How to Open Your Own Comics Retail Store Part VI

If my past six columns on the risks and requirements of opening your own comics shop haven't scared you off of the idea, then maybe discussing (in very general terms) the costs involved in opening a store will bring you to your senses. I say this with some measure of facetiousness, as I really would like to see more fans take the next step into retailing comics, but I want to be sure that everyone who makes the decision to hit the tar baby knows exactly what they're getting into before they begin.

As regards working capital requirements, a lot depends on the size and scope of your store. Are you planning to open (at least initially) a small (700-900 square foot) neighborhood store? In that case I would estimate that $50,000 would get you started. You can figure the following in expenses:

Fixtures $10,000

Inventory $30,000

Advertising $ 5,000

Safety Reserve $5,000

I've made this analysis incredibly simplistic, as fixtures will include not only display racks, but also signage, phone installation, first month's rent and security deposit, computer software, etc. Believe me, $10,000 evaporates very quickly in addressing those areas. That's why most new comics stores end up buying their fixtures second-hand.

As regards inventory, you can figure that you'll have to pay Diamond up front for much of your initial inventory. Even if your primary focus will be comics, you'll still need to purchase a supply of trade paperbacks, statues, and comics-related toys. As a newbie, with no established earned discount, your max discount on this initial purchase will probably be only 40%. The math can be chilling, as just a purchase of 500 trade paperbacks at $19.95 each equals $9,975 at full retail. Even with your 40% discount, you will still owe Diamond $5,985.00 for this small batch of books, plus freight. Bear in mind that 500 trades will not get you far, as that is equal to about 1 copy each of the popular titles that are in stock with Diamond.

What makes this math even more difficult is that not all of the inventory you initially purchase will sell to your local audience. This is the bane of comics shops, and the #1 reason why they fold. A typical successful neighborhood comics shop has about 200 regular customers (at least one visit per 2-3 weeks), 200 peripheral customers (at least one visit per 5-6 weeks), and another couple hundred folks who stop by a couple of times a year. While that may seem like a lot of fans in total, it really isn't. Particularly if you're ordering all sorts of diverse product, hoping that at least one person in your clientele group will have an interest in every item. As a general rule, no matter what you do, you will get stuck with all manner of good products that no one within your usual clientele will have any interest in buying. This is the point at which your precious working capital starts being tied up in unsold inventory. If you don't figure out a way to get that inventory selling, your business will inevitably die.

Another very important factor in the success of your new store is that you have an attractive stock of collectibles. If you don't take advantage of the suggestion I made in my last column to spend a couple of years selling on weekends to build up a collectibles inventory before you open, then you'll need to purchase a very large collection of prime material before you open. This can be done at comics conventions from other dealers, but be prepared to pay top dollar. That's why most new comics store owners quickly make the decision to contribute some, or all, of their personal collection into the store. The hard truth is that most successful comics shop owners end up owning far fewer comics after they open their store, then when they were just a fan...

On the topic of advertising, it is critical to get the word out to as broad a spectrum of the general populace as possible that you've opened a new comics shop. Even utilizing very limited mechanisms (Yellow Pages ads, flyers, newspaper ads, late night cable spots, radio ads, etc.), this is going to cost you a minimum of $5,000. If there's already another comics shop within 10 miles, double that figure. The good news is that the need to advertise diminishes over time. Once comics fans realize where you are, word-of-mouth advertising will usually keep them coming in, but getting your initial critical mass of customers to start frequenting the store can be quite expensive.

My final budget item was to keep at least $5,000 in a cash reserve. This will, of course, not work for you for very long. Of the 3,000+ comics shops open in America today, I doubt if more than a few hundred could claim that they have access to $5,000 in free working capital. Still, if you can at all do it, it would be wonderful for your peace of mind to know that you always have at least one month's basic expenses tucked away. You never know when another economic disruption, such as a UPS strike, or 9/11 might occur.

All of the costs I've mentioned to this point are for a barebones comics shop. If you are also planning to sell cards, games, toys, or other non-comics related product lines, then I highly encourage you to seek more working capital. A full-line new store will require at least $100,000 to get started.

Next week, I'll offer some suggestions on how to reduce the costs of opening a store.

Please send your e-mails to chuck@milehighcomics.com, and your letters to:

Mile High Comics, Inc.
Attn: Chuck Rozanski
2151 W. 56th Ave.
Denver, CO 80221



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