Friday, March 17, 2006

Abraham Maslow and the Underpants Gnomes Part Last

Whew... I'm back, did you miss me? If Mamakaze had let me take the laptop, I might still be living on lobster and tequila south of the border! But enough of that, she didn't and I'm not, so let's tie up this excercise as promised with a look at the retail side of the equation.

Yep, retailers, my peeps, as much as I wish it weren't so, we do have to share in the blame here. Again, as with publishing, I speak with experience as I have been a comic shop owner/operator for much of the last 25 years. I have also made many (OK, most) of the idiotic mistakes that could be made to prevent the success of a comic shop and if truth be told, I've made some of them many times.

Looking back at previous installments, you might remember me mentioning that if I could pick just one reason for the woes of the comic industry, it is the extremely low barrier to entry. Because it is so inexpensive to create and publish a comic or even to sign a lease and open an account with Diamond Comics Distributors, the industry is rife with Hobbyists (vs Professionals), folks whose purpose is often less for profit and more for vanity. The lack of expense, seems to trick people into believing the endeavor will be easy and that business planning isn't necessary.

The industry can survive hobbyist creators and publishers and in fact may actually benefit from some of them. Until books are solicited, they really aren't on anyone's radar or timetable and there are thousands of other items available each month. So it really doesn't matter what other obligations or financial hurdles the creator/publisher has, as long as they ultimately solicit and deliver responsibly. But hobbyist retailers, well, these folks could very well be the death of the Direct Market as many stand as the proof of the Comic Shop Guy stereotype, representing the industry as the first (and last) face to current and potential customers and the way things stand today, if the DM falls there will be a lot of collateral damage.

So what exactly is the difference between a hobbyist and a professional and how does this relate to comic retailing? Well let's look at the two words, Robert Bogue at says:

Before we delve into the differences between the two, it's necessary to explore the definitions of the two groups. The first definition, that of a hobbyist, is:

"a person engaged in activities, in their spare time, that bring them pleasure."

OK nothing sinister there, eh? Aren't we all told to seek a profession that we enjoy? Unfortunately those who are not looking to their shops as a full time job, needing it to be profitable in order to support themselves and a family, often behave in ways that are detrimental to both the appearance and acceptance of comics as art and literature, furthering the basest of stereotypes for both the medium and it's fans.

So let's look at professional:

The professional has a slightly more complex definition, which includes:
Being Paid - A person being paid for a skilled activity
Being an Expert - Having demonstrated great skill or expertise in a given activity
Career Activity - Engaging in an activity for the purpose of a career
Professional Behavior - Conforming to standards of professional behavior

So while there is nothing nefarious about being a hobbyist, one can certainly see where it isn't necessarily as conducive to growing the comic market as the professional might be. Why? Retailer Failure #1

  • Like many comic shops, Comickaze opened on the strength of a partner with a decent line of credit and a condo whose rent was part of my compensation, my personal collection and my labor/knowledge. I ran the shop open to close, 7 days a week. The "plan" at the time was to grow the business to a point that it would pay both my partner and I a decent wage and then we would open more locations. Like the Underpants Gnomes, we had step 1: get comics and step 3: profit/expansion but totally spaced on step 2!

But let me back track here for a moment because I think some of you might think you know where I'm going with this and I just want to make some distinctions here.

Comickaze started primarily as a front of the catalog comic shop. Not because I don't like small press books, I have always had an affinity for them from Quack, Star*Reach, Metamorphosis Oddysey and Nexus to Groo, Star Slayer, Boris the Bear and Ex-Mutants, I personally enjoyed a far more diverse selection of comics than the stereotypical comic reader but from a business point of view, I had a hard time passing on my appreciation for small press work. Heck in my first go-around as a retailer as co-owner of The Comic Alternative in the early 1980's my distributor was also a small press publisher, Pacific Comics (and later as Blackthorne), who brought us a line of (as then relatively unheard of) creator owned series like Groo, Starslayer, Rocketeer and Captain Victory.

