Opening a new brick and mortar shop 13 13

[lighthouse]

This first post isn't part of the story that follows. It's mostly just to address some likely reactions and get those out of the way... If you're the type who always pushes "skip intro" on Netflix, you could skip this and not miss much. But it's here.

Those of you who were members 15 years ago are well aware that I write like I am being paid by the word. For the rest of you, eye bleeding awaits you.

To get these caveats out of the way... No, I am not selling anything online. No, I am not hoping to sell anything here on these forums. I haven't made a mail order commitment to anyone in over a decade, and have no plans to do so within the next few years. If I ever reach the point where mail order is something that should be connected to my business, I will designate someone else to do it. No, I am not requesting to be removed from the Probation List.

For those of you super-confused because you have no clue who I am? I suppose my custom title speaks for itself. There was a time I was a very successful eBay seller. PowerSeller with shooting stars and all that nonsense, shipping a hundred packages a week. Then I had a meltdown and my customers suffered. Then I thought I had gotten myself straight, and loads of people were happy to give me second chances because of the past goodwill I had built up. Then I melted down again. Then I thought I had gotten myself straight again. And yep, there were still folks willing to give me more chances. And I melted down again...

Then I left the comic industry for a decade. I resolved all my outstanding CGC Forum debts, and made good on failed eBay transactions. I donated 50,000 comics to charity. I sold the bulk of the "good stuff" that was left to dealer friends. I tossed a few boxes in the closet as my "personal collection". And I went and got a real job. As part of that job, I wound up at SDCC every year for a half dozen years. And I ran into several board members there while working the other side of the fence. Then I moved to San Francisco. Then I moved to China.

Through all of that, I continued pining for another shop. Every time I was in a strip center that said it had space available, I took a peek in the windows and thought about whether a shop could be viable there. What was the foot traffic like. How was the tenant mix. How was parking. How far way were the nearest shops. Even as I climbed the ladder in my career, the back of my mind was always churning with the desire to hang out my shingle again.

I thought a lot about what I did wrong in my past shops. I thought a little about what I did right. I planned changes. There are three or four notebooks on a bookshelf in my living room where I periodically jotted down ideas of things I wanted to do differently the next time around. With no actual timetable for that "next time". No guarantee it would ever come...

But it did. And since threads about opening new comic shops seem to be popular, I thought I would share a little here. And rest assured, for all of you who wish you could stab 2007 Lighthouse (or 2004 Lighthouse) in the kidneys just to watch him suffer for his crimes? I do as well. That guy cost me years of happiness and gave me a decade of terrible credit. He wasted a perfectly good marriage. He ruined friendships. He made enemies. All, apparently, to teach me a lesson. And given the only lessons we truly learn from are painful ones, that guy was one hell of a teacher.

Grab some popcorn, Greggy. Story time with Lighthouse awaits.

[lighthouse]

When I returned from China, I didn't really plan to open another comic shop. My life had taken me in a pretty winding direction, and the end result was that I was nearly debt free, had professional certifications that would allow me to get a decent salary job pretty much anywhere, and had no special ties to the Bay Area (the locale I left for China).

So I spent the first few months back in the US exploring my options. I didn't need income for a while, and my professional field is one where it is inappropriate to take a position without committing to at least 5-7 years with a firm. Until I knew what I really wanted to do, I didn't want to rush into a 7-year commitment anywhere. And I certainly didn't want to take the risk of making that commitment and then needing to bail after a year (weakening my resume in the process).

So I helped out a friend for a while, and readjusted to living in America again. Even though I was only in East Asia for 14 months, mostly in China with some time in Thailand and Cambodia, the adjustment back to life in the US was much more difficult than I expected. You don't realize how much sugar is in everything until you spend time away. And I had developed several transportation habits in Asia that amount to survival skills there but might get you killed in America (such as jaywalking across 14 lanes of traffic one at a time while cars are coming). The fresh air here was fantastic. The everpresent cheese and cream sauces on everything, not so much. And strangely I had gotten used to people staring at me everywhere I went. It was odd being so anonymous again, though certainly welcome at times.

Pretty soon I looked up and realized it was time to make some decisions about income. And I started the process of researching whether a shop was viable.

Edited August 27, 2018 by lighthouse

[lighthouse]

Does opening a shop make sense?

Unfortunately, that's a question that very few shop owners actually answer before beginning. It's not quite as bad as vape shops. I am convinced there is no one in America who is more optimistic than "that guy who just opened a vape shop". But there are many good and decent people opening comic shops that have no business being an entrepreneur in the first place.

It's funny. Because one of the things that really struck me during my time in China is that the entrepreneurial spirit in China dwarfs anything we see in the US. There are so many more people willing to stick their neck out and make a go of having their own business. So many people willing to put in the 70-80 hours a week every single week in order to be their own boss. My downstairs neighbor was a BBQ restaurant (technically a chaun'r restaurant). I got to know the owner reasonably well during my year there even though he spoke no English (and I speak almost no Mandarin). His restaurant was open 7 days a week all year round with the exception of two national holidays totaling about 15 days, when he would pack up his family and take them back to his ancestral home in the countryside. 70-80 hours a week, 50 weeks a year, year in and year out. China doesn't have the barriers to entry we do in the US. So if you own a wheelbarrow and want to have a business hauling auto parts around town from shop to shop, boom, you now have your own business. No licensing, no permits, no taxes, you're a business owner.

But just in the year I was there, I saw a dozen businesses within 50 meters of my door open and close. There's no Chamber of Commerce, no Small Business Administration, no community college classes to take, few opportunities to get mentoring of any kind. I visited restaurants with amazing food that had no idea how to price their meals. One place would deliver a kilogram of noodle soup directly to my door for 10 RMB (roughly $1.40 at the time) including paying a guy on a moped to bring it to me, and the delivery driver wouldn't accept tips. I would have happily paid 30 RMB for the same dish, but unsurprisingly, they went out of business because no one could make that business model work.

First things first

The very first piece of research, before wasting time with business plans and financing questions, is pretty simple. Are there more shops than normal in your area, or fewer shops than normal in your area?

