Evolution of the Direct Market Part V

As I detailed in my last column, I went to great lengths in 1978 to become a subdistributor for Seagate Distributing. By becoming a subdistributor, I was allowed to purchase my new comics at a 50% discount from cover price, which was an unheard-of-rate in those early days of the Direct Market. The normal rate from ID wholesalers at that time was 30% (with return privileges if the comics didn't sell after 30 days), or 40% from Seagate. To receive an extra 10% off of cover price on all my new comics (which I was already selling...) provided me a huge financial benefit. This was offset, of course, by the fact that Seagate required payment at the time you submitted your order, which often left my cash flow tied up in Seagate's hands for many months. But for such a substantial decrease in my overall new comics costs, I was more than willing to make the switch to Seagate.

Ironically, the primary reason for my wanting a better discount on my new comics was not so I could earn a greater profit on my new comics sales. Quite the opposite, in fact. I wanted a greater discount on my new comics cost because today's new comics became tomorrow's back issues. Like most comics dealers of that era, I regularly speculated in new issues, setting many thousands aside for future back issue sales. By reducing my cost of setting aside new issues for backstock by approximately 17%, I greatly improved the overall economics of my speculating.

Along that same line of reasoning, one factor I cannot stress enough is how marginal the new comics business was during the period of the late-1970's. Even with a 50% discount, our earnings on the sale of a 40 cent cover price new comic were only 20 cents. Even selling many thousands of new comics each month didn't provide the operating earnings required to cover even our store rents, much less any of our other operating expenses. New comics were great traffic builders, however, and the only store in Denver that tried to live without them soon failed.

Making low cost recent back issues all the more important, as a part of my plan to expand Mile High Comics after my 1977 discovery of the Edgar Church collection, I had in early 1978 purchased Richard Alf's San Diego-based comics mail order business. Richard wanted out because he realized that he simply didn't have the resources to compete with the powerhouse mail order dealers of the day such as Robert Bell, Pacific Comics, and Passaic Book Center. He had, however, built a very nice little business, and he was convinced that I would be able to expand it quite easily. Richard's biggest problem was that given the size of his mailing list, he had a remarkably small inventory of back issues. To his credit, however, he had developed some wonderful manual systems for tracking customers, orders, and inventory. I made a $20,000 bet that I could grow his business quite rapidly by wedding my existing 200,000 copy back issue inventory to Richard's superlative operating systems, and massive mailing list.

Tying this all back to Seagate, with my purchase of the mail order business, I desperately needed a break on my costs of speculating in new comics. During our purchase discussions, Richard had made me very aware that there were warehouses on the East Coast where I could purchase recent back issues for five cents each, or less. The hitch was that Richard believed that these books were the results of "affidavit returns" scams on the part of some crooked distributors (Richard even provided me with several carton labels made out to a certain huge New York distributor that had come off of unopened cases that Richard had purchased through one of these warehouses...). Richard had visited one East Coast warehouse in 1977, and reported to me that the place was so big that they had one staff member who spent the entire day shifting around pallets of comics, magazines, and paperbacks so that potential customers could get a better view. Clearly, any mail comics dealer who availed themselves of this incredible source of cheap recent back issues would have a tremendous operating advantage over us.

Ultimately, my decision was to gut it out. I refused to buy from the returns warehouses, deciding instead to purchase my recent back issues from Seagate. While I wasn't getting my inventory for a nickel, the economics still worked due to the low cover prices. I could, for example, purchase an entire case (300 copies) of a new issue of Uncanny X-Men from Seagate for only $60 (40 cent cover price less 50% = 20 cents X 300 = $60). Since there were no mail order subscription services in those days, and new comics distribution was spotty (at best), we typically sold at least 100 copies of a popular title within 90 days, at a minimum back issue price of 50 cents. That recovered our working capital very quickly, and allowed us to purchase another case the next month. Even "dog" titles sold pretty well, as there was such a remarkable shortage of available back issues in the marketplace. Bear in mind, this was a period when Marvel and DC, combined, only published 50-60 titles per month. This lack of supply in the face of rapidly growing demand for comics is what ultimately led to the break-up of Seagate Distributing.

To be continued.

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

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