Comic Stores and Diamond Distributors Clash as Industry Reopens
Post-reopening from coronavirus-directed shutdown, Diamond Comic Distributors have been charging customers increased shipping rates for product, eating into comic book retailers' profits at the same time as it runs a promotional campaign intended to raise funds for those same retailers, The Hollywood Reporter has learned.
Retailers tell THR payments to Diamond in recent weeks have increased, in part because of a relatively new policy that sees orders divided up into more shipments, meaning more charges. That’s not the only concern retailers have as stores struggle to get back on their feet post shutdown.
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"I was paying roughly 6 percent of wholesale on shipping from Diamond pre-[pandemic]. ... This has raised up to approximately 10 percent, and we've had single weeks rise as high as 25 percent," Brian Hibbs, owner of Comix Experience and Comix Experience Outpost in San Francisco, explained via email.
Diamond denied it was intentionally increasing shipping costs, with Chris Powell, chief relationship officer of parent company Geppi Family Enterprises, shifting the blame to publishers in an email to THR.
“Our base shipping rates have not changed, but the landscape in which we are all operating has,” Powell wrote. “Freight costs increase as a percentage of an order’s value as the weight decreases — smaller shipments cost more to ship per pound than large shipments. A number of publishers have reduced their publishing activities in response to the [COVID-related] challenges in the retail space, and that was appreciated by many retailers who saw the need for a slower ramp-up to full production.
"As we approach a more normal capacity, shipment sizes will increase and the freight as a percentage of the shipment’s value will go back down. Some discounts from the various shippers are passed along to retailers but are also based on specific weight thresholds. Some retailers are missing those thresholds now, but we hope will soon exceed them again.”
The comic book industry ground to a halt in late March when Diamond announced that it was temporarily suspending distribution of new product because of concerns surrounding the coronavirus outbreak. A number of stores had already been forced to temporarily close due to local shutdowns, with publishers reducing or suspending releases as a result. A week later, Diamond announced that it was planning to withhold payment to vendors due to a lack of “consistent payments from our customers.”
Diamond restarted shipments in late May, announcing the branding ”Back The Comeback” at the same time, intended to combine a promotional campaign with a fundraising effort for non-profits assisting struggling comic book retailers.
In his email, Powell also suggested that retailers experiencing shipping cost increases might be suffering from attempting to diversify their supply chain.
“A consolidation of orders from one source has always been the best way to maximize overall freight cost containment, and was a strength of Diamond’s distribution that greatly benefited retailers for the past 25 years,” Powell wrote. “Retailers who have now moved some of their purchases to other distributors, whether by their choice or when forced to do so by DC’s recent changes, are experiencing a reduction of that benefit, and are seeing their overall costs go up for goods. They’re going to have to look at their ordering procedures as part of a holistic process, determining how savings in one place may result in additional costs in another, and make the best decisions for their businesses.”
The mention of “DC’s recent changes” is a reference to DC — the number two publisher in the U.S. comic book market — cutting ties with Diamond, following signing up with two new distributors during Diamond’s COVID shutdown. The argument that retailers would benefit from consolidating their distribution sources is far from convincing to everyone.
“I haven't bought any graphic novels that I didn't have to from Diamond in something like a year and a half,” Hibbs wrote, “We are a book-focused comic book stop, and Diamond's shipping policies have cost them tens of thousands of dollars in orders from stores like mine who long ago abandoned graphic novel purchases from Diamond for better terms. Most big-volume [graphic novel] stores who have switched didn't especially tell Diamond, so I personally believe that Diamond's metrics and understandings of sales and volume potential are fatally off.”
The problems retailers have with Diamond’s shipping goes beyond simply cost, as it turns out; Ryan Higgins, owner of Comics Conspiracy, told THR, “For decades we used an independent trucking company for our weekly deliveries, along with most other stores in the Bay Area. Our local shipping group dissolved after some terrible service and most of us switched over to Diamond's standard UPS delivery. It was the worst six months in the history of the shop. Boxes were lost, smashed, delivered late, and caused thousands of dollars in damages to the product a month.”
Eventually, Higgins teamed with another retailer to receive shipments via FedEx Freight, he explained. “Our weekly shipment now come shrink-wrapped on a pallet and held for pick-up at a local FedEx hub, and the cost is well below the price we were paying Diamond directly for the UPS shipments. Damages from shipping are almost zero. Multiple customers have even commented on the fact that our books seem to be in better shape than other local stores, and the shipments are always on time.”
Diamond is unrepentant about the increased financial burden on comic stores at this time, judging by Powell’s response to THR. “In most of the cases we’ve researched so far, the cost increase was caused by the factors I outline above, so we have not issued freight credits. We have always done so when we identify an error on our part, but in most cases it’s simply the economics of shipping the goods,” he wrote.
by Daniel Fienberg