Comic Book Stores (and Game Stores) – The Problems of Inventory Buildup and Low Goss Margins – Part 5 of a Series

Recently, I have noticed that comic book stores seem to have somewhat lower gross margins than they use to have in the past. In the past, the typical gross margin for items was on the order of 50% but recently I have seen some items being sold with margins as low as 15%. While 15% may ‘sound’ ok to anyone not running a store, it becomes almost impossible to keep a retail store open on margins that low.

While there was always a problem of inventory build up for all stores when the owner made a mistake on what they thought would sell and orders things that no one wanted, the low gross margins adds to this problem. As an example; in a podcast episode of ‘My Comic Shop History’ they recount how they thought the Ape series of comics would be a good seller so the store orders 150 copies. As it turned out, no one wanted it at all, and none of the copies sold. While an extreme case, it shows how hard it is to get ordering exactly right, and how bad things can go when that happens. While there is not much one can do about problems like that; since how can anyone always be right about all ordering, there is the additional problem of gross margins going down over time. The result of this seems to be that a lot of the reported profit (for those stores that are reporting any profit) from a store is getting ‘stuck’ in inventory; inventory that will not sell at any price and ends up sitting in stores for years or even decades.

One example of an item where there were lots of inventory all over the place, and this was a very successful item, was the 1976 pinup poster of Farrah Fawcett. I remember the first time I saw that poster in years was as part of the background on the TV sitcom, “The 70s Show”. I remember thinking, “wow, I can’t believe they (show creators) were able to find something like that”. I thought there was no way it could be an original from those original print runs and had to be a copy of the poster created special (printed up) just for their use within the show. As it turns out, there are still lots of these posters still around and the price is only around for $15 to $20 per poster. As an example of how many of these posters are still around, one ebay seller listed a few hundred of these posters for sale recently, still in the original shipping tubes with a note that they got them from a failed distributor. My impression is that there still thousands of these poster from the 1970s print runs of them. Another interesting fact surrounding this poster is that the company that originally put this poster out, Pro Arts Inc, went bankrupt. This happened even though they sold something like several million of these posters along with their other posters. My impression is that for some reason they printed millions of extra of these posters that did not sell, which are still turning up in inventories of various distributors and shops as they liquidate after all of these years. Pro Arts Inc itself has a somewhat interesting history since they had some kind of lawsuit on another poster and won, but spent more on legal fees than they won, and eventually went bankrupt with the two owners’ homes as part of the bankruptcy. There was also a book written by one of the owners where he basically accuses everyone, including judges, of ‘being in on the fix’ to take the company apart. I have not been able to find a copy of that book in any form but expect it will be an interesting read of how the company failed even though they put out what was the best selling poster of all time.

Now, comics and games are not the only thins that this problem happens to, but it is an industry where there are stores all over the place in the same industry, across the county, and we see this inventory buildup everywhere. Stuff does not sell, and seems to sit there forever, taking up space and costing money in rent, inventory taxes, etc to keep stored. Plus the money, or profit, of the store is tied up in these items, which may never sell.

While better ordering can fix part of this problem, it is impossible for any store to just order what will sell, since inevitable that owners will order things that will not sell and get stuck with them.

What would help this problem is if the gross margin on items was better, something like on the items of 10% or 20% improvement. That would help all stores so that even though items may not sell, at least the store will make more on what does and it will help to cover the losses on the inevitable mistakes made on ordering.

Good Luck and Take Care,

Louis J. Desy Jr. – Sunday, October 06, 2019

LouisDesyjr@gmail.com

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