Pulling Back the Magic Curtain

In last week's installment of this column, I went into detail about the current disfunctionality in the back issue comics market. Specifically, I made reference to the reality that most comics dealers now only have the ability to market certain very popular back issues, leading them to dump their remaining inventory on the market at prices ranging from 25 cents to one dollar each. Ironically, at exactly the same time, demand for recent back issues of all kinds is very strong, primarily because print runs have become so low. This has led to the evolution of online comics marketing companies that purchase bulk back issues from those dealers who have no cost-effective access to consumers, with those online retailers remarketing those same books to consumers at significant premiums over cover price.

In writing columns of this nature, I sometimes feel like the Great Oz, voluntarily pulling back the curtain to reveal both the secrets, and the weaknesses, of our business. In fact, the staff member who vettes my columns for me before I submit them to CBG has expressed concerns that I sometimes am too forthcoming in the information that I pass on to you. I understand his concerns, but at the same time, I want this column to serve a useful purpose. In this instance, I am trying to provide a generalized explanation of the economic realities of the current market for back issue comics. Those realities can sometimes be hard to swallow, however, and as a consequence, I can leave myself at risk for severe personal criticism for simply stating the facts. I think it is important, however, that everyone understand the dynamics that drive the current back issue comics marketplace.

An e-mail I that received this week is an example of what can go wrong with being forthcoming. Specifically, my disenchanted correspondent objected vociferously to the fact that our margins are quite high on some of the back issues we sell, going so far as to call the dramatic differences between our buying and selling prices "unethical." Well, that is certainly one perspective. A perspective I believe is based at least in some measure, however, in a simple lack of understanding of the costs required to create and operate a database marketing system for back issue comics. I know I contribute in some measure to this misunderstanding by not taking the time to explain fully the realities of our business, so I'm going to go into a bit more detail in this week's column.

Years ago, I decided that I would adopt the business model of McGuckin's Hardware, the leading hardware store of Boulder, Colorado. McGuckin's is a locally-owned company that is considered one of the treasures of Boulder retailing. When you enter their incredibly huge building, you find yourself in a world that the Big Box retailers can only dream that they could create. Simply put, McGuckin's has everything from huge gas patio grills, to the tinniest screws, to drafting supplies in quantities to rival the best specialty store. No where in America have I ever seen anything to rival McGuckin's inventory selection. Taking their excellence even further, McGuckin's has (literally) more than 100 staff members on the floor at any given time to help you find whatever you might possibly need. You cannot walk through the place without having been asked (by genuinely friendly people) at least half a dozen times if you would like some help. Going to McGuckin's is easy, rewarding, and fun!

On the flip side of the equation, however, the costs of all those wonderful amenities have to be somehow covered. The answer for McGuckin's lies in their pricing. If you are looking for a bargain, McGuckin's does have some very good deals as a result of their affiliation with the True Value Hardware chain, but on items not offered through True Value, they charge a steep premium over what you would pay elsewhere. Despite that premium pricing, however, the consumers of Boulder remain very loyal to McGuckin's. While almost everyone shops the discount stores on occasion, there is a very widespread realization that the exemplary service and selection provided by McGuckin's is a unique community benefit that needs to be preserved. That's why, on any given day, McGuckin's is inevitably crowded with throngs of consumers. Those folks know that they're paying more at McGuckin's than they could get the same items for elsewhere, but they're willing to pay a premium for the benefits of service, selection, and convenience.

That, in a nutshell, is our business model at Mile High Comics. We do have some great bargains on back issues where we manage to locate bulk quantities. In fact, you can probably find well over 20,000 different back issues priced at under $2 on our website on any given day. On items where we are in short supply, however, our prices are frequently significantly over what you would pay elsewhere for the same issues. The reason for this lies in the fact that, unlike any other dealer in the world of comics, we try to stock everything. In fact, we have one full-time staff position dedicated almost exclusively to adding new entries into our database every day. As a result, you will find a far broader selection of comics on the Mile High Comics website than anywhere else in the world.

While having a great selection is a wonderful benefit, the reality is that we do it because it is my passion, not because it makes any particular economic sense. As much as I wish it were otherwise, a great many of the more obscure back issue comics we stock do not sell even a single copy over the course of a year. I insist we keep accumulating them, however, both because I really want to have them available if the day ever arrives when someone might finally be seeking them, and because I suffer from this strange notion that all comics ever published deserve respect. One of my favorite personal moments is when I hear from a fan at a convention about how I've blown their mind by having some incredibly strange Independent they've been seeking for years available in our database. It may not pay, but it sure makes me feel good...

As regards the dollars and cents, it is not unusual for us to buy a comic book on the wholesale market for a dime, and then turn around and sell it for three dollars. Is that, as my correspondent of earlier this week claimed "vicious price-gouging"? I don't think so. While the actual cost to us of the comic book in question may be miniscule, the real costs are in the labor to grade, bag, enter into our computer inventory, pull that book for an order, and ship that book (about 60 cents per book), and in the long-term storage costs. Then you have to add in the capital costs of constructing and maintaining our database, and the costs of our excellent customer service. While this may come as a shock to you, the net earnings of operating a business like www.milehighcomics.com can end up being pocket change. To be more specific, last year was the best year in our history. Excluding an extraordinary gain from a contract settlement, we earned a whopping 2.5 cents on the dollars of our gross sales. The remaining 97.5 cents went out in inventory, labor, promotion, rents, and operating costs. After giving the government our income taxes, we netted less than two cents on the dollar in 2002. Our gross margins may appear to be high when we sell back issues, but quite frankly, those margins are also the only factor that allow us to stay in business.

As I promised last week, I'm including a listing of specific newer books with this column where we gladly would pay full Overstreet prices, because we're seeing strong demand at prices far above the 2003 Guide prices. I go into more detail on price/selection/sales velocity in next week's column.

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