If the nationwide average were 1 comic shop for every 10,000 population, and you lived in a town of 100,000 people that already had 20 shops? You better be awfully certain about your ability to put your competition out of business. And you better feel that doing so is the best return on your capital. Otherwise you're a lot better off just buying some Coca-Cola stock and getting a job working for someone else.

The actual number of shops nationwide is obviously nowhere near 1 per 10,000. But if you are pondering opening a new store and you don't know these numbers? You are flying blind.

The excellent website http://www.comichron.com/

Has a ton of research information available. With snapshots of the marketplace over the last decade or so, allowing you to see publisher trends and product trends, as well as general health metrics of the industry. And of course you want to visit Diamond's own website as well. Any brick and mortar retailer that sells new comics is a de facto employee of Diamond, and it's worth researching your new employer.

There are roughly 3,000 comic shops in North America. There is roughly 1 comic shop for every 115,000 population in the US. And that number has been fairly stable for over a decade. If you are considering opening a shop in a town of 60,000 people and there is already one there? It's going to be very difficult for you to succeed. If you are considering opening a shop in a metro of 700,000 people that only has 3 shops? There is a very good chance the market is underserved, and you can grow your business quickly. You'll need to find out WHY there are only 3 shops. Is one of them the size of 4 normal shops put together and is a destination for people from 300 miles away with immense inventory and legendary customer service? That should factor into your mental calculus. But in general, markets that are underserved are much more fertile than those who over overserved.

Obviously you also need to factor in population growth expectations. Your population count could be a little light if you were opening in North Las Vegas, and have the population grow to support you. And you'd want to be wary of opening in an area that is experiencing heavy outward migration. Population loss is wonderful for shortening your morning commute, but it is not a boon of retail.

Obviously... since I am here posting... the math in my area was good. It was an underserved area, potentially fertile for growth.

Edited August 27, 2018 by lighthouse

[lighthouse]

Common advice and whether I followed it

There have been several threads on opening brick and mortar shops here over the years. And some of the most frequently cited advice goes as follows:

1) Order as little from Diamond as possible

2) Have a large area for tabletop gaming

3) Carry a limited product mix initially to avoid getting stuck with things that will never sell

While some of these suggestions have come from people I otherwise respect, and while I think they may have validity in some circumstances, I didn't follow any of them.

 

Retail shops fall into three basic categories:

A - Shops that are in heavily trafficked areas with a great deal of "casual" potential customers

B - Shops that are off the beaten path with almost no foot traffic, purely a destination for people who know to go there

C - Shops that are large enough and/or (usually and) established enough that they can locate themselves off the beaten path and create foot traffic by attracting other businesses to the location

A typical dry cleaners or nail salon is usually an A. They feed off of other business' traffic and need to be somewhere busy to succeed. They are willing to pay higher rents than B because they generate additional sales to make up for it.

A Walmart is a classic example of a C. Walmart can open a location in the middle of nowhere and generate so much traffic other businesses will flood the area.

Most young comic shops around the country are a B. Most have decided that paying $1.00-$1.25 a foot in monthly rent is their best course of action to sustain themselves. And they hope that customers will find them via word of mouth or social media or just happen to drive by one day. They tend to be undercapitalized, and committing to "higher" rents isn't an option for them. Plus most landlords of A properties have more stringent credit and financial criteria for tenants and may reject a comic shop outright rather than risk having to replace them in a year.

A mature comic shop can occasionally graduate to being a C. Expanding in inventory and customer base to the point they can afford to move into a huge location off the beaten path and pull nearly all their customers with them. It's a pipe dream for most young shops. If getting from B to C was easy, loads of shops would have already done it. There probably aren't 25 comic chains in the country that are legitimate C shops. Where they can choose to move most anywhere and make that location a new destination.

So one of the first questions is... A or B?

A or B?

There are perfectly valid reasons to choose either approach. B will pay much less in rent the first few years, and there is more of an opportunity to make mistakes with smaller overhead. But an A will see increased top line sales from day one. Your A store will also need to hire additional staff much earlier. B can afford to run incredibly lean in the early going, perhaps as few as one part-time employee to assist the owner. There won't be huge crowds. There won't be much need to have overlapping coverage. B can frequently just have one employee working at a time. B can also afford to close one or two days a week if desired. If your customer base is traveling specifically for you, they will know in advance that you are "always closed on Mondays" and you will miss very few sales (while getting precious free time back for yourself).

A doesn't have that luxury. A pretty much has to be open 7 days a week, because it is expecting customers to randomly find it while they are shopping for other things. A counts on additional sales from casual customers who haven't read a comic in years but might want a birthday gift for someone. And A has to have additional staff from the start. Fifteen lookiloos may only turn into 2 actual sales, but all fifteen of those people need greeting and handholding (and monitoring for loss prevention). While the B shop may have 9 people walk through the doors and make 8 sales, the A shop might have 60 people through the doors to make 13 sales. Yes, the extra rent turns into extra sales, but it turns into far more non-sales. And every one of those non-sales is a chance for a negative review, if the staff is overly tired or frustrated and says the wrong thing.

B can survive on weaker customer service as long as product knowledge is there. Hardcore comic collectors have been shopping at versions of The Android's Dungeon for decades. The stereotype of Comic Book Guy exists because there really are shop owners like that scattered around the country. And the product is so good than many customers will accept service levels at their comic shop that they would never tolerate at their grocery store or Mexican restaurant or barber shop. As long as B is better than Comic Book Guy (an awfully low bar to clear), the store has a chance.

The A store doesn't have that luxury. The A store is not a destination. It feeds off the having the general public willing to walk in and see what it might see. The A store has to be better lit, more welcoming, better organized, and most importantly friendlier in order to survive.

Mere survival isn't the goal of course. It would be foolish to invest $10,000 much less $100,000 in a business just to buy yourself what amounts to a minimum wage job barely making ends meet and barely paying your bills. In order to truly succeed, any store will have be better. But what it takes for an A to survive is much more than what it takes for a B.

