Back Against the Wall

Here is a response I sent today to a long-time comics retailer who wrote to me this week seeking advice. His store is in financial difficulties, and he doesn't know what to do...

Dear __________:

Let me say, first of all, that I am overwhelmingly sympathetic to your plight. You are part of an enormous class of comics retailers who were enticed into the business during the golden years of the early 1990's, who subsequently have seen an entire world disintegrate around them. The comics business that existed ten years ago is now dead and gone, taking with it the hopes and dreams of thousands of hardworking people who's greatest sin was only wanting to participate on a daily basis in the wonderful world of comics.

As regards the actions you have taken over the past few years to keep your business going, I see no flaw in your reasoning, or your methodologies. You've reduced costs, even to the extent of finding an alternative income source for yourself, and still you're not able to meet your weekly expenses. Even your current efforts on eBay and other online selling sites, have had only marginal success. That being the case, I would say that you would probably be doing yourself a favor by immediately exiting the new comics business. I don't see where Chapter 11 bankruptcy would help you, as the costs associated with that type of filing usually eat up all the cash flow of a smaller business. With no new working capital, you would have no resources with which to stage a recovery. I think your accountant and your attorney are giving you good advice when they tell you that it is time to shut down. There is simply no justification for you to jeopardize you health any further by holding out when all hope is gone. As much as you feel a strong sense of commitment to your long-term new comics buyers, they will simply have to find another source. You've given them your complete dedication for over ten years, but now there's nothing more left for you to give.

That having been said, I would recommend that you go the route that I've seen many other former brick-and-mortar retailers take, of selling more online, and at conventions. While both of those markets have become more competitive of late, there is still a lot of room for growth. Especially if selling collectible items is your primary focus. I see the root of many of your problems being the overhead of maintaining a retail location, and the hardship of having to meet that damn weekly Diamond bill. If I were you, I would walk away from both of those costs, and instead try and set up a collectibles business out of my home, or at a very inexpensive rental location, such as an old garage with a dry roof, and strong doors. I would keep whatever stock was previously in the store, and would work to gradually sell it online. I would also search for collections locally, and try to steadily build my inventory of collectibles.

As the inventory built, I would find an area within comics collecting in which I had a specific personal interest, such as Prince Valiant, Big Little Books, Amazing Spider-Man toys, etc. It really doesn't matter what specialized genre it is, as long as you feel passionate about it. Your goal would then need to be to search the web, including eBay and all the other public sales sites, for items related to your genre. Work diligently to buy up as many items within your specialty as you can, while simultaneously constructing a small, easy-to-maintain website focused entirely around your preferred genre. One absolute truism about the Internet is that it rewards specialization. There are millions of people shopping on the web every day, often times with very specific collecting desires. They can gain a certain amount of satisfaction from the public sales sites, but my experience has been that they are frequently willing to pay a premium for the instant gratification of being able to purchase items in their genre of desire, in a one-stop-shopping environment. If you have the best darn site in the world for any given genre, your little boutique website will generate a certain level of revenue. The search engines, in particular, will send you more potential customers if you have more items in a given genre than other sites. In the meantime, continue to sell other collectible items you have in inventory at whatever prices you can get. Bear in mind, if it doesn't fit within your genre of specialization, it doesn't really matter. Any working capital you can redirect into your area of specialization is a benefit to your long-term strategic plan.

What I think is critical to this discussion is the factor of personal control over your life. In many regards, the limits on your success with a boutique website will be set primarily by the popularity of your chosen genre or genres, your perseverance in building your site and inventory, and your ability to provide quality personalized service. While those factors are not insignificant challenges, at least they are areas in which you have an absolute ability to affect the outcome of the situation. This is a dramatic departure from the dilemma you're in right now, which is that no matter how hard you work and sweat, you're still ending up behind the eight ball at the end of the day.

Before I forget, this strategy that I'm advocating does not abandon your current creditors. By this point, most of them are aware that you are in imminent danger of shutting down. That's part of the reason why the Diamond credit department is playing hardball. They want to squeeze as much out of you as they can before you fold. They've seen this situation with other comics retailers far too many times in the past, and they are well aware that once you're out of business, the odds of them getting anything are almost nil. What I would do would be to set up a payment plan with all the current creditors, including Diamond. I would arrive at a final indebtedness figure (using my numbers, not theirs...), and then set up a two year plan to gradually eliminate that debt. I would give myself at least a month, or two, to get my new marketing plans going, and then start off with very small checks. You will absolutely get a lot of flack from your creditors while you're reorganizing without the benefit of a formal bankruptcy (they've heard every lie and excuse ever told...), but that will gradually subside if they start seeing a steady stream of small checks whittling away at the indebtedness. My experience has been that this strategy works, even with the taxing agencies. Bear in mind that the credit officers at most companies are personally rewarded if they are able to bring in any portion of debt which has been classified as "uncollectible." As far as I'm concerned, you're doing them a big favor by taking the honorable route of trying to pay down the back debt. I wouldn't take any guff from them, nor would I put up with any attempts on their part to charge interest (above a very nominal figure) or penalties on your final indebtedness. As long as you're making the commitment to pay them what they're owed, they have no cause to complain. No matter how slowly your payments come in, at least you are gradually making the debt go away.