10 years later, following a long absence from anything comic related, I re-entered comic retailing with Comickaze and found that in my absence, the market had regressed. Having grown fat and happy while embracing style over substance the late 80's and early 90's exposed the lies of get-rich-quick gimmick covers and other manufactured collectible practices. And as fans realized that they had been lied to (whether overtly or covertly) by both publishers and retailers, they abandoned the hobby in droves, leaving many publishers and retailers mortally wounded. Why? Retailer Failure #2

  • Most (OK, all) comic retailers became retailers because they love comics, not because they were great business people who saw an excellent earning potential. Being able to buy their personal books wholesale and covering operating costs and a little more to scrape buy on was good enough and for many it still is or as Joe Field, owner of Flying Colors Comics and the man behind Free Comic Book Day points to a comment by the late Carol Kalish in a column he wrote for Comics & Games Retailer:
    ...get your comics for free and have enough left over for a Big Mac and a Big Gulp.

This type of retailer was unable to recognize the oncoming headlights or able to make out the license of the vehicle that ran 'em over.

Since a lot of this growth had been built on smaller press and specifically black & white comics as everyone hoped to find the next Teenage Mutant Ninja Turtles, when those who'd bought into the get-rich-quick, copies by the case aspect of comics disappeared those that remained, went back to buying what they enjoyed reading and doing so in single copies. Leaving many remaining retailers wary of anything non Marvel, DC or based on recognized licenses like Dark Horse or "hot" creators like Image. It was easy and comfortable for bothe fans and the retailers to slip back into the Zombie mentality and for me, having missed both the boom and the bust, I set up Comickaze with those I was familiar with from my 80's tenure, Marvel, DC, Dark Horse (the new Pacific Comics to me) and Image still the belle of the ball as the new Marvel, with Lee's WildCATs & Silvestri's Cyberforce (X-Men), Liefeld's Youngblood (X-Force), Keown's Pitt (Hulk) and McFarlane's Spawn (Venom).

Many retailers, myself included continued to ride the Image bandwagon, even as our competitors continued to drop off, touting their potential future value as well as reaping the profits on recent "rare" back issues. IMNSHO the arrival and subsequent success of eBay probably did the most to expose the claims of rarity for many of these recent "hot" books as thousands of "rare" books began appearing there but not before registering with publishers that they had indeed been leaving a great deal of money on the table by leaving their properties innaccessible to fans who merely wanted to read the stories and would not pay $10+ for back issues if indeed they could be found. The mid to late 90's brought the (re)emergence of the Trade Paperback (TPB) collecting multiple issues of out of print issues, often for less than their combined initial cover price and always for less than the market price for the actual back issues as well as the & Graphic Novel (GN) long form comic stories never released in serial comic form but rather all at once in book form like prose novels.

This was probably the most significant change in the Direct Market since it began as it served as a demarkation point, an opportunity for comics to return to its role as entertainment as opposed to a collectible and also to reach out to prose book readers with a package that resembled less a childs pursuit and more the books they were faimiliar with and appreciative of.

But I say this with the benefit of hindsight and at the time I remember being fearful of this "new format". Hard enough selling $2 comics, how was I going to get customers to but $10-$15 books, especially reprints, books that could never be sold for more than cover price? Worse, how could I afford to buy them? Enter Retailer Failure #3

  • Jack of All product, Master of none. Who are you? Why should a comic reader or better yet a non comic reader, shop with you? Are you 31 Flavors or are you any flavor they want as long as it's vanilla? Do you offer superior knowledge, convenience, utility...? Or do you just exist from day to day glomming on to whatever hot item you can to maintain the satus quo but never really moving forward?

Me, I had Magic the Gathering, Sports & Non Sports Cards, Spawn Action Figures, Pogs and Pokemon! Why take a chance? Fortunately, for me a light went on about then. I'd spent a lot of my life in retail: books, pets, electornics... and I was seeing some patterns emerge. I realized that too much of what I was dealing with was fad driven and though that, in and of itself was not necessarily a bad thing, there was a strong possibility that these things would quickly go the way of Cabbage Patch Kids, Power Rangers and Metallic Die-Cut covers, so I had better figure out what could take their spot and hopefully lay a foundatin for future growth.