Man this Lighthouse guy loves to hear himself talk...

True. But that's not a question...

So which did you choose?

Option A.

Despite the fact that it is essentially "rolling bigger dice", I felt the best option was to pay premium rents for a premium location. Once that decision was made, it generated a cascade of other decisions. It wouldn't make sense to stock an A the same way I would stock a B. It wouldn't make sense to staff an A the same way I would staff a B. And many of the most important decisions a comic shop will make actually get made before they open their doors.

So what next?

The next step was starting the business plan. Using data from Comichron as well as demographic information for my area, I pulled together what I felt year 3 sales results "should" be. I projected taking less than 10% of my sales from my competitors, and instead focused on sales that were essentially going unharvested. Comichron has sales data for the total marketplace, and it's just a matter of math to reach projections for a realistic service area for a shop. There are a few demographic factors that affect comic sales relative to the rest of the population (military and college populations both purchase more comics than average, and households where English is not spoken purchase fewer), but in general people in Des Moines or Seattle or Macon or Falmouth or Austin are all equally likely to purchase comics.

As an example of how the math is done, in 2018 Diamond has averaged selling 6.5 million comics from its top 300 titles each month. Adjusting for sell-through and incentive-driven overorders, it's safe enough to ballpark that at 6 million per month. That works out to 0.0184 new release comics per capita per month. If your projected customer base is a population of 115,000 people, that's a little over 2100 new release comics per month you can realistically expect from your local population. At average retail of $4.06 per comic, that works out to $8,600 gross per month.

Yes, there are more than 300 titles shipped by Diamond each month, but for a new store, it's not a great idea to project anything based on those titles. Until your customer base is large and established, ordering a wide variety of small press titles is just a path to lower sell-throughs. In reality, the first several months, sell-through will be much lower than 90%, but having those titles sitting unsold on the shelves is an advertisement to first-time customers that you are a "serious" comic shop who carries a full array of titles.

After running the math on where I felt year 3 sales for new release comics would be, I projected proportional numbers for TPB and HC again using Comichron data. And then the real fun begins. How to project sales of other product lines without even necessarily knowing what those product lines would be?

I started store planning a generic "shotgun-style" retail space in the 1400-1800sf range while still in this mode. Laying out a typical 22-foot-wide space and plotting how much room I felt new releases would require. How much space a decent TPB selection would take. How large my decompression zone would be. What size cashwrap would be required. How many back issue tables I would need... Yes, I had every intention from day one to be a store that carried back issue comics. Many stores around the country have gone away from doing so. And I hadn't owned a shop in 14 years. But I was convinced back issues (if done right) can be very profitable for a brick and mortar shop.

I would estimate I spent roughly 60 hours on store design. All before even looking at spaces. I needed a sense of the minimum space that would accommodate the kind of shop I wanted to provide my customers. And I needed a sense of what product lines would fit in what space.

But one of the very first decisions I made?

No tabletop gaming.

Does this guy ever get to the end of a story?

No... no I don't... but it's fine...

So while still in the business planning phase, I started contacting commercial real estate brokers. If I had one piece of advice to give prospective shop owners that I think is more important than almost any other? (Okay, it's behind actually WRITING a business plan.. and it's behind doing market research... and it's behind being properly capitalized for your venture... fine... it's like 6th on the list... but it's the one I see missed most often!) Get a commercial broker to negotiate your lease for you.

I'll repeat. Get a commercial broker to negotiate your lease for you.

You wouldn't buy a $250,000 house without a realtor working on your behalf. Why in the world do so many small business owners enter into contracts where they agree to pay $200,000+ in rent over a period of years, and not have someone working for them???

Commercial brokers do two very important things. They get you better leases than you could possibly get on your own. And they give you credibility with landlords you wouldn't have on your own. The simple fact that you have engaged the services of a broker makes you a more serious tenant in the landlord's eyes. And more serious tenants are less likely to go out of business. There are plenty of commercial spaces that won't even consider your for tenancy if you approach them on your own, because they leap to the immediate conclusion that you aren't serious. Having a broker costs you nothing. They get paid out of the rent the landlord receives, just as a realtor gets proceeds from the seller not the buyer.

My broker was able to give me a wealth of insight on what was actually going on in the market. His firm provided services to both landlords and tenants (though obviously not both in the same transaction), and he was able to give me real-time information with results from other leases all around the area. Which areas were commonly seeing 3 months free rent on a 5-year lease, which areas had been softening and it was possible to get a month per year, which landlords were easier or harder to deal with. He and his firm had negotiated multiple leases in almost every shopping center in town, either on the landlord side or the tenant side. He knew which centers had tenants complaining about car traffic patterns, which centers were seeing fresh growth from new apartment complexes nearby, you name it.

His services didn't cost me a dime, and he saved me at least $15,000 in rents compared to what I would have paid on my own. Plus he steered me away from two properties I was initially smitten with that would likely have turned out horribly for me.

Get a commercial broker to negotiate your lease for you.

And then?

After running the numbers for year 3, and backtracking what I felt were logical growth curves to get to those numbers, I decided something in the 1400-1500sf range would be ideal. I plugged in expected rent numbers. I plugged in advertising costs, licensing costs, fixtures, signage, all the usual CapEx stuff. I spent probably 20 hours researching POS systems and ultimately decided Square was best for my needs.

Before finishing the business plan (and still well before visiting any properties), I moved money around and waited a month to boost my credit score. I knew I would want to have business credit cards prior to opening, and wanted the best deals I could get. My score was sitting at 805 when I did those applications, giving me 18 months of 0% access to a five-figure credit line in addition to my starting cash. (By comparison I started my first comic shop with less than $3000 in cash, less than $2000 in credit line, and barely $10k retail in inventory with a credit score of 520... I was so young and foolish then).

