Let's Get Small!

Okay, if you're not involved in the world of comic book retailing, this may be a "deep in the woods" conversation that holds no interest to you. I hope you'll bear with me, though, as I discuss further ramifications of the whole distributor crisis that's been going on in 2025. I promise that my next blog post will be something less industry-focused, honest!

To make a long story very short, the largest distributor in comics, Diamond Comics Distribution, filed bankruptcy on January 13th. The new owners took over on May 15th, but they don't really seem interested in distributing anything, leaving a number of small and mid-sized publishers in the lurch. All of the mid-sized publishers have found new homes and are working to get the money they're owed, but the small guys are struggling to find distribution.

To fill the void, a comics writer and convention-runner named Phillip Russertt started a new distribution company, Philbo Distribution, a small operation that wants to distribute books from the small guys to comic shops. There's only one problem,.

For a retailer with a good understanding of his business, Philbo's model is totally unworkable. The company offers a super-short discount of 40% for orders of less than ten copies of a title, but almost all of the books that Philbo carries are the sort that hardly any store would possibly need ten copies of. Philbo wants prepayment at the time the order is placed, even though retailers have no firm idea of when the books will ship. No firm shipping date means that retailers can't count on aggregated shipping to cover the cost (what if only one publisher ships a book that week?). Philbo has no proven track record for reliability, packing quality, shipping efficiency, negotiated freight discounts, and so on.  That means that full shipping must be borne by the retailer with no volume discounts because Philbo has no volume (hopefully they'll use someone like Pirate Ship to at least get some discount off standard rates). 

Let's talk about the reality of the retail world. Retailers really need 50% discounts on comics to cover rents, utilities, taxes, employee wages, and other overhead items and still make a profit. The last survey I saw showed that most comic shops spend about 42% of their annual income on those overhead items. If that's the case, then it's more cost effective to toss a few dollars into the parking lot every month than it would be to order at this discount (because after paying shipping costs, the odds are you'll be looking at a 30% discount, realistically).

Now the old distributor, Diamond, offered 45% discounts on several of those small publishers and only a 40% on a few--but they also carried the big guys, so retailers could consolidate shipping across all the publishers into a lower per-book cost. Right now, Lunar and Penguin Random House have stepped into the void, taking over many of the mid-sized publishers (and in Lunar's case, some of the small publishers), almost all at a 50% discount. But the key here is lower aggregate shipping costs, payment on or after receipt of merchandise, and a proven track record of negotiated discounts on freight costs (or, in PRH's case, no freight cost at all).

When I first heard about Philbo, I wrote to Phillip about this. In his reply, he said that "creators pay print costs of $2.75-$3 per book [for a $5 book] and simply can't survive on offering 50% or more on orders of two or three books." First off, I don't think that's correct for most publishers; the only people I know who are paying that sort of cost are print-on-demand publishers.  But if that is true, then these small publishers they shouldn't be publishers at all--they're doing fanzines, not professional comics (how can they pay $3 a book to print a comic that they're wholesaling for $3 a copy, with Phillip keeping at least 10% of that $3 and the publishers also paying the ship the books to him? If these numbers are somehow accurate (an assertion I still question), that would mean they're losing money on every copy, so we're helping them financially by not ordering, right?

(I should add that for more than 35 years, Ward Batty and I published Comic Shop News, a weekly printed at the same facilities where comics are printed, and I know that none of the comics printed at these facilities cost even a significant fraction of $2.75/$3.00 per copy. So I do have decades of business experience in publishing on which my doubts are founded.)

As I continued to discuss this with Phillip, he told me that "...you wish to discourage small publishers the opportunity to get in the ring and potentially grow and feel that kills the market that's  why marvel and DC regurgitate garbage to stay safe [sic]... Only betting on sure things has worked so you play it safe." At this point, I saw little reason to explain that my store, Dr. No's Comics & Games SuperStore, is the most fully stocked comic shop in the metro area and one of the most fully stocked in the US, and that we have carried independent comics since the store got into comics back in the late 70s, when I was the guy in charge of ordering for the original owner. 

Christina Merkler, co-owner of Lunar Distribution, said on a podcast recently something to the effect that if a publisher can't sell 250 or 300 copies of a book (I forget which number she cited), then they're not really ready to enter the marketplace, and I agree with that. That's the number that Lunar is looking for, and I gather that a lot of the smallest publishers aren't hitting that number, even with 2000 comic shops as their potential market (and remember, a small publisher sells to retailers, not to readers because a small publisher has zero marketing budget to reach those readers), Small publishers have to make expansion of the buying audience their number one priority. That may require deeper discounts, losing money for a while (I know of hardly any small business that didn't take a loss initially), or most importantly of all, pricing your product so that you can offer industry-standard discounts. Does that mean you might have to charge $1 more cover price to give a 50% discount? Perhaps so--but it also means that you open a lot more retail avenues for your product. Offering a product at a lower cover price, and paying for that lower price by charging 20% more for your product at the wholesale level (I pay $2.50 for a $5 book at a 50% discount, but I pay $3 at a 40% discount, and $3 is 20% more than $2.50) is forcing the retailer to become a discounter... but most small businesses don't have the profit margin to survive as a discounter. 

There's also an added cost involved in adding new distributors. It takes time to calculate orders for each distributor, it takes time to handle payments, it costs more proportionately  to process a small order than it does to process a large order. Their is an economy of scale involved in dealing with fewer distributors for more product, and for a small business, economy is the key—we have to maximize return on every dollar spent if we want to survive.

I hope that small publishers can find a means to get into comic shops like mine. I said, when Diamond began having problems, that losing them would hurt the smallest publishers much more than anyone else. But they're going to need a better business model than this to achieve success. Maybe Phillip Russertt will prove me wrong, but from what I've seen from fellow retailers and other knowledgable industry veterans, it's not likely.