So I took a tip mentioned to me years earlier which was, to succeed, look at what everyone else is doing and do the opposite. So I began identifying the strengths of my competition and deciding where I could compete and where I couldn't or didn't want to.

The first thing I noticed was that 4 local shops had shut down in the previous 18 months (3 that were part of multi-store chains) and 2 prominent behaviors of these shops were, Retailer Failure #4

  • Reliance on high priced collectibles sold as investments. In other words something akin to a pyramid scheme that needed a steady supply of folks constantly buying product not to use it but to hold and resell at a higher price later. Problem, wheat happens when the items don't increase in value, folks whose sole motivation was resale, stop buying, leaving you on the hook for non-returnable product preordered to maintain sales levels.

and Retailer Failure #5

  • Discounting. For most comic shops a 15-20% discount wasn't uncommon which meant they were actually giving away close to half of their gross profit. Once sales started to slow, they had no way to compensate for lost profits and instead of eliminating discounting, actually increased it in an attempt to pull customers from other stores. But to do that, they had to move to a 100% sell through model meaning that customers that didn't pull and hold would be unlikely to find anything new on the shelves past New Comic Day. Those retailers continued to eat their own tails until *poof* nothing was left.

Armed with this info, I decided that it was time to separate from the herd and start building my business on the aspects that excited me about it in the first place. Out went the Sports/Non Sports Cards, Gaming and figures were de-empasized and a slow but considered addition of small press comics and trade paperbacks including my first exposure to Manga through Dark Horse. Oh yeah, no more discounts.

Some folks left for discounts elsewhere but many returned as they saw our commitment to having copies on the shelf for them to browse before buying, even weeks after they shipped, as well as carrying books that their new shop couldn't be bothered to order and in the meantime I actually started making enough money to afford to help to get an occasional day off! Which brings us to Retailer Failure #6.

  • The start of most business ventures, are going to entail a honeymoon period, a period where 60+ hour work weeks are novel and exciting but the length of that honeymoon is almost always finite and seems to be in proportion to the amount of preparation excercised prior to start-up. As it becomes evident that there is more to the day to day operation of a comic shop, than sitting around reading comics moods change which affects shopping experiences. Often you will also see a shop being run by "employees" legal or otherwise as owners re-join the work force to cover living expenses and business shortfalls.

    Unfortunately businesses like this (as well as weekend/eBay warriors) tend to leech sales from the marketplace and as discussed, with a market that is as malnourished as this, it can prevent the professional stores from finding sufficient volume to make it worthwhile to develop a full service full line shop.

Over the last two years I've forced myself to hire 2 employees, move to a larger location and made a concerted effort to market and merchandise Comickaze as a full service and full line comic bookstore. The effort and expense has clearly paid off both financially and professionally as we posted our strongest sales year ever, were named San Diego's best Comic Shop for 2005, and routinely have customers referred to us not only from other area comic shops but from area book stores. I was told that when TokyoPop approached a Borders store last year in preparation to bring VIP's from Japan to see the TokyoPop offerings, they were told they'd be better off coming to Comickaze!

The last failure I want to address though certainly not the last that could be addressed, is Retailer Failure #7

  • Communication or lack of. Too many comic retailers act as if they exist in a vaccuum, behaving as if competing businesses are the enemy, unwilling to share information or resources. No co-op outreach advertising. No buying groups to share increased discounts on products and services. No way, no how. Not always but seemingly more often than not.

Ultimately communication is the biggest reason for my success so far and will likely continue to be the catalyst for future growth. In 1997 I was at a crossroads, I was engaged to be married, I was still working 7 days a week, my former business partner lost the condo I was living in and my landlord decided that they were going to move up the demolition of the building my shop was in to facilitate the chain drugstore that was to build on that spot despite the fact that the new store fronts we were supposed to be moved in to were not going to be available for over 6 months. Due to our incredibly cheap but month to month lease (gee, it seemed like such a great deal at the time!) I had 30 days to vacate. Homeless both personally and business wise!