I reached out to Diamond almost 4 months before I expected to open. Their process is a little weird if you don't have a physical space yet. But having a physical space before having a Diamond account is foolish if you plan to be an A. You could probably get away with it if you were a B. Not that many people would find you until you had merchandise in place. But if you want to open your doors to dozens of walk-in customers a day, you need full shelves the first day. Ultimately the application process went through just fine. They don't require local business license info as long as you have it from the state. And sales tax permits can be initially from your residence if you wish, you just have to file for a new one at a new location once you have one. (Your local regulations may vary).

My business plan didn't require any outside financing beyond a business credit card. No need for SBA loans or anything of the sort. And I expected to have 15 months rent in reserve after handling all my CapEx spending, initial advertising, etc.

Most of the fixtures were purchased at IKEA. It's a simple enough way to have a uniform identity with the ability to replace or add pieces as needed. A small amount of traditional slatwall racking was needed for the perimeter. But most of the shop was done in IKEA.

The first Diamond order

The very first order you place with Diamond is likely the most important order you will ever place.

Diamond has all sorts of incentives for new shops. You receive a 53% discount on Marvel and DC product your first 6 months regardless of order volume. Most small shops will ultimately only receive a 50% once their lookback period is established (Marvel looks at the preceding six months, DC looks at the preceding 12). Back in the day, your discounts varied wildly month to month for the big 2. But they switched to this method years ago. And you can now afford to go "light" in a given month without dropping in discount as long as your averages stay up. In addition to what is usually a boosted discount for new shops, the various publishers give you a bunch of free stuff. DC and Marvel each ship you around $1000-1500 worth of free trades at the start of your business. Image does similar. Some of the smaller publishers also send free limited variants that you can resell.

You also get a one-time only opportunity to buy certain things at Diamond's maximum discount. You're allowed to make one supply order where you receive the "I ordered 15,000 short boxes" price even if you only ordered 12. It applies to all their bags and boards and boxes, and even their Gerber supplies. (That order was the only time I ordered Mylites2 from Diamond, after that it's always direct).

But the biggest triggering bonus they do is what they call "Stock to the Max". Diamond takes the retail value of your first initial order, and allows you to order half that much at each publisher's maximum discount. So if your initial order was $4,000 retail, they let you place a one-time reorder for $2,000 worth of product where you get 59% from Marvel, 57% from DC, 57.5% from Image, etc. Normally you have to order over $1.5 million retail of Marvel product during a year to qualify for 59%.

There are several ways to game the system. From the perfectly ethical padding your order with statues that won't come out for 8 months (that you can blow out at cost on eBay when they do). To the not-so-ethical maxing out that first order with stuff that you later reduce at the FOC date. But regardless, the ability to stock your shelves with evergreen merchandise at 57-59% off is a big deal. And if you place an initial order of $3,000 and then find yourself doing $5,000 of reorders of TPBs and HCs like Infinity Gauntlet, Walking Dead, and Killing Joke... that's on you... Ordering just 250 trades for your shelves gets you to four or five grand retail in a hurry. It's well worth making sure your initial order is high enough to compensate.

Product Mix

As an A store, I knew from the beginning that we would need to have mass appeal products on the shelf. While I wanted to be a shop where collectors might drive 200 miles to check out our high grade Bronze, I also needed to have a product mix that would appeal to random walk-in customers. No matter how friendly we were, no matter how well lit and well organized, if we didn't have things people would want, it wouldn't matter.

Funko Pop! figures were a necessary evil. For many shops around the country, Funko represents 15-20% of their sales volume. And no matter how much you may dislike the figures personally, arguing with customers about what they like is a recipe for failure. I took the projections for new release comic sales, projected out what full month gross sales would be, and then plotted Funko as 15% of that number.

I didn't want Funko to be the only "toys" we would carry. Hasbro was out immediately. It is sold everywhere, and at prices where profits are nigh impossible to achieve. Many good comic shops carry Hasbro, but they are doing so almost as a loss leader. When distributors are bragging to you that retail will be $130 a case and your cost is only $100, that's not a product that is going to pay your bills. Diamond's own Marvel Select figures and Marvel Gallery figures are far more profitable. Marvel Select are available at 47.5% off if you order them at the right times. And Gallery figures (which are almost statues) can be had at 50% off. For comparison, the delivered cost on Funko tends to be around 40% off if you order in decent quantity. It's very easy to over-order Funko, but I endeavored to take a broad and shallow approach to them. Plus there are opportunities to buy collections from customers and lower your cost-of-goods-sold (COGS) the same as you would by buying comic collections to resell as back issues.

One of Diamond's early offers for new stores is the ability to buy Eaglemoss figures at prices you will ever see again. Eaglemoss makes toys for Walking Dead, DC, Aliens, Predator, etc. Price points around $18-20, between Funko at $11.99 and Marvel Select at $24.99. Diamond also offers Diamond Select Toys for DC, at a $28 price point. But they are significantly smaller than the Marvel Select figures and the figures that don't have well made faces are near impossible to sell (looking at you, Wonder Woman and Harley Quinn where half your toys have terrible face sculpts).

The biggest change from my two previous shops (which were both B stores) is our selection of t-shirts. We committed from day one to carry at least 70 different comic t-shirts, with as many as possible in every size from S-XXL. Apparel brings its own problems, with sizing and returns, and the challenges of guessing whether a character will sell more tiny people shirts or more huge people shirts. But it's the single most reliable product that almost anyone will want to buy. Either for themselves or as a gift. Literally everyone buys t-shirts.

We also went heavy on adult coloring books. The market still has legs. And even though I suspect less than half the coloring books we sell ever actually get colored, it's a very safe gift choice for people to buy. They may know their cousin loves Harley Quinn but have no clue what she owns already. It's hard to go wrong with a Mad Love coloring book.

So for casual walk-in customers that haven't read comics in years if ever... t-shirts, Funko, Marvel Select, coloring books...

And for the long-time collectors... an extensive selection of back issues, a nice selection of wall books, a healthy selection of trades and hardcovers, and a full complement of new release titles.

But wait... what about Magic and Pokemon and tabletop gaming?

To do gaming even vaguely right, you need at least 600sf devoted to it. And to do it really well you need more like 1000sf. Gamers are pretty territorial. And they aren't likely to leave their current place if it's meeting their needs. Plus there are real questions about whether they provide profits to the shop.

