Sunday, April 15, 2007

A Discussion on Discounting

Yesterday discounting was a big topic for me. First I was sent a great set of lyrics written by James Meeley. Then I was contacted by a new store owner who wanted to know what I thought of his business practices - on of which was discounting.

For those of you who don't know this yet, I am very much against the direct market practice of discounting. I feel quite strongly that there is nothing wrong with asking people to pay the price the manufacturer puts on the comic book.

The store owner sent me an email that said one of his business practices was giving 15% off of all new comics - to everyone. He was even using this as part of his marketing to get people to come into the store. I immediately was concerned about the future of his store and wanted to know why he felt the need to offer the discount. He explained that there were two stores in town, one open 10 years and one 12 years - both had offered a 15% discount on new comics. However the 12-year-old store had recently gone out of business and the 10-year-old store owner changed the discount to 10% and only if the customer purchased 5 items or more. So, already there wasn't as much reason to offer a 15% discount.

I won't put down everything I told this new store owner, but here are a few tidbits taken from the two long emails I sent him in my attempt to convince him to change this discount practice ASAP or sooner:

Just selling all of your brand-new comics right off the shelf for 15% seems like a bad business decision to me, and I know that others in the industry would agree. People want new comics and they'll pay the price. If you have unsold copies you're loosing money with a 15% discount - that's the truth. 50% discounts are horrible, by the way. Most other retail outlets get 100% discounts or better except for the loss-leader items they mark down to bring people in. You are now only making 35% on comics with that discount - and that's before shipping costs.

When you give money away you are sacrificing something else - what you sacrifice depends on you. Maybe you keep a small, crowded space instead of expanding. Maybe you pay yourself little or don't hire an employee. Maybe you put back issues into boxes on tables instead of buying back issue bins. Maybe you don't buy as many new comics as you really should because you don't have the money to risk on being well supplied. Maybe you don't advertise. Maybe you sacrifice something else. But giving up that money means your store has to deny itself something else because it isn't making as much as it could/should.

Many other successful retailers, in fact some of the most successful retailers, offer no discounts and rarely even have in-store sales. I don't believe in being a discount store. I don't want people to think of Neptune Comics as that kind of place - they pay the regular retail price and in return they get the privilege of seeing my store stay open and offer them quality selection and service in a quality atmosphere. If they want a discount they can shop on-line or at a store that doesn't offer the same kind of quality. I believe that the products we sell, as well as the extra benefit of shopping here, are well worth paying full price. Many people who shop here feel the same way, and that's why they come back week after week and never complain once about paying full price. If you think that your products are sub-par or that your services aren't as good as they could be, then I guess customers deserve a discount. But if you believe in yourself and your business then show it.

Using 15% discounts as a hook to get people to go to your store is a bad idea!! Even if you do offer that discount it shouldn't be the thing you use to get people in. If that's all your store has going for it, they may as well just keep shopping at the other store in town. I can get cheap crap anywhere - why should I go to your store? People have no reason to switch to you because they're getting the same thing at the store they are already going to. But, if you are a better store than the other guy in town, then don't be afraid to say that, and don't be afraid to ask people to pay full cover price for it.

All you are asking people to do is pay the price the maker of the product felt is was worth. You're not marking it up another $2 - you are asking them to pay the market price for the item, and for no extra charge they get a quality shopping experience. Sounds like a good deal, doesn't it? In service based businesses like plumbers and electricians, the contractors with the best reputation for quality service often charge the most per hour for it, and sometimes charge a higher price for parts too - but people use them because they are just that good. At my store I'm not charging extra for my quality service or pricing my merchandise higher - I ask for what they're worth and give so much more in return.


Thankfully my bits of wisdom were able to convince this new comic book shop owner that he could have a successful business without offering discounts to everyone who walks in the door. I also informed him that there isn't anything wrong with giving regular customers incentives for shopping at his store but that these incentives should involve customer participation and not just be a give-away for everyone who wanders in.

