Posted in: Comics, Comics Publishers, Current News, DC Comics, Marvel Comics | Tagged: comic shop, Mystery Retailer

A Mystery Retailer Talks About DC Comics, Discounts and Carrying On

Our Mystery Retailer, an online comics shop owner of 22 years, wanted to delve into the issue of discounts that Phil Boyle brought up.

Bleeding Cool has been covering a lot of comic book retailers talking about the comic book industry right now, with our Comic Retailers Say The Funniest Things articles. But not all retailers want to be so… public-facing. Such as our Mystery Retailer, an online retailer of 22 years standing, who wanted to delve into the issue of discounts that Phil Boyle brought up, though didn't want to be named, "to give you honest opinions without fear of retribution.". The Mystery Retailer writes;

"It's important to know that comic books are not dying. That narrative is completely false. Are the majority of direct market stores facing challenges or worse? Yes absolutely. I think it will shock you to know that while that is the case and many stores are experiencing dropping sales, overall orders for periodicals are stable and this isn't the worst time in history. But pricing, discounts and distribution are the biggest challenges facing the direct market today."

It's been said that comic books are the only medium that has been predicting its own death since it began. Tom Brevoort has a T-Shirt made that reads  COMICS: DYING SINCE 1935. The Mystery Retailer continues;

Comic shops and pricing

"Let's start with pricing. I'm sure your first reaction and the common argument is that periodicals are too expensive. I don't think anyone can argue with that. However, a mentor of mine who has owned a comic book store since the 1950s once told me, "Every time Marvel and DC raised their cover prices, sales increased." I don't know if this is a psychological reaction, but historically, according to him, this would happen. Slowly, for at least 15 years, there has been a business strategy in the direct market to offer significant discounts off the cover price of periodicals and collected editions (most of the time by using a preorder system) through online ordering. While brick-and-mortar stores have been fearful that online selling would destroy physical stores, it didn't happen right away. It has happened slowly and it's not simply a case of availability. It's 100% because of discount comic book sellers."

"We can even determine who, in fact, is directly benefiting from this practice. It would be the two largest direct market retailers (by a huge margin) in the US. That's Discount Comic Book Service/InStockTrades.com/DCBServices.com and Midtown Comics. DCBS had a Brick and Mortar presence which was closed in 2017 and Midtown has three stores in New York. These two companies alone command and dominate the direct market. They sustain the direct market by themselves and that's why overall order numbers aren't down but redistributed to these two multi-million dollar retailers who use the tactic of deep discounting periodicals and collected editions not only to increase sales but also attract brick-and-mortar direct market store customers who feel cover prices are too high. DCBS offers 40% off DC and 36% off Marvel periodicals and collected editions. The publishers know this practice is taking place, but like in all businesses, your top customers will always get some kind of favoritism. Publishers directly benefit from these two entities dominating orders. Retailers are not oblivious to it."

"Other contributors to this problem are Things From Another World, MyComicShop.com, Unknown Comics, Impulse Creations and CheapGraphicNovels.com. There are more. However, these five are additional stores using a presale deep discount model. Midtown not only preorders at a discount, but new releases are 10% off cover, (it used to be 15%) and 15% off cover for collected editions. The Midtown preorders discount is 35% off cover on periodicals and 30% off cover of collected editions. Retailers have known this is happening and have voiced concerns in the past to deaf ears. Around 2012, Midtown and DCBS would put out full-page ads in monthly periodicals from Marvel and DC stating "never miss an issue" and how much consumers could save using them. This was a huge slap in the face to brick-and-mortar direct market retailers. Publishers listened and I don't recall seeing these types of ads since. This tactic was not new. During the speculator bubble in the 90s, American Entertainment/Entertainment This Month would put out full-page ads discounting books based on how much you buy. At a time when collectors were buying ten packs to put away in hopes of paying their kid's college tuition or for their retirement fund, these discounts were helpful."

I remember those, Mystery Retailer, here's one!

"I'm aware this was a problem because my entire business model was based on selling hundreds of books a week at 10-25% off the cover price. During that time, I didn't realize what it could do to the direct market and if I'm being honest, I don't believe I would have cared. I personally had customers leave my company because I couldn't match DCBS specifically. Because customers are trying to save money where they can, brick-and-mortar stores are losing customers to these two giants."

"Remember earlier, I said Marvel and DC are aware. I don't know how invested Marvel is in overall order numbers or if they even monitor it, but DC did and most likely still does. In 2020 DC approached the two biggest accounts with the most orders and largest volume to exclusively distribute their comics to retailers. DCBS would create Lunar Distribution and Midtown would create UCS Distribution, splitting the distribution of the direct market. While all publishers were still utilizing Diamond, DC sales representatives would actively obtain access to what other publishers were doing (especially Marvel) and report this information internally. They also knew which stores ordered what and who the top stores were."