The most serious players get all their cards online rather than from a store, unless they happen to need a few cards that same day for a deck tweak. At most shops, the best players that call the store home spend almost nothing there. They view their tourney entry fees as cheap purchases of the prizes they will win. And they trade cards at a profit from less experienced players. A shop needs those players to call the place home, because gamers will follow good players around for the privilege of losing to them (and hopefully learning something). But it's the losing players that provide revenue.

Gamers also scare away casual customers of other products. Ignoring the mostly outdated stereotypes about hygiene and social skills, gaming is still loud. It will always be loud. And most customers don't like shopping in loud places. Unless you fully embrace the counterculture and go all Hot Topic with blaring music and crowded aisles, loud is not a good fit for shopping. Being in a loud room is like being in the sun. It may be fine for a while, but soon enough you need a respite from it.

To get gaming and non-gaming to happily coexist requires some separation and some soundproofing. Otherwise the gaming area not only may not pull its weight in sales per square foot, it may reduce the sales per square foot in the non-gaming area. If you can confine the gaming to times of day and days of the week when other sales are light (like a church and a bank sharing a parking lot) you can make it work. But if you expect retail sales on Friday evenings, gaming may fill your parking lot to overflowing and cost you those sales.

Given our A rent rates, having a gaming area just didn't make sense.

So, we chose to carry a selection of Magic boosters, and a selection of Pokemon boosters, so there would be options for walk-in customers. And we left the tabletop gaming market to the various competitors who were already doing it well.

Are you ever going to stop typing?

I warned you... but there's only one more initial post... after I get some lunch...

Edited August 27, 2018 by lighthouse

[lighthouse]

So as a recap of our story so far...

Choices made that go against the common wisdom here regarding opening a brick and mortar shop:

- No eBay sales and no website sales. No mail order of any kind.
- Choosing to be open 7 days a week in a "higher" rent location for additional foot traffic
- No tabletop gaming
- Significant Diamond order volume from day one
- Significant breadth of products from day one
- Heavy selection of comic back issues

And on with our tale...

Retail businesses have a variety of ways they can choose to compete in the marketplace. Deciding what kind of store you will be is at least as important as deciding where to put it. You can choose to compete on price. You can choose to compete on selection. You can choose to compete on customer service. You can choose to compete on logistical efficiency... No store can compete on everything. But a store without an identity will find it hard to carve out its place in the market.

We chose from day one to compete on customer service and selection. Amazon and eBay and Target and Walmart combine to offer virtually everything we carry at a cheaper price. Trying to have the cheapest price on everything is a fool's errand. And it also isn't necessary. People don't wear the cheapest shoes they can find. They don't drive the cheapest cars. They don't eat the cheapest food. Customers will happily pay more for a better shopping experience and better customer service. It's just critical to maintain the service standards that bring them back.

So on the day we opened, we had the largest selection of back issues within 100 miles. The largest selection of comic t-shirts within 100 miles. Every title published by DC, Marvel, Image, Dark Horse, and IDW for the previous two months was sitting on display on our racks.

It was 8 weeks from the day we moved in until that first day open to the public. During that 8 weeks we processed and sorted 110 long boxes of back issue comics (purchased during the five months between "is this viable" and "it's time to open"). We stocked 78 t-shirt designs, most of them in 5 sizes. We stocked one booster box each of the last 20 Magic The Gathering sets to have packs available, plus extra sealed boxes of the three most recent sets. Getting the local business license took time waiting on inspections. Getting people trained on how to use the Square For Retail system took time. Developing a loyalty program (also administered through Square) took time. Developing systems for how sub pulls would happen, how adds and drops would be recorded and entered, how special orders would be handled, determining what lexicon would be used to answer customer questions (completely eliminating the "no problem" response is a challenge for the under-25 set)... it all took time.

The channel letter sign hanging above the front doors was roughly $5,000. Interior signage was mostly of the "print it out in Word" variety, but the same company that fabricated our channel letter sign also made a "New This Week" sign for the new release area.

Final tab from IKEA was roughly $3800. Lots of KALLAX (the replacement for EXPEDIT), a few TOMNAS, a couple VITTJO, lots of DRONA for the KALLAX, some NAPEN for the display windows. Yes, display windows. There isn't a single poster in any of the front windows. Not one. The front windows are decorated with shirts on mannequins, rotating displays of Funkos and Marvel Selects and trade paperbacks.

Women are the primary decision makers when it comes to retail shopping. And unlike many comic shops which actively alienate female shoppers in pursuit of a "boy's club" vibe, we made the choice before opening to be as welcoming and inclusive as possible. Much of the store design and decoration was built around a theoretical reluctant single mother with a 9yo child, who wants to purchase things for her offspring but has had bad experiences in past shops. A friend of mine owns a fly fishing shop, and he said the first thing he did when he took the store over was get everything up off the floor. His male customers didn't care. They would happily dig through boxes looking for hackles and fur whether the stock was on the floor or at waist height. But female customers do care. And there was no benefit to alienating them. We could "use" the space at floor level for more comics, but any title that got the "floor" treatment would immediately be seen as unloved. And that customer kneeling on the floor digging through boxes is in the way of anyone else coming down the aisle. Managing the "butt brush distance" (yes that's a real thing) is bad enough when designing a store layout, but anything that encourages adults to be down on the floor just makes everyone shopping near them uncomfortable.

The truly great comic shops (and there are many of them) are wonderlands where customers are excited to walk through the door. And it doesn't matter if the customer is young or old, male or female, a fan of superheros or a fan of My Little Pony, those customers know they will get great customer service and will leave happy. We didn't emulate any specific comic shops when setting our goals. Instead our goals were companies like Trader Joe's, Nordstrom, Southwest Airlines, REI... companies whose customer service sets them apart. It doesn't matter whether I like Firestorm or not. If a customer is stoked about finding some Firestorm back issues, it's important that we are just as stoked to help (rather than condescendingly disparaging his choice).