These are the kinds of things that happen when you fail to have a plan and any one or two of these would generally be enough to knock an unprepared person out. Somehow I kept on my feet but realized that I just didn't have the knowledge base to turn things around so I was going to have to figure out something quickly or I was going to have to fold the tent and explore opportunities in the fast food industry.

Someone was looking out for me because as I was doing product searches on the internet, I came across an ad for an online message board community. Looking at it I realized this would be an excellent way for retailers from around the country to share info with each other in a controlled environment. Hopefully the geographic distances of the people involved would allw them to lose the fear that might exist in giving a nearby competitor a hand and The Comic Book Industry Alliance was formed. Not long after this, membership which had originally been restricted to retailers, was expanded to include creators, publishers, distributors and other folks employeed in industry supportive positions. Over the last eight years the resulting exchange of information between the 700+ members from all facets of the industry has been invaluable to me and feedback from other members suggests this holds true for many of them as well.

OK, we've gone through the areas I feel are both most egregious and easily addressable at each level of the Comic Industry food chain. Next Monday a final pass as we look at how each level would work, IF I WERE IN CHARGE...

Wednesday, March 08, 2006

One For The Road...

Just to prove I am an equal opportunity offender and to tide you over, here's a peek at a quickee piece I posted to ICv2 in response to a fellow retailer...

Robert Scott of Comickaze on 'Ultimate Avengers DVD

March 08, 2006
Robert Scott of Comickaze in San Diego, California saw the comments by Dean Phillips on the Ultimate Avengers The Movie DVD (see "Dean Phillips of Krypton Comics on Ultimate Avengers DVD") and has several ways to turn the situation to his advantage.

Regarding comments by Dean Phillips about the new Ultimate Avengers The Movie DVD, I have to say I was shocked.

Heck yeah I chalk his complaint up to sour grapes. This is not a new development so I'm not sure why he was so surprised that the DVD would be available at retail for less than his wholesale cost from Diamond.

"The suggested retail price of $19.95 makes me and all other direct market stores look like morons."

Uh uh Dean, it's not the SRP making you look like uninformed, it's your misunderstanding of the market and the way you do business. It wouldn't matter if the SRP was $10, Diamond is still going to charge you $6.50 and ship it to you after the street date (because they can't figure out how to do Tuesday street dates) and WalMart is still going to sell it for $5 and on time.

Are you loyal to one gas station or do you pull over and fill up when you see gas a nickel cheaper than your usual stop? There are some cold hard facts in our market. There are going to be poachers who will use comic-oriented items as loss leaders to lure in families to buy from the rest of their product mix. They know you don't jockey for a space and stand in line at Wal-Mart or Costco just to save $5 on a DVD but YOU could. Go in first thing on the morning of the street date and buy a few dozen, getting them below cost (but don't buy anything else!). Have them ready for sale when you open that day and return those that haven't sold in a few weeks!

We stopped ordering DVDs for awhile to avoid your problem but many of my customers appreciated the convenience of picking them up from us at Comickaze, so we now take prepaid orders at 10% off. We pre-sold half a dozen Ultimate Avengers and still made $7 each. We also offer bigger discounts up to giving the DVD free as an incentive to buy other product, kinda like the big guys. Since we don't have the variety of high margin add-ons that the mass market boys do, we are offering $5 off the Ultimate Avengers DVD with the purchase of any Ultimates or Avengers TPB at $12.99 or more as well as giving it away FREE with the purchase of a Captain America Baseball Jersey or any Ultimates or Avengers bust or Statue at $65 or more.

We're currently selling a Zombie Pack that contains the Shaun of the Dead, Walking Dead Vol 1 and Remains TPB and a FREE copy of the Shaun of the Dead DVD. You can get a FREE or discounted Corpse Bride DVD with the purchase of Corpse Bride Action Figures and the same goes for Wallace and Gromit. It's called promotion!