"Joe Dunn, Publisher of Antarctic Press, recently suggested Manufacturer Suggested Retail Price (MSRP) and that retailers should price products themselves. Unfortunately, the MSRP model is where the direct market is now, with a printed cover price. Effectively, what publishers have done is devalue their own brand by devaluing their own products. By allowing discounts on new periodicals and collected editions, they have sent a message to their customers and the market that hot off the printing press, their products are not worth the cover price. If you look at international brands similar to Marvel and DC (e.g. Apple, Lego and Hasbro), they do not allow their retailers to discount their products for a designated time increment. Can you imagine any of those companies selling their products at 40% off right away? These other international brands refuse to discount in that way and their brands are very strong, maybe the strongest in the world, since there is still high demand and their products maintain value from the start."

"The one and only solution Phil Boyle mentioned, which I agree with, is the Market Advertised Price (MAP). Phil mentions this solution; however, in the same sentence disregards it. We need MAP on all periodicals and collected editions for six months from release. This will level the playing field for the entire direct market. However, just as Phil immediately dismissed the idea of MAP, the publishers were not likely to do this. The reason they won't is if 1998 of 2000 direct market stores closed today, it would barely make a dent in overall orders. They have no incentive because their top earners are covering the spread."

Comic shops and Amazon

"The other entity that is causing distress to the direct market in regards to collected editions is Amazon. While I suspect there actually may be a MAP in place with Amazon, they most likely work around that by preordering at full price. Then, six months later, when they are released, they are automatically discounted by 46%. Other retailers can't compete with 46% off. Not 40% off, not 36% off and not 30% off. I have spoken with store owners who no longer carry collected editions. They even tell their customers they are better off buying from Amazon."

"Something needs to change. DCBS and Midtown are well aware of what is happening.  During an interview about their sister business, Lunar Distribution, DCBS co-owner Christine Merkler says, "It's weird because, at DCBS, we've always flown under the radar because we are a discounter, so we discount to consumers. And so we're like the Amazon of comics. So, not everyone loves us because of that. I mean, especially our competitors, I guess." With Midtown's UCS Distribution no longer distributing DC comics, DCBS is the #1 comic book retailer in the direct market. Now they also have  Lunar Distribution to exclusively distribute DC and Image Comics to themselves. In another article from the same 2021 interview, Christina Merkler said, "We know we currently have about 65 employees, but we know that's going to probably double once we add Marvel into the mix, which is the largest publisher in all of the comics industry." Marvel at Lunar? Why didn't that happen? How did Penguin Random House win the bid over Lunar?"

"There are structural changes that need to be made and that starts with MAP and ends with MAP. It is my belief that in an effort to cut costs and maximize profits by laying off experienced staff such as sales reps and cutting off open dialogue between them and retailers, DC Comics essentially cares little about the overall direct market. We used to have a forum for direct communication with DC about our concerns or upcoming projects. DC shut that down. They did not want to hear anything from the 1998 retailers who weren't DCBS and Midtown. DC sales reps were essential to the direct market. They were short-staffed to handle the volume of stores; however, they were essential workers who had years of experience. If I could point to one publisher that has turned its back on the direct market, it would be DC. Do you remember when Marvel and DC did subscriptions directly from them? These subscriptions are still around. Who handles orders and shipping for their subscriptions? Midtown Comics. While this business has drastically waned in the past 10 years, Marvel would make that transition first. Years back, DC Comics was looking to move that business to another party. I expressed interest in bidding for that business. No one ever followed up with me and that business was awarded to Midtown. By far and large, DCBS and Midtown have a devastating impact on the direct market, while also being incentivized to continue doing it."

Distributors and discounts

"Now let's discuss discounts. What I am referring to now are the discounts in place from distributors to retailers in the direct market. Before Marvel and DC split from Diamond, it was a plateau discount system. In other words, how much you spend at the distributor for each publisher during a twelve-month period would determine what your discount will be. At the height of my sales success, I was ordering a lot and my discount was 55% for Marvel and DC. From there the discounts could be deeper. This system rewards larger volume stores like DCBS and Midtown specifically. This discount structure is devastating to smaller stores who would never hit those higher plateaus, even when ordering larger and larger amounts based on incentive ratio variants. With DC Comics leaving for Lunar exclusively, they grandfathered everyone in at their current Diamond discount percentage. Now, the order minimum and the plateau discount structure are back in place."

"Here's where things get interesting. My DC Comics discount at Lunar is so awful now I am better off ordering from DCBS at 40% off the cover price than buying wholesale at Lunar at 35%. You did not read that wrong. DCBS and Lunar are the same company. DCBS is for consumer sales, and Lunar is for distribution to retailers for resale. How does it make any sense that the very consumers I'm trying to sell to for a profit can buy the same books I am wholesaling from the same company for less? Shouldn't it be the other way around?"

