Modifications to the Distribution System

While there were many other interesting elements to my first trip to Marvel Comics, I want to get back on track with my recounting of comics history by focusing more on the modifications to the distribution system for comics that came about during that remarkably dynamic period of 1979-1982, and how those changes directly affect the distribution system that we have today. As I mentioned a couple of columns ago, Ed Shukin offered me the chance to become the first new Marvel Comics distributor under the terms created in May, 1979. I jumped at that chance, and was quickly followed by over a dozen other new distributors. There were also a couple of companies (including Pacific Comics) which had already been purchasing from Marvel under the old terms (which discriminated in shipping costs against all distributors except Phil Seuling's Seagate Distributing company), and were eager to expand their market share when Seuling was forced to compete under the same terms as everyone else.

While it would appear at first glance that simply leveling the playing field in distribution would have no net positive effect, the exact opposite turned out to be true. From the minute that Marvel's management opened their distribution of comics to anyone who could clear a $3,000 monthly check, their business within the Direct Market exploded. All of the old Seagate sub-distributors who had been held in check by Phil's unbeatably great sweetheart deal with the publishers suddenly found themselves able to poach Seagate's wholesale accounts at will. In order to justify the new infrastructures required to handle the logistics of distribution, however, they also had to hustle aggressively for new accounts. These new venues would need to be above and beyond those that existed with the approximately 750 comics specialty stores that were in business in 1979.

Every distributor tried different techniques to stimulate sales growth, with Marvel comics suddenly appearing in such diverse places as bookstores, record stores, and gaming stores. The path of least resistance, however, was encouraging the growth of additional comics shops. With the working capital provided by Marvel's generous new credit program distributors began offering 30-day billing even to comics dealers who didn't yet have a retail location. This expansion in available credit led directly to a 15-year massive growth in the number of comics shops around the world.

The impact of this sudden surge in growth cannot be underestimated. Because I had such a personal vested interest in the growth trends of the Direct Market, during the early 1980's I quizzed everyone at Marvel who would give me figures as to what impact comics shops were having on the sales at company. I derived the following estimated numbers specifically from conversations with Jim Shooter, Ed Shukin, Michael Hobson, and Carol Kalish:

1979 Direct Market 6% of Marvel's gross sales
1982 Direct Market 20% of Marvel's gross sales
1985 Direct Market 50% of Marvel's gross sales
1987 Direct Market 70% of Marvel's gross sales

While the exact figures may vary slightly from my derived estimates, the fact remains that Marvel's choosing to open up their distribution system to new entrants in 1979, and providing working capital at the same time, turned out to be the turning point in the history of the company. In fact, if you consider that the expansion in market share by the Direct Market was paralleled by the simultaneous collapse of the newsstand business, it becomes clear that Marvel Comics would not have survived the 1980's without the robust growth in comics specialty shops.

In benefiting from the growth of comics specialty stores, however, Marvel inadvertently let the genie out of the bottle. It never occurred to anyone at Marvel (or me...) that this wonderful new system of specialty distributors would sell far more than just the standard comics being published in 1979. The reality of the situation, however, that once you had 20+ distribution companies simultaneously trying to sell comics into every place they possibly could, you had also created an extreme need for more comics products.

The Shanes brothers, at Pacific Comics, were the first to spot the potential of this new distribution system, and they quickly took advantage by starting the first large scale independent comics publishing business. With Dave Scroggy at the editorial helm of their new company, they quickly dumped a broad selection of new titles into a business crying out for additional new comics. These books were almost all instant hits, as not only were they purchased for immediate sale, but quite a few were also purchased by speculators (most comics shop owners...) for future sale. Pacific Comics eventually fell victim to its own initial success, however, as the huge profitability of its first publications created unrealistic expectations for its long term prospects. The internal cost structures built during those heady days when they were the leaders of the independent comics publishing movement turned out to be a fatal burden when sales finally drifted downward. For a period of time in the early 1980's, however, Pacific Comics showed the rest of us our first glimpse of the brave new world of comics.

To be continued...

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