? Why does everyone think that DB’s prices are high?

  8. Kent Larsen Post author

    Brandt (2), you wrote “Should DB carry garments?”

    Perhaps I wasn’t clear. It is my understanding that under this policy the selected DB stores DO carry garments.

  9. Chris

    In Deseret Book stores in the Salt Lake area, Church Distribution items are marking up to a higher retail price. I hope this disturbing practice will not occur in other stores. When the Church begins to offer its products at a higher retail mark-up, it makes it difficult for its members to afford necessary Church materials. I hope the Church will become more transparent in its marketing of merchandise.

  10. David J. West

    Kent
    People think DB’s prices are high because they are in comparison to virtually any other bookstore you can shop at. Seagull is always 10% cheaper (or more) and even Borders and B&N give you far more coupons, new release discounts and better bargain selecions than DB ever does.

    With my fixed budget for books (probably 25% of each check ;)) I never shop at DB because my money will go farther everywhere else.

    That and they won’t carry my wicked book either.

    Oh yeah, let me also add that DB doesn’t have even half the selection they used to only 4-5 years ago-I did shop there 4-5 years ago when you could actually find obscure books. Nowadays you’re better off looking online, the D.I. or the shrinking handful of independent used bookshops.

    I can’t see myself ever shopping there again BUT for distribution items-IF thats the only place I can get them.

  11. Wm Morris

    If Utahns and LDS in other states are going to have the convenience of being able to acquire Church distribution items at a local Deseret Book then why they shouldn’t they have to pay a mark-up in order to support staff costs and other overhead for the store? I’m all for DB making a profit.

  12. Mark D.

    There is nothing stopping LDS Distribution from charging almost any price they want as long as the surplus is used for non-profit purposes. Lots of non-profit organizations raise money this way – sometimes it is about the only way they raise money.

  13. Mojo

    I have issues with profit being made on something that is a doctrinal requirement for exaltation.

    Paying cost + shipping + tax, I don’t mind. Going to Deseret Book and pay twice or three times the total online is going to put my, ah…knickers…in a twist.

    As for the rest of the materials being moved to DB and marked up, have at it.

  14. Th.

    .

    I find this unsettling. DB does have this aura of authority — as if it has the power to bestow God’s approval upon products and I can’t imagine this change will make anyone more aware of that unfortunate undercurrent.

    Of course this is all very abstract for me. The only local LDS bookstore closed two or three years ago so I’ll be shopping online anyway. Especially if they close our distribution center. Inside of which I have never been.

  15. Kent Larsen Post author

    Thanks David (13). I didn’t realize it was a discounting problem — that DB doesn’t discount as much as others.

    I’d always heard this as saying that the list prices of DB published titles were more expensive than those published by others.

  16. Adam K. K. Figueira

    Wm. (#14),

    If the move was to add DB to existing distribution outlets, I’d agree with you, but making them the exclusive source of Distribution materials is different. The convenience factor is more incidental than a value-added offering if the stores where you can get things cheaper are closing. Why should I have to pay more to get products from the only place they’re sold just because I happen to live close?

    Also, Kent, though I don’t shop at DB often, I agree with David’s analysis. The list prices are comparable to other stores, but selection and specials are not as good.

    Th., I agree, but for me it’s not academic. That “official” approval is a very real cultural force around here. It’s like the DB catalog is the formal list of the D&C’s “best books” from which we’re allowed to study. Anything not on the list is a “distraction.”

  17. Wm Morris

    Why should the Church subsidize your ability to walk in to a store and buy distribution products? They provide phone and Internet catalog orders.

  18. Mojo

    Why should the Church subsidize your ability to walk in to a store and buy distribution products?

    Well. Here’s the thing: One (distribution products) is for church SERVICE. The other (books, kitsch) is not.

    I can make a case on my Schedule C that everything I buy from church distribution is tax-deductible. If I start buying them from DB, boing! Suddenly they are not.

    To put it more precise context: The PROFIT arm of the church is now the distributor for the NON-PROFIT’s products.

    There are tax implications here that are being overlooked. As for “why should the church subsidize it”: Well, the church damn near requires it, so yeah, they should subsidize it. Once you start getting into the subtext of the materials one should have in one’s home as part of gospel/doctrine/salvation, subsidy and/or profit becomes a nasty snarl.

  19. Mojo

    It’s also possible that the church wants to force DB INTO profitability by having it sell things that people MUST (or feel they must, or are strongly encouraged to) buy.

  20. Wm Morris

    Again: anyone can get the items they need via internet or catalog phone call.

    The profit arm of the church is not now The Distributor — it is an alternate distributor. DB carrying items is a convenience (and, yes, a lure), but it is not required to shop at DB to get those items. If shoppers want to take advantage of that convenience, then, heck, yes, they should pay a mark up. Why should the rest of us subsidize that convenience? Alternately, why should that convenience go away in areas where there is a DB presence? If sales in areas with DB stores remain with DB, then that pulls pressure and resources off of the catalog services to fulfill as many orders.