In closing, I would ask you to view this new journey you're about to undertake as a beginning, not an end. The current business plan you're operating under has become functionally obsolete. Without a core online genre around which to build your business, your prospects are dismal. Shutting down your existing operation right now simply frees you up to begin rebuilding from the ashes. I know that the comics market seems very depressed right now compared to in the past, but I remain very optimistic about our prospects for the future. With the relatively recent advent of the Internet, I see the death of the comics industry as no longer inevitable. In fact, with our sudden incredible ability to present millions of potential new readers with free access to the joys of comics and graphic storytelling, I think that we are setting the stage for a potential new blossoming of our entire world. If you start preparing right now, you could be one of the leaders in this exciting and prosperous new comics marketing reality. Bear in mind, you have knowledge, experience, and passion for comics. You may be tired and burned out right now, but there's no reason for you to quit our world entirely. Give yourself a break, rest for a while and reorganize your marketing, and I think you'll be right back doing what you love in a profitable manner. Please do this for all of us, as we very much need your to help build the bright new future of comics.

All the best!

Chuck Rozanski,
President - Mile High Comics, Inc.

Original Letter

I have owned my shop for 10 years and have worked there for 20. That is why this is a difficult letter to write, but I feel that I am too close to the situation, and am seeking your advice, for you are one of the most respected names in the industry.

In order to understand where I am coming from, let me offer a brief overview. When I bought the shop in December of '92, we were hot on the heels of the Death of Superman. Comics flew of the shelves in huge stacks. People bought 10 and 20 copies of the same issue, as I am sure you well remember. Literally six months later, I couldn't sell a comic if it wasn't deep discounted. Perhaps I should have closed my doors then. My children were small, though, and I had taken this chance by buying the store where I had worked for so long, because I was certain I could make a go of it.

In the ensuing years, I have struggled against overwhelming odds in a shrinking industry and a soft economy. I have moved the store twice from our original location. The last move was 18 months ago. Upon making that move, I suffered a retinal detachment that has since become inoperable. I lost sight in one eye. The surgeries and treatment prevented me from being the hands-on owner I am used to being and I lost ground with notifying people where I had moved to and as a result, could not afford to erect a new roadside sign to advertise my presence. However, I pulled myself up and persevered as best I could. When tragedy stuck our nation on 9-11, it shook our economy and rattled mail-order customers, who became afraid of buying for fear of Anthrax arriving in place of their goods. But still, I pulled myself up and persevered as best I could.

This past February, I was approached by an old friend and a former employee wanting to buy my store. I worked with him and his wife for 6 months to train and prepare them. But at the 11th hour, he backed away and did not follow through.

Simultaneously, I later realized, I had slowly been getting screwed by Diamond as, having signed up for their magazine program, I was not getting credit for the returns I sent back. Despite numerous e-mails and detailed spreadsheets and an audit of the whole mess, Diamond still refuses to refund me the $1,403.00 they owe me.

Through all these troubled years, I have acquired a certain amount of debt with creditors that I feel obligated to repay. I have also had a loyal customer base of a few dozen that I would like to continue servicing. Meanwhile, at age 40, I have returned to college and am continuing toward my degree in education, and am working as a substitute teacher. In this way, I no longer have to pull any store capital to put toward household expenses.

Had the deal to sell the store gone through, I would have had the capital to repay the creditors and had a clean slate. This was my desire all along. At the same time, the store would have continued on with someone at the helm who would take care of my customers, many of whom had been with me going back to the beginning, under the original owner 20 years ago. I would have enjoyed stopping in after a day of teaching to ocassionally say hello and help out if there was need. I enjoy all aspects of the comic industry with the exception of owning the shop outright. For me, it is stressful and has become an albatross around my neck. But I never intended to close the store.

After the deal went bust September 1st, however, my sales took a sudden plummet that I originally attributed to the deal going sour. Sales had risen over the summer, and my optimism had gotten the better of me. I dropped everything I was doing, including participating in my college courses, to try to turn things around. However, in this shakey economy, my best efforts have seen my sales at an all-time low. I am behind on the store's rent and am also behind with Diamond, who still refuse to refund or credit me the money I am rightfully owed. As a result, they have changed my terms, as of next Wednesday, to COD Certified. Additionally, they threaten to close my account if one more check does not clear. They will only back debt one check at a time for me, and one is currently being repaid. I am considering Chapter 11 to prevent closure of the store, but both my accountant and my attorney, who are personal friends, advise me to close the doors.

I realize that it's about as bleak as it can get, short of Diamond closing my account, which may be next. I am trying to consider what options, if any, I have. Should I just quit, after 20 years, and walk away owing all this money? Should I try the Chapter 11 and see if I can finagle my way out of this mess? Does the comic industry even appear to be holding its own or is it going to continue to decline? I can't hope to survive any further loss of business.

I am in the process of trying to open an online store, an eBay store, and have been regularly posting to eBay for a couple of years. Lately, sales have been sluggish there as well.

I debate about turning my store into an online store, service my best subscribers, set up a repayment plan with the creditors, and store the rest of my stock and list it all in an online store. If I do this, streamlining the subscription service so that all customers must pre-pay or have a credit card or debit card on file so that their account is paid in a timely manner must become the way of the future. By doing this, I have no rent, or additional expenses except storage, and can work off the computer here at home.

Therefore, my reason for writing is simply to ask your advice. Since these problems are overwhelming me mentally, physically and emotionally, I hope, after reading what the store has meant to me and how I feel about leaving creditors in the lurch, that you can advise me as to what you think my best plan of action should be? Are there avenues to pursue that I have not considered? Is there a way to service my customers and keep my account open that I haven't thought of?

As I said earlier, you are considered one of the most respected men in the business. You have a reputation for being tough and fair and thinking with both your heart and head.

I thank you for your time.

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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