It's an open market and someone is always going to undercut you and there's nothing Diamond or anyone else can do about it. But you can get smarter about the way you do business and there's nothing the discounters can do to stop you from doing that.

Monday, March 06, 2006

Get Your War On!! Jam War that is...


Sign up in- store NOW to guarantee your spot.

Comics Jam WarTM brings comic book creation into comic shops

On April 1st, 2006, teams of comic book creators will gather in comic book stores across the U.S. and Canada. At noon Eastern time, 9 AM Pacific time, they will all be given a topic for the comic book, and then each team will start work on an all-ages 8 page black-and-white comic book story. Twelve hours later, the drawing stops.

A panel of comics industry professionals will then judge the stories, with cash prizes and publications in a special anthology.

Why? When we announced 24 Hour Comics Day, there were retailers who wanted to be involved but simply couldn't host a 24 hour event. And when we moved 24 Hour Comics Day to the fall for 2006, there were retailers who still wanted something to do in April. So we turned 24 Hour Comics Day (the marathon, non-competitive festival of solo cartooning) on its head and came up with a shorter, team based event. That's Comics Jam War.

Sunday, March 05, 2006

Abraham Maslow and the Underpants Gnomes Part C

Not a lot of folks have commented on the blog so far, so it's hard to tell if anyone is reading it or not but I'm having fun, even if the ony thing I'm doing is venting to an empty hall. It might also be a good time to invite you to hit me with any questions you have about the industry or things you want to hear my take on. Click HERE to let me know what's on your mind.

So, we've touched on Creator and Publisher contributions to the industry's depression and now the we arrive at Distributors. Within the direct market there are basically two distributors remaining, both serving a specific niche but maintianing a bit of an overlap. Quick history lesson. [edited to add: there is a great more in depth look at distribution here]

The largest and most important is Diamond Comic Distributors. With the recently announced closure of FM International, Diamond is the last front list comic distributor standing, meaning that this is where retailers order their new comics. Prior to 1994, there were two other full service front list distributors, Capital City Distributing which also was a with a a nationwide distribution system and and Heroes World a regional distributor in New Jersey. Many retailers dealt with at least two of these distributors and competition for business kept them on their toes vying for retailers business.

Due to machinations set in motion by Marvel Comics' purchase of Heroes World in an attempt to self distribute in the early '90s, DC Comics, Dark Horse and Image ended up signing exclusive distribution deals with Diamond, starving Capital City to the point that it resigned and sold it's assets to Diamond. Less than two years later Marvel came to terms with the fact that their decision to self distribute was a failure and with Diamond the only remaining distributor with the infrastructure to handle Marvel's sales volume, sold their HW assets to Diamond and joined DC, DH and Image as a Diamond exclusive publisher.

Rounding out the group is Cold Cut Distribution a backlist distributor in Salinas, CA. From their website,
"Cold Cut has been servicing retailers across the country and internationally since 1994... We currently mail our main catalogs to well over 500 stores, and service regular orders from around 300."

So ten years later Diamond, in addition to Marvel, DC, Image, Dark Horse has has also brokered exclusive rights to distribute Wizard, Tokyo Pop, Oni and a few other publishers within the Direct Market. Basically, if you want to be a Full Line Comic Shop, you have to deal with Diamond and if you aren't happy with the level of service, tough, there's nowhere else to go.

It's tough to blame Diamond entirely, their primary responsibility is to preserve their ability to earn a profit and to be fair, Diamond Owner, Steve Geppi has been very benevolent in his role as dictator of the Direct Market. Things like the Comic Shop Locator Service and Free Comic Book Day were born during this tumultuous time and owe a large part of their success to Diamond. Those publishers didn't need to sign those exclusive deals either (I wonder if they would have had they known where it would lead) but they did. And from where I'm standing, an industry that was hurting so much from the speculator bust of the late '80's and early 90's that it was unable to support multiple full line distributors is no closer to acheiving that today despite the reported growth in sales of comics and graphic novels in both the DM and Book Markets as well as on the big and small screens.