Now let me share James' song lyrics I mentioned earlier--I think he did a great job making his lyrics fit the original song. These should be sung to the melody of the song "Love Unconditional" by Richard Marx, from his 1991 album "Rush Street." You can click here to hear a sample of the song and even buy and download the full song if you want to hear it all. Then instead of those lyrics, sing along with James' modified lyrics below:

Victim of inflation
Can't make it go away
See it and they want it, baby
As long as they don't have to pay
You know I don't want nothing I haven't earned
Oh no I won't take less than I know it's worth
All this talking make me feel like I'm earnin' minimum rage
Ain't no point in tryin' to change cheapskates these days

Discount unconditional
Purely financial
What I opened for's a mystery to me
Discount unconditional
It's just nonsensical
Discount unconditional is all you want from me

People say I'm crazy
Wonder why I play this game
Sure beats being bankrupt, baby
But the story ends the same
I wanna feel like I'm making a solid sale
Don't wanna be just a business set up to fail
If I have to hit my knees and beg that you pay more
Maybe you are not the sale I've waited for

Discount unconditional
Purely financial
What I opened for's a mystery to me
Discount unconditional
Profits invisible
Discount unconditional is all you want from me

You feel no shame penny pinchin' all the time
All price and zero feelin', I don't see a way of changing your mind
I know this kind of game is bound force my doors to close
The light inside the shop is on, but no one's home

Discount unconditional
Purely financial
What I opened for's a mystery to me
Discount unconditional
Profits invisible
Discount unconditional is all you want from me

Discount unconditional
Purely financial
What I'm staying for's a mystery to me
Discount unconditional
It's just nonsensical
Discount unconditional is what you want from me!

So there you go. A long discussion on discounts and some song lyrics to boot - and at no extra charge. If you are thinking of opening your own comic store think about these points. If you shop at a comic book store, think of these points.

3 comments:

Thom said...

I gotta admit though...as a consumer, I always appreciate the subscription discount. Granted, in that situation, it usually means you get a number of comics pulled and and people with no subscription get no deal...

James Meeley said...

Thom:

Yeah, but you need to view it from the retailer's perspective.

New comics are the "life's blood" of the comic shop. Discounting them. even by a small percentage, only takes money away from the store that you will need (especially in the early days of first opening).

There are alternatives to giving a pull file discount. I've noted these before at other forums:

1. A pull file raffle: Do a bi-monthly or quarterly raffle drawing for a cool prize (like say a Spider-Man statue, for example). Only those wil pull files get in on the raffle and you get an entry in every time you come in and make a purchase during that raffle period. It gives you a reson to start a pull file and it's a lot easier for a shop owner to absorb the cost of one item, rather than week after week of discounting new comics.

2. Give pull files a bigger discount during sales: When the shop holds the occasional sale, give the pull file folks an extra 10 % off (like say the sale on back issue is 40% off to the public, pull file folks get 50% off). Since it's a sale, a retailer already will be taking something of a loss. This give you reason to have a pull file and the retailer isn't losing mcuh more than they are expecting during a sale.

3. Pull File party: Make being a pull file at the store feel more like a club or community. You can spring for a quarterly pizza party at the store after hours. You can enhance it with a screening of a movie and maybe even a small sale for attendees. This makes having a pull file seem worthwhile for you, but the store owner isn't loosing huge amounts of money every week.

And these are just off the top of my head. You see, Thom, what many folks don't understand, is that comic retail has some very special concerns most other retail shops don't. Like only having ONE distributor to buy the vast majority of your product from. Or having your main revenue source (comics) having a very low price point (as expensive as they are, comics are still cheaper than almost any other form of magazine), which makes giving a discount on new ones very difficult to make a profit on. Or having a non-refundable product, that if it doesn't sell the retailer is stuck with, not the distributor or manufacturer, as with many other products.

I know that as a consumer you like getting deals. But there's a reason most other retail outlets only hold sales on occasion. If they gave out continual discounts to a large part of their regular customers, they'd go out of business, just like so many comic shops that do. That's another thing comic shops face, that most other forms of retail don't. They need the regulars. they need to know you