The welcoming vibe we pursue begins before a customer reaches the front door. That "wall" of posters covering the front windows of many shops is just that, a wall. It tells passersby that if they aren't part of the club, they need to keep out. I freely admit that my first two shops had WAY to many posters in the windows. I was convinced it made the store "cool". But in reality it acts like a burly bouncer at the door encouraging reluctant customers to leave rather than making the attempt. Our theoretical single mom customer shouldn't have to gird herself for battle just to come inside. She should feel just as comfortable as she does walking into Skechers or Bath and Body Works or Forever 21 or Buckle.

Again, these choices are less important with a B location. If 13 of your 14 customers to walk through the door in a given day are people who drove across town to specifically come to you, the wall of posters has less of an impact. But if you choose to pay higher rents for higher foot traffic, chasing 45% of your clientele away with a Boy's Club vibe is wasting that extra rent money.

Get back to the story, would ya?

Fine... fine...

In the month leading up to opening, after seeing the place essentially stocked and fine tuning the customer service standards, we started our advertising on social media. Facebook and Instagram were the vehicles of choice. While people under 30 rarely use Facebook any more, attempting to advertise on Snapchat as an old fart was going to be an exercise in futility. Our location saw significant foot traffic (to the point where people knocked on door a dozen times a day weeks before we opened. But we wanted to get the name out as much as possible in advance.

Wait so this business has a name?

Yeah, I guess I forgot that part of the early story. Naming a business is incredibly difficult. Coming up with something memorable and distinctive, that isn't easily confused for other businesses, that has domain and social media account names available, that doesn't have to fight uphill to be the top result on Google? It's tough.

I've owned a couple dozen domain names for the last fifteen years or so, and I was very familiar with GoDaddy's search processes. But even still, I spent roughly 30 hours going over possible name combinations. Some I had to rule out due to misspelling options. Some I had to rule out because the first google hit for the name was some ten year old meme that would likely holding the top spot on google until the end of time. Some I had to rule out because there was a similar named business in another industry that might have been confused for mine.

Could you name a new shop something like Comic Palace and make a go of it? Sure. If there isn't already a comic palace in your state (and hasn't been one recently), the state will be happy to let you use the name. I mean it's not the same name as Comic Book Palace in Massachusetts, after all. It's just Comic Palace. But you will NEVER be the top hit on Google. And you will almost certainly wind up with confused customers. I still own the domain name for Lighthouse Comics, but there's a publishing company called Lighthouse Publications that would just confuse customers.

In the end, I was able to find a name I liked that had both domain names available (with and without "comics" on the end), had facebook available, twitter available, tumblr available, instagram available, and had no previous top hits on Google. Was that result worth 30 hours of my time? If the business folds in 3 years, probably not. But if the business is around for a decade, it will be effort well spent.

So you never actually said what the name was

I'll get to that eventually. This thread isn't a sales pitch for the store. I'm not doing mail order, here or otherwise. And I don't expect more than a couple board visitors a year. I'm not doing the thread to drum up sales. I'm doing it to provide some real life examples of what it's like to open a comic shop today. There are many roads to entrepreneurial success. But if my experiences can help just one other prospective shop owner, I will have felt like the time was worth it.

Fine... So what about this advertising you did?

We spent roughly $800 during the month before we opened advertising our Grand Opening celebration. The Grand Opening was actually a week after we first opened our doors. And plenty of folks found us during that week. But the goal was to get the word out for the weekend and work some kinks out of our systems during the soft opening.

75% of our Facebook advertising was specifically targeted to women. The remaining 25% was to everyone. So roughly 7/8th of our advertising spend was directed specifically at women. We highlighted our selection of t-shirts, specifically mentioning the two dozen designs in women's cuts. We highlighted our selection of tank dresses. We highlighted titles like Saga and SIP and Sandman. We devoted a good bit of our advertising to promoting our costume contest, which included age group categories from 0-23 months all the way to 65+. The costume contest age groups reinforced that we are a store for all ages. And who doesn't enjoy seeing a bunch of toddlers dressed up as Batman and Iron Man and Han Solo??? I mean, come on.

The logic behind targeting women is that women will share posts tagging their male friends/partners far more often than men will share them tagging female friends and partners. By reaching 1,000 women (for example) we would likely also wind up seen by 500 men, whereas if we reached 1,000 men, they might only share to 75 women. That logic was borne out, as our ads wound up shared over 30 times and were ultimately seen by many more people than we initially paid to reach.

And the turnout?

Our official Grand Opening was a one day event on a Friday. We had just over 600 people through the door. We had 16 entries for the costume contest. And we did $1.81 per foot in sales on that Friday. We had over 500 people through the door on Saturday, and another 350 or so through the door on Sunday.

Edited August 28, 2018 by lighthouse
quite the typo saying our ads were shared 300 times (instead of 30) lol...

[Pirate]

It must be Friday in China

[Phicks]

He writes like Michael Davis on Bleeding  Cool.

[lighthouse]

$1.81 a foot in a day? Is that a lot?

It was far, far more than we expected... When you consider that many comic shops around the country pay less than $1.81 a foot in rent per month, the idea that we did that much sales on a Friday (our first Friday in business) staggered me. Did I expect to do bigger sales than that on Black Friday and FCBD and whatnot? Of course. But our first Friday, even with heavy advertising... never...

My original business plan had called for $170 per foot in sales in year 1. But that projection was based on a slow rampup the first 4-6 months, with sales gradually building. It was based on us having time to train additional employees during the first couple months. And it was based around only needing $300,000 or so in retail value of inventory the first 6 months. The original projection called for just $4 per foot in sales in month 1, gradually increasing to $20-24 a foot for peak summer and holiday months after we had been open a while. Some months of $4-8, some months of $12-14, and a peak in the low 20s that would bring the annual average to $14 for the first year.

Instead... we were slammed. Absolutely slammed. To the point where shelves were emptying much faster than planned. To the point where Diamond's "normal" turnaround time for reorders simply wasn't going to be fast enough. And much more importantly, to the point where the customer service standards were very difficult to maintain.

