Macroeconomic and Microeconomic Underpinnings
In last month's column, I provided you with some very graphic negative mental images that I hoped would convey to you the current plight of brick-and-mortar comics retailers all around the country. If, after reading that column, you are still determined to open your own comics shop, then I believe that you're pretty darn rash, and more than a little irrational. That having been said, I'm about to give you some tips that might help you bring your dream to fruition. It was, after all, only 31 years ago that I dropped my full scholarship to the University of Colorado in order to live in the back of my 1963 Chevy Impala, selling comics at conventions in order to raise the working capital to open my first comics shop. Without a doubt, that decision on my part was also "rash and irrational." Conditions were even worse for the comics industry back then, than they are today, and yet I still ultimately achieved the success that I was seeking. Without a doubt, you can succeed as well. I do believe however, that it would help you a great deal to first gain a very firm conceptional background on the current state of the comics world so that you can avoid making as many mistakes as possible in the beginning.
One thing I am not going to cover in this series of columns are the nuts and bolts of actually opening a comics shop. The really basic information ( available as brochures about licenses, insurance, tax requirements, etc) you can aquire, for free, from the US Small Business Administration (SBA). I also highly recommend taking courses in marketing, finance, accounting, business law, and business administration at your local junior college. Knowing what the heck you're doing in terms of business basics when you get started is very, very helpful. I was frequently quite bored in the business classes that I took at CU, but it has amazed me how frequently certain critical bits of knowledge from those classes has impacted my decision-making over the past 30 years.
The one area I do intend to cover today are the macroeconomic and microeconomic underpinnings of the entire comics world. While those two topics may sound intimidating at first, they are mostly just common sense applied within a specific context. On the macroeconomic level, for example, we know that the new comics world is dominated by two large publishers (Marvel & DC), two small publishers (Image and Dark Horse), and a slew of Independent and small press publishers. There is one distributor (Diamond), and (depending on your definitions) there are somewhere between 1500-2000 active comics shops. On a microeconomic level, most comics shops gross in the $100,000 per year range, with owners typically earning less per manhour than what they could generate by working at a fast food restaurant. There are certainly exceptions, with a lucky few large comics shops grossing over $1,000,000 per year, and quite a few larger ones generating $250,000+, but they are the exceptions rather than the rule.
That's all I'm going to cover about comics shops in general, as I've already written several columns in the past on the subject of private collectors selling their comics, and the basics of opening a comics store. Those columns are all archived at www.milehighcomics.com/tales/. What I believe is essential to recognize, however, is that since I wrote those earlier columns the comics retailing world has undergone yet another fairly radical shift. While I certainly made mention of the impact of Internet sales on the overall comics market in my earlier columns about comics retailing, I now believe that online comics sales are the predominance of overall revenues, rather than merely an adjunct to an existing market. This is a critical observation as regards how to enter the marketplace, as the skills and personal selling tools that you now need to develop to be a successful comics retailer today have far less to do with personal interactions, and far more to do with your ability to utilize available online sales venues to maximize revenues.
If your reaction to my previous statement is to say "but I don't really want to sell online...," then I highly recommend that you don't even consider opening a comics shop. Simply put, the most successful comics shops today are those that are able to broaden their geographic reach by selling to customers around the world. Those that have continued to limit themselves to selling only to local fans are failing in droves. In point of fact, the best comics shops in business today are adjuncts to successful online operations, rather than primary businesses. Simply put, it is far easier to cost justify having a retail location when its primary purpose of that site is acting as a warehouse and distribution center for a successful online business. Then there are nowhere near as many concerns about what to do with your hired help on the slow sales days of the week, and there is a strong external revenue stream to help cover all the fixed costs, such as rent, utilities, insurance, etc.
Now that I've articulated my philosophic perspective of the day about comics retailing, I have to tell you that entering the comics retailing world today is both incredibly easy, and remarkably difficult. This dichotomy comes about because it has become so darn simple to sell online. Back in the dark days at the beginnings of online selling (1995/1996), you had to set up your own website, and then try to figure out some way to drive traffic. Generating that traffic in a cost-effective fashion was far more difficult than it seemed, which was a significant factor in the demise of so many dotcom companies.
Conditions for entry are vastly easier today, thanks in great part to the creation of "aggregation" websites such as eBay, Yahoo!, and Amazon. Those sites each offer potential sellers easy-to-use tools that allow them to sell goods within a searchable database that merges the listings of many thousands of sellers into a single opportunity area for potential buyers. That sounds great, doesn't it? Well, while in many regards it is now remarkably easy to list items within aggregation sites, that very ease of entry creates a competitive arena that is astoundingly cutthroat. Imagine for a second that eBay is actually a comics convention that operates 365 days a year, with an infinite amount of floor space to rent to potential sellers. As long as the cost of that rental space remains attractive, the theory is that more and more sellers will be encouraged to open up booths.
The basic underlying problem with this theory, however, is that if the number of buyers does not grow at the same pace as the number of sellers, then the revenue pie is continually being reapportioned. Adam Smith, whom many consider to be the founder of modern economic theory, would have loved watching the evolution of sales competition on eBay, as it has precisely followed most of his underlying principals. Most specifically, Adam Smith postulated that markets over time tend to become more efficient as competition increases, with the ultimate result being that 100% efficient markets produce zero profit for the participants!
In the case of eBay, it has become the ultimate catalyst for home-based businesses. With no rent, insurance, labor, utilities, and (frequently) no taxes with which to contend, many eBay sellers are simply able to underprice more traditional retailers. As a result, a great many traditional retailers have abandoned eBay (and other online sites) as simply being impossible arenas within which to make a profit. Without a doubt, competing against individuals with a zero cost structure for their businesses is very, very hard. That having been said, however, I still absolutely believe that is imperative for any new potential comics retailer to first devise a strategy for selling successfully in one of the highly competitive online aggregation sites. Just think about it. As long as you don't have the costs and hassles of a store, you can compete effectively on eBay against other sellers who also have no overhead. Fix up a sales area in a corner of your garage or a spare bedroom, and start listings items online. Pretty darn quickly you're going to gain a great deal of knowledge about which comics sell in the worldwide market, and those that are unsaleable at any price. If you're lucky, you'll also be able to develop a customer base, and your own niche market area in which you can specialize. Presuming that you do a good job, you can create a profitable home-based business long before you take the highly risky path of signing a lease, and opening a fix site retail location. By developing the skills to sell effectively online prior to saddling yourself with onerous overhead, you provide yourself with a significant advantage in the race for survival. There are still no guarantees that your business will make it (SBA statistics indicate that 90%+ of new businesses fail during their first five years...), but at least you'll have a decent shot at survival. Especially considering that so many of the dinosaur comics shops whose owners are simply unwilling to adapt to the new Internet world are sliding into the tar pits as we speak. Our industry desperately needs talented, aggressive new comics retailers right now in the worst way. In direct contrast to past patterns, however, that process now begins with developing the skills of online selling, rather than finding a great retail location.
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