Comic Attitudes

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Gross profit margins on the merchandise vary considerably, ranging from 45% on some sideline products to a rare but achievable 1,000% for a back issue. Those margins, particularly for back issues, can be misleading, cautions Thompson. A back issue purchased for a dime can be sold for $2, "but the turnover rate for back issues is abominable," he notes, "between one-half and one turn per year." The inevitable result is an inventory that balloons out of control, sucking away at retailers' cash flow. Mullen and Schwindinger know that all too well. Currently lining the entire back wall of their 1,300-square-foot office/warehouse are 10 storage racks holding 20 boxes each of back issues, for a total of 50,000 to 60,000 comic books worth approximately $40,000.

Compounding the problem is the fact that for comic-book retailers, inventory is nonreturnable (which is not the case for book retailers). Eighty percent of the distribution market is locked up by two multimillion-dollar giants, Diamond Comic Distributors, in Baltimore, which has a 55% market share, and Capital City Distribution, in Madison, Wis., which has a 25% market share. The remainder is occupied by 10 small operators. Distributors receive new titles, which are typically discounted 61% off retail from the publishers (the extra 1% covers damaged copies, which are also nonreturnable and must be swallowed by the distributors), and turn around and sell them to retailers for anywhere from 40% to 57% off the cover price (with 55% being the standard discount). The system is very efficient: distributors get a product on retailers' shelves within 48 hours after it's released from the printer. Hot titles typically fly off the shelves in a matter of days (or hours, in the case of Death of Superman).

There is a catch to that scenario, one Mullen and Schwindinger are quick to point out. Like many of the superheroes showcased on their shelves, the retailers need to have the power to divine the future if they wish to survive. Because the inventory is nonreturnable and must be ordered two months ahead of time, the retailers "take on all the risks," says Mullen. Unlike many stores, adds Schwin-dinger, Comic Attitudes never orders to sell out. "Our goal is to be in stock for the entire month," he says. Not only do retailers need to be up on the latest titles, plot twists, and events in the lives of the fantasy characters, but they need to be enormously educated about the buying habits of their customers.

"Your success will depend on your knowledge and intimacy with the product," says DC Comics publisher Paul Levitz. Product knowledge is even more critical in comics than in other retail fields, he says, because of comics' short selling window (of which consumers are very aware) and the lack of an effective mechanism for selling off unneeded inventory. Whereas clothing retailers can move their slower-selling goods to second-tier stores or discount outlets, with comics "you have 30 days to make your value from them or they're pulp," says Levitz.

Some retailers try to give themselves a hedge by soliciting orders ahead of time from their customers. Catalogs announcing upcoming titles provided by the distributors facilitate the process. "If you do that," notes Schwindinger, "then you're safe, but you've also missed an opportunity to make the extra sales on a product that becomes hot, and you've prevented yourself from bringing in a new customer." While as many as 90% of all comic-book stores offer subscription or reserve ("pull and hold") services to their customers, Comic Attitudes made a deliberate decision not to do so. Before opening his stores Schwindinger polled 50 owners who offered those services and learned that 80% or more of the reserve customers come in at least once a week. "Those customers are so interested in the material that they're going to come in anyway," he says.

The key for retailers is to have tight inventory tracking and order systems in place. Thompson estimates that roughly a quarter of all comic-book retailers in North America use a personal computer to run their stores, and more-sophisticated software is coming down the pipeline all the time. Comic Attitudes has spent $21,000 to date on automation and has a point-of-sale computerized inventory-management system in the works. Schwindinger firmly believes automation will provide Comic Attitudes a competitive edge over other retailers, but with large companies like Marvel and Blockbuster possibly entering the fray, how long that competitive advantage will last is anyone's guess.

Try telling that to Mullen and Schwindinger. They are both single-minded in the pursuit of their goal, blocking out any obstructing or worrisome facts. "There was definitely a time when I would have probably been very happy with a few stores, increasing their sales, and making it work," says Schwindinger. "But over time you become obsessed. Because our lives are the business."

Mullen concurs. "We don't go anywhere or do anything that's not Comic Attitudes related." The couple are planning a vacation to Disney World this year, and just as soon as Schwindinger decided they would drive to save airfare, Mullen presented him with a plan for what malls they would be stopping at along the way. Whenever they get in a car, he drives and she reads management books aloud.

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