I spent that first Monday after the Grand Opening weekend huddled over my laptop, trying to project how quickly we would run out of various inventory, how long we would be out of it before reorders would arrive, and how we could rearrange the store in the meantime. It wasn't as though selling out of 110 long boxes of back issues was an issue. But if you expect to sell 10 bottles of ketchup a week, and it takes three weeks to get more, so you stock your shelves with 40 bottles initially to have some buffer... and then you sell 27 bottles in a weekend? The prospect of being completely sold out of ketchup for 16 days isn't pleasant. Especially when you are trying to make a good first impression on new customers.

In the end, there wasn't much choice. I was on the phone with my Diamond rep that afternoon, explaining the situation and asking how much additional freight charges would be to get some things resupplied via 2nd day air. Diamond heavily subsidizes the cost of freight, and they get an insane ground rate from UPS. But it still routinely works out to an additional 1.5-2.0% of retail in inbound freight charges for ground shipments. Giving away huge chunks of margin to pay for air freight is far from ideal.

The nice thing was, my Diamond rep was elated. Diamond has designated reps that only do onboarding of new accounts. So your first six months with a new account, you have a rep that only deals with newbies. I wasn't exactly a newbie since I had had Diamond accounts before, but computer systems had obviously changed dramatically in 14 years away, and I still needed a little handholding. I definitely got the sense that "new store says they are selling too much product too quickly" was not a phone call she received often. And it was a pleasant break from the normal calls for her.

So we reordered roughly 300lbs of products to be delivered via 2nd day air. And did our best to shuffle items on the shelves to make things look full.

Did everything arrive okay?

For that batch of shipments, yes. But "UPS problems" are just a fact of life if you don't live in a drop city. If you're in one of the dozen or so metros where you can drive to a terminal and pick up your books directly without UPS ever touching them, life is good. That was a luxury I had at my first shop. But even before we opened, we had our share of issues. Roughly one box in ten gets dropped hard enough to see some of the contents sustain damage. And Diamond's own personnel aren't expert packers. I suspect it's a conscious choice on their part. They would rather have 1% of all product shipped out be reported damaged and have to provide replacements than to pay the labor to spend more time carefully packing. At a point it is cheaper to clean up messes than prevent them, and based on how certain items get packed, I believe Diamond has done the math that cleanup is cheaper.

It's particularly frustrating when it comes to incentive variants. Anything at 1 in 100 or above is bagged and boarded for shipping, but the people doing the bagging and boarding treat every book as though it's worth $3 rather than $100. And those bagged and boarded comics usually just wind up wedged between some hardcovers in a stack. If the hardcovers shift in transit, oh well. And if your incentive book is damaged and they didn't set aside enough replacements? Here's your refund for $2.

But even simple things like "you probably shouldn't put heavy stuff on top of light stuff" is routinely ignored.

"Hey Larry, we're down to our last box for this account and they have thirty Funko Pops and five Big Big Overstreets, does it matter how I pack this?"
"Nope. Do whatever you want."
"Cool"           *puts Funkos in the bottom and dumps Overstreets on top of them*

I have to assume working in a Diamond warehouse sucks. And I have to assume they don't have much incentive to care. But it's frustrating on the other end when you open a box and realize it would have taken them 2 extra minutes to pack it 15 times better.

So how did the things go after the Grand Opening?

To be honest? It's a blur.

Day after day of long hours. Chasing inventory levels. Chasing employee training. Learning the quirks of Square's inventory system on the fly. I got the keys to the space two months before we opened, and it was a long time before I took a day off again. The shop is open 73 hours a week at a minimum (mandated hours by the property) with additional hours beyond that on Friday and Saturday nights. Counting pre-opening work and post-closing work, weeks under 80 hours just aren't a thing. I tell myself I had 14 months off while in East Asia, I won't need time off again for some time.

You mentioned you didn't take enough pics. Did you take any?

Well actually, that was in a reply much further down this thread, but if you're a time traveler, welcome. Can you tell me if issue 3 of John Wick has come out yet?

I haven't attached a pic here in a decade or so. Let me run to the test thread and see how it works now. Be right back.

Alright. I think I have this figured out... Nope... lemme try again...

Okay... got it. I think.

Here's a couple pics from move-in day:

Just an empty shell. With some slatwall already installed from 5' to 9' high. Ceiling just shy of 12'. A very typical retail space.

After taking possession, I flew to Texas to bring back comics. Strangely enough, Waze is unwilling to give you directions for a trip of more than 1000 miles...

 

A couple weeks later:

Just a typical scene of pre-opening chaos. Fixture building going on, comic sorting to follow.

The tables are from Sams Club. Rated for 2000lbs. Somehow I doubt they will hold up to that standard, but they have no issue with having 600lbs of humans on them. Originally purchased more of them than I thought we would need, with intentions of using the extras at a storage facility once one was needed.

 

Some t-shirts on the slatwall:

The basic design for how these would be displayed was something I had developed around 2009 or 2010. I made a couple modifications in my notebooks over the years. Actual implementation was much easier than I expected, but required more safety pins than I planned. Whatever you do, never use a 2XL shirt as the display item (looking at you, Captain America).

 

One of our display windows as viewed from outside:

Lots of rotating themes so they stay fresh. This one was a Wonder Woman (obviously). Nothing is in the window long enough to see fading. Although your typical t-shirt will last about 60 times as long as a poster when it comes to sun fading.

 

Funko Pop! figures on slatwall shelving under the t-shirts:

These wind up in a line at eye level for anyone 12 and over. Tiny people can't reach them easily, but it's a steady stream of popular characters all down the length of the wall. The t-shirts are best viewed from the middle of the store, but still provide some change in eye level.

 

So you've been open more than a month by now, right? How did things go?

We have. And we are constantly making changes (hopefully of the improvement variety but changes nonetheless). But the first month exceeded every expectation.