    Church distribution should be thought of now (and for many of us has been for awhile) as a catalog company. If you want to buy retail, pay for the requirements of those products being carried retail.

    As far as the major thrust of this — I don’t know that the distinguishing issue is going to exacerbate things much. Those that already have that mindset that the DB imprinteur = official Church validation may have that belief slightly more firmly, but I doubt that they’d be swayed off of that opinion anyway. If at some point the Church starts running DB ads on lds.org (and ldscatalog.org) and in the Ensign, then that might be cause for concern.

  21. Mojo

    Again: anyone can get the items they need via internet or catalog phone call.

    Is this a US-only thing or are we talking about worldwide?

    And in poor urban areas where there is little to no internet access and possibly no credit card capabilities?

    I guess I’m not getting the whole “why should the church/we subsidize…” thing. Of course it does. We all do. We subsidize everything already. That’s part of the covenant we make. And now the church wants to move it all into the profit-making arm, where DB is free to mark it up? That’s called double-dipping everywhere else in the world.

  22. Adam K. K. Figueira

    As far as I’m concerned, things that are either required for gospel living or nearly so should be available as cheaply as possible no matter where you live.

    From that perspective, the catalog only argument makes sense. On the other hand, I recognize that there are costs associated with brick-and-mortar stores, but if the church is going to provide that kind of outlet at all, I think it should be done in a way that preserves the low-cost model distribution stores currently have.

    I mean, are the members who don’t live near a DB really subsidizing those stores any more than those who do live near them? Do you expect to get your tithing lowered if garments get more expensive in Utah? Are church donations really the same thing as taxes? I don’t particularly like the integration with DB. I think the old model of putting distribution outlets in complexes with DI, bishop’s storehouses, etc. was better.

    The way I see it, we all donate willingly – by commandment, yes, but without coercion. That means that I give my donations trusting that they will be used with wisdom and inspiration. I also want to see that money put to the best possible use, but I don’t think it’s unjust to expect products that allow me to keep my covenants to be the same price wherever they are sold. Exaltation is not a business proposition.

  23. brandt

    I agree with Adam. The fact that the lines have been blurred between business and spirituality have always bothered me, Deseret Book especially. I’m not sure what international rules might be for shipping, or whatever, but if the church was getting rid of the Distribution Centers, it should go either online-only or catalog only. Yes, even if you live right next door to the Church Office Building. Perhaps it’s my bias from living in Michigan, but that’s the feeling I get.

    But the fact that they’re putting Distribution Materials in DB (which they did before, if I remember correctly) seems…..well…..forgive me, but it seems a bit unethical. Deseret Book is in highly populated LDS areas, that’s how they sustain a decent portion of their business. But by putting LDS Distribution materials in there, it blurs the line of profitability and non-profit status. I donno, it just doesn’t feel right to me…..

  24. Wm Morris

    “As far as I’m concerned, things that are either required for gospel living or nearly so should be available as cheaply as possible no matter where you live.”

    They are. Anyone who lives next door to a DB can still order online or by phone.

    “And in poor urban areas where there is little to no internet access and possibly no credit card capabilities?”

    DB is an alternative to that in very few areas (maybe only downtown SLC; possibly Oakland) so I doubt any of the population you are talking about would be impacted by DB offering distribution products. Almost all of the folks I know use the catalog mode and those that have issues with no internet access or credit cards are helped out by their local congregations.

    In regards to the lines between business and spirituality: have ya’ll forgotten our history? They’ve always been blurred and entangled. There’s even scriptural justification for that. Granted, I’d be happy for a return to the old co-op model and agree that there has always been an awkward relationship between DB and the Church in terms of how much DB should reflect and promote and is tacitly endorsed by the institutional church. But I’d rather there be a muddled situation than either a complete divestment or a complete, utter endorsement of everything on the shelves.

  25. Mojo

    if the church was getting rid of the Distribution Centers, it should go either online-only or catalog only.

    They should be in the stake centers, as part of the library.

  26. Kent Larsen Post author

    Mojo (21) wrote:

    I can make a case on my Schedule C that everything I buy from church distribution is tax-deductible. If I start buying them from DB, boing! Suddenly they are not.

    IIRC, Schedule C is for those who run an unincorporated business, right? If so, then you can deduct whatever you want there, as long as it has a “BUSINESS” purpose — i.e., you are using it to help generate income. Where you purchase whatever you deduct there is irrelevant.

    As far as personal deductions are concerned, you can’t deduct the things you purchase from Church distribution. Under U.S. tax law, the only time that you can deduct the cost of what you purchased from a charity is when the price you paid is above market value, and only then to the extent that it is above market value. Because of this, you sometimes see the market value of items purchased from non-profits listed on the receipt or printed on the item.

    You may be thinking of purchasing items you need for charitable work (such as Church callings). Those can be deducted as a charitable deduction IF they are REQUIRED for your calling. Since most callings don’t require that you purchase anything (most really required items are free at LDS Church distribution) and since LDS Distribution prices are nominal, for most people the issue is not important.