Should be. Here's a look at the Lunar retailer discount spread right now.

"Marvel left Diamond for Penguin Random House after deciding not to go through Lunar. They have a different discount structure, which is 50% flat for everyone. Big or small, you get the same. Penguin offers free shipping to retailers on any size order or frequency. Lunar and Diamond still charge shipping, but I'll discuss that in-depth in a moment. Here's how things get worse for Lunar and DC. DC distributes collected editions through Penguin. I am better off ordering collected editions from DCBService.com/InStockTrades.com or Amazon, where I can get 50% off and free shipping, than buying wholesale at Lunar Distribution, where I only get 35% off and pay shipping. There is something fundamentally broken with this system. I can, however, honestly say Lunar is far superior to Diamond or Penguin in preventing damages and shortages. My solution here is that Lunar and Diamond move to a flat 50% off discount program for the direct market. No more plateau discounting. It's imperative they level the playing field for the entire direct market."

There have been times when Amazon collections pricing has dipped below Diamond's discounts, I have let retailers know, and they cleaned Amazon out. Maybe I should try this again? The Mystery Retailer continues;

"I've talked about distribution above in length, but a smaller point here to be made is that with multiple distributors, many retailers had logistical issues after being accustomed to a singular distributor model. While ordering online from Lunar, Penguin, and Diamond is relatively easy, there are definitely challenges in having to order from multiple sources. There is a solution to help alleviate some of those challenges. Penguin Random House offers free shipping for Marvel, DC-collected editions and IDW. Lunar and Diamond must adopt the same shipping stance as Penguin. Now that Image is exclusively with Lunar, I strictly only use Penguin and Lunar. Free shipping will more effectively help retailers order and not have to worry about who covers shipping and who doesn't."

Diamond Comic Distributors… remember them?

"The final part of distribution I want to address is Diamond. Diamond no longer distributes DC, but they are still distributing Marvel and Image. In an effort to avoid losing customers, they are essentially ordering Image through Lunar and Marvel through Penguin and providing retailers access to these titles through Diamond at a lower discount. Basically a second distributor middleman. Why isn't Diamond doing the same with DC? DC always had a policy with smaller distributors where if retailers had Diamond accounts, they wouldn't be allowed to wholesale to them. I'm assuming this policy extends to Lunar. The CBIA, which was run by the late Robert Scott for many years, had a forum for retailers and publishers to address concerns and offer books to each other at wholesale when Diamond was out of stock in order to help fill customer needs. DC even frowned upon this."

Move New Comic Book Day To The Sabbath?

"The last distribution element I want to discuss is New Comic Book Day. DC Comics moving their new release dates to a Tuesday really disrupted this once-a-week event. While some stores just held them for Wednesday. Retailers (with or without the support of DC) need to move DC back to the same New Comic Book Day as all the rest of the publishers. I have seen arguments that say "Wednesday New Comic Book Day" is dead, and no one cares. I disagree with that pessimistic viewpoint. New Comic Book Day used to be an event you didn't want to miss out on. As stores are ordering less and overprinting is increasingly rare, customers feel if they don't get there Wednesday, they are missing out and in many cases, they do. I propose moving DC back with the rest of the publishers and moving New Comic Book Day to Saturday. Make it an event every Saturday that you just can't miss. Retailers could possibly do special NCBD variants only sold on that day. Unsold copies would be returned or destroyed. As more customers are starting to age out, make it a family outing. Get your kids away from their TVs, tablets and phones for an hour. What better way to bring in younger audiences than a family tradition? Unfortunately, the 30-year-olds and younger were not driven to comic stores with all the comic media such as movies, TV and video games like we had all hoped it would. There is so much available at your local comic store that is sourced for all the media kids consume. We need ways to help connect them to it."

Saturday is often a string day for comic book retailer sales, but so is Wednesday – and now Tuesday. Consolidating all of that for one day, Saturday, might not be great for cashflow. But Mystery Retailer concludes.

"My hope is to have described what is happening as challenges instead of problems. I believe these are sound solutions to some major challenges that most people don't realize are actually happening. It's not character swapping. It's not gender-bending. It's not sexual orientation changes. Really, it's not even the cover price. We start here with these solutions for real challenges to help strengthen and rebuild a foundation for the direct market that will last for years to come. My additional op-eds will examine other aspects of the industry. There are millions of dollars being spent in the direct market and in comics as an industry, as well as a hobby. Some of those dollars can be redirected, and unfortunately, some cannot."

Would you like to hear more from Mystery Retailer? He/she is chomping at the bit…

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