Here are gross sales figures, before discounts, for the first month in operation. These represent categories in Square that we track, and there are glitches here and there (like one coloring book got setup as Coloring Book rather than Coloring Books by mistake so it shows up as its own entire category), and it takes time to get everything identified correctly (which is why we initially had to ring up a lot of back issues as uncategorized rather than breaking them out in more detail). But here they are. Categories in italics represent subcategories of back issues (all except wall books). Much as I wish I had full detail on these early sales, I just have to trust that I will have more and more accurate data as time goes on.

And here's the same data sorted by descending percentage of gross sales

 

Any takeaways from all that?

A few...

For one, it proved the concept that back issues can be a revenue stream for a comic shop today. Having not owned one in over a decade, and having been in MANY shops in the years since then that didn't bother with back issues at all, it was refreshing to see that yes, it was absolutely possible to move back issues in a brick and mortar shop.

The new book count was light, relative to where we expected to be down the road. But for a first month, moving 1000+ new books didn't feel like a failure. Especially when our subscriber count started the month at 0. Selling what amounts to 1000 shelf copies the first month as a brand new store was much more than I expected.

Our coloring book sales would have been higher, but we ran out of many of them before we could get reorders. Same with Marvel Select figures. We initially only stocked 2 each of about a dozen characters. By the end of the month, we were sitting on over triple that inventory level, but we missed sales waiting for resupply.

T-shirt sales were a pleasant surprise. I would doubt there are 100 shops in the country that sell 190 t-shirts a month. There might not even be 50. Most shops just don't choose to stock them (which is frankly a sensible choice if you are B location, since people aren't going to make an entire drive to buy one shirt). But with our level of foot traffic, there were lots of opportunities to sell to non-hardcore customers. And t-shirts were a solid revenue stream.

Statues were lighter than expected. It's pretty hard to even justify carrying a product line that represents less than 1% of sales. But I was confident that big-ticket items just take more time to sell, and they would move better down the line. And a difference of just 2 item sales moves the needle significantly when those items can be $200+, so it was a wait and see.

You about ready to stop typing?

Yeah probably. Normally I would be unpacking my shipment right now for tomorrow. But this week's shipment is late a day. Hard to know what to do with myself on a Tuesday without boxes to unpack.

All in all, the first month in business was wonderful chaos. In many ways it was a firehose in the front yard. And growth kills nearly as many businesses as downturns do. So there's a lot to fear when sales dwarf expectations.

But, after discounts, we did $19.69 a foot in sales our first month, including well over $5.00 a foot in back issues alone. If a prospective shop owner showed me those figures in his business plan for his first month, I'd have to bite my cheek not to laugh. But it happened. The combination of our location, our $1200 advertising spend, and the underserved nature of our market combined to make those numbers a reality.

As the month came to a close, I logged into my LivePlan account (highly recommending solution for a business plan that remains a living document) and tried to project what I thought the first year would be like after seeing month one. It would have been suicide to just say "we tripled our expectations in month one, we should triple them for the whole year". But I have rarely felt more impotent than I did trying to take the month one numbers and extrapolate them with any sort of confidence.

How much holiday increase to expect? How much downturn to expect in the slowest months? How much should the new advertising budget be? How many employees need to be hired and how fast can they be trained? Can we buy enough comic collections to support that level of back issue sales? Is this going to be like a restaurant and our first month is the best we will ever have?

First month brought plenty of joy, and lots of questions. (And not much sleep... according to my Fitbit, I was sleep depped by 68 hours that month relative to what I was getting before taking possession of the space)

Edited August 28, 2018 by lighthouse

[lighthouse]

And a placeholder 6. That should be enough.

[sfcityduck]

Where and what is the name of your store?

[Jeffro.]

4 hours ago, lighthouse said:

Then I left the comic industry for a decade. I resolved all my outstanding CGC Forum debts, and made good on failed eBay transactions. I donated 50,000 comics to charity. I sold the bulk of the "good stuff" that was left to dealer friends. I tossed a few boxes in the closet as my "personal collection". And I went and got a real job. As part of that job, I wound up at SDCC every year for a half dozen years. And I ran into several board members there while working the other side of the fence. Then I moved to San Francisco. Then I moved to China.

You resolved all of your CGC forum debts? You're still on the probation list. Care to explain?

 

[lighthouse]

13 minutes ago, Jerkfro said:

You resolved all of your CGC forum debts? You're still on the probation list. Care to explain?

 

I've never asked to be removed from it.

I'm fine with remaining on it permanently. I've done private deals with a few board members in the decade since then (mostly in person), but don't plan to ever make mail order commitments again. I made lots and lots of poor decisions during my "worst of times", but every outstanding debt was resolved years and years ago. And as I have said in 2010 and 2012 and 2014 (best guess on dates) when I have randomly logged into these boards since then to say hello, if there is anyone who has an unresolved situation with me from back in the day, I will be happy to resolve it now. I've never run from my past. We are the sum of our past decisions, both good and bad, and the terrible actions and choices I made in 2004 and 2007 helped shape who I am today. Sitting on the probation list for eternity is a scar I choose not to hide.

One of my greatest sins during the bad times was hiding from my problems. That ended long ago.

[SerialGrape]

Good read.

Looking forward to the rest.

[comicartfan]

1 hour ago, sfcityduck said:

Where and what is the name of your store?

I think I saw a sign for it on the highway 

 

[Mr.Mcknowitall]

I think I have the vapors......I was OK until we left China. It is getting a bit difficult to follow. Now I know what my posts must look like to others. I am so sorry. Really. 

[Buzzetta]

Tagging @jaybuck43 just because he will appreciate the youtube response. 

[jaybuck43]

1 hour ago, comicartfan said:

I think I saw a sign for it on the highway 

 

I wish I was joking, but I can blame my brother on that place  

[lighthouse]

Placeholder 4 has been completed. I will get back to Placeholder 5 tomorrow if I have time.

[greggy]

20 minutes ago, lighthouse said:

Placeholder 4 has been completed. I will get back to Placeholder 5 tomorrow if I have time.

[Buzzetta]

52 minutes ago, greggy said:

EDIT: Post 21212 

 

Edited August 28, 2018 by Buzzetta