    [At least the above is what I remember from my tax classes years ago when I got my accounting degree.]

    The tax issue here is really about what the Church can do without paying tax, and what are its for-profit activities on which it must pay taxes. And this is a subject that the Church looks at carefully using tax accountants and lawyers who know a lot more about this than you or I.

  27. Wm Morris

    I completely agree, MoJo. Perhaps family history centers or clerk’s offices could have hours where their computers could be used for church distribution shopping.

  28. Kent Larsen Post author

    Mojo (24) wrote:

    Is this a US-only thing or are we talking about worldwide?

    I’m not sure how the worldwide element is relevant. Since there aren’t DB stores outside of the Western half of the U.S., it isn’t possible for Church distribution materials to be available in DB outlets outside of this area.

    AFAICT, this is still a program that is limited to select DB stores. Nor is there an indication that LDS Church Distribution outlets will be eliminated completely in these areas. It seems to be mostly about convenience.

    And now the church wants to move it all into the profit-making arm, where DB is free to mark it up?

    No, I don’t think anyone said that the Church was moving ALL distribution materials to DB. There isn’t an attempt to eliminate completely distribution centers.

  29. Mojo

    IIRC, Schedule C is for those who run an unincorporated business, right? If so, then you can deduct whatever you want there, as long as it has a “BUSINESS” purpose — i.e., you are using it to help generate income. Where you purchase whatever you deduct there is irrelevant.

    OOPS!!! I meant Schedule A. I’m just so USED to typing Schedule C…

    Hm, but thanks for your post. I need to go re-read that part.

  30. Adam K. K. Figueira

    “They are. Anyone who lives next door to a DB can still order online or by phone.”

    Right. Which is why I say the catalog model makes sense. But I don’t think there should be a premium on buying certain items, like temple clothes. So if there are going to be retail outlets, I think those doctrinally mandated or prophetically encouraged items should be exempt from markups. I’m fine with markups for convenience on manuals, artwork, binders, etc. Just not on the other, which is what I think of when I think of distribution items.

  31. Kristy

    Just thought I’d add a little comment in here after reading. I actually work for DB. Gasp! I know. After reading some of your comments, I’ll probably be tarred and feathered when I’m through. It sounds like most of you didn’t know this, but DB actually price matches any other brick & mortar store out there. (Including the Distribution Center.) So, when you walk into a DB store and you see those Distribution items sitting there on the shelf at those marked up prices, all you have to do is ask for the Distribution price and you will get it. Simple. Same with any other item. If it’s on sale somewhere else, you can get it for the same price at DB.

    Anyway, as for the whole merging of DB with Distribution, I don’t know all of the answers, but when the merging happens, prices are not going to be marked up. They will stay at the regular Distribution prices. There will be a separate area for Distribution center items, and a current recommend will be required to purchase many of the items. The Distribution section will be treated much the same way as Distribution centers are now. And as far as I know, anywhere where there isn’t a DB, the Distribution centers are going to stay in place. DB isn’t going to be charging any premiums.

    Anyway, this wasn’t DB trying to hone in on the market. This was actually the Church’s idea. The few stores that they have done this with over the past year have been really successful.

  32. Kent Larsen Post author

    Kristy, thanks for the viewpoint. That is much as I imagined it. I agree that there isn’t any nefarious plot by DB to take over the market!! And I’m certainly not surprised that the program has been successful.

    But, I do think that some DB actions tend toward monopoly, intended or not. And even if there isn’t any intention to blur the line between distribution and DB, this move certainly does exactly that (although I tend to agree that the consequences of this particular program aren’t that drastic).

  33. Kristy

    In response to some of the questions at the bottom of your essay/dialog (I don’t know what to call it….) One thing to keep in mind is that DB is owned by the Church, so there probably won’t be a problem with other bookstores selling items like garments that the Distribution Center keeps under tight control.
    You do have a point in that there is a line being blurred here, however. I didn’t think of it that way, being an employee and seeing from the inside, but I can see how it can look that way looking from the outside in.
    The point here is that DB sells stuff. From that profit, they pay their overhead and the rest goes to the Church. The system is already set up. By adding the Distribution Center to DB which is an entity that is already set up and running, they cut costs and don’t add to the overhead. Maybe not quite as simple as that, but that’s basically how it works. So, I think it’s probably safe to assume that in all likelihood other stores are not going to be seeing a Distribution Center attachment.

  34. Kent Larsen Post author

    Kristy, thanks again for your insight.

    I actually think you have touched on the core of the problem with DB — the inside vs. outside issue. I’m sure that DB and its employees are certain that they have done things right, things that support the Church, from that inside view.

    The problem is that they don’t try to see the outside view, or dismiss the outside view as coming from those who don’t really understand.

    Unfortunately, the history of business is littered with the remains of companies that had similar certainty that they had made the right decisions.

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