And the terrible thing is, that during this whole fiasco the DM has continued feeding on itself. Instead of increasing the customer base, the base has contracted and publishers are returning to gimmicks like variant covers to suck even more money from a diminishing clientele. Diamond further exacerbates the situation because as long as there is only one distributor to service the market, the market can only grow as fast as Diamond can. With the the stranglehold that Diamond has on the Big4 publishers, things they consider unimportant go unaddressed, and retailers are left wanting because their is no substantive alternative.

Have you ever heard the phrase Jack of all Trades, Master of None? That is now Diamond's position. In fact few years back I was among a group of retailers invited to Diamond's home office in Maryland to discuss the growing TPB/GN market and what Diamond could do to get more of our business. When the disparity in discounts as compared to Cold Cut were mentioned, we were asked if we would move all of our orders to Diamond if they increased their discount? Thank God, they were met with a unanimous, NO!

They can't serve their brokered publishers, their exclusive publishers and all of the smaller publishers in the back of the book, equally. The big guys set their own sales terms and discounts but small press publishers frequently profess that Diamond restircts the discounts they are able to offer to retailers and then there's the matter of a reorder fee that gets tacked onto all reorders of small press books. This is a problem because even a retailer who wants to stock a diverse mix of comics, has to consider that selling a $2.99 Marvel or DC comic could make them far more money than even a $3.99 small press title. Why risk more to make less money?

The other problem is as I mentioned earlier, that this results in the market eating itself. We've already looked at the lack of marketing done to support many of these books by their pubishers so with the majority of retailers forced to rely on Diamond for most, if not all of their product, anything Diamond doesn't offer, whether at all or profitably, will just not get ordered. So by choice or by necessity, a large percentage of the DM is forced to rely on Marvel and DC to stay in business. Of course if they'd done their homework before opening that might not be the case but as I said in the first installment, creators and publishers aren't the only ones who try to run before they can crawl. So Diamond hooks this group on the spandex teat, punishing those who attempt to build business outside of the front of the catalog with lower discounts and punitive reorder fees.

The ironic thing though is that by doing this, Diamond also becomes more reliant on the front of the book publishers and the retailers who love them and as those retailers drop off, whether due to competition from online discounters or the book market, Diamond suffers. To combat this weakness Diamond has started to place greater emphasis on toy and collectibles sales as well as creating a separate division to sell TPB/GN into the book market. This creates another problem too. As Diamond's Book arm pushes more TPB/GN into B&N, Borders, Amazon, WalMart... on a returnable basis, the book market can hold these books hostage, making them unavailable for DM retailers and their customers during peak sales periods and both Diamond and the publisher eat the books once sales start trending down and they are returned. Multiple distributors would make it harder for all of a publishers output to end up in one spot.

These days, this is where Cold Cut often comes in to play for me and according to Cold Cut's own website, about 10% of DM Comic Shops. Presumably these are shops that like Comickaze, are so firmly entrenched in their discount level with Diamond that they can afford to shunt orders for certain Publishers that aren't exclusive to or even carried by Diamond over, to Cold Cut.

Cold Cut does a reasonable job of supplying small press titles that aren't offered (for many reasons) or have already been offered through Diamond. What they don't do is make it easy for anyone to preorder new product. I'd move thousands of dollars of business to them in a heartbeat, all of my Fantagraphics, AiT PlantLar, Drawn & Quarterly... but for whatever reason, they're comfortable as is. I'm always leery when I here that a retailer turned down a sale by not ordering a book for someone but if Cold Cut is willing to forgo $2-3k/month, maybe it's true.

Oddly enough both distributors are there own worst enemy. One keeps grabbing for bigger pieces of a shrinking pie and the other sometimes doesn't seem to like pie at all.

Mmmmm... Pie!

Whew, I really didn't think I had that much to say about distribution but this is quite a chunk to digest so I guess we'll have to wait for the Retailer Round Up and the light at the end of the tunnel. And unfortunately it will need to wait a little longer than usual because, I'll be off on a cruise this coming weekend with Mamakaze, celebrating her birthday and our anniversary.

Take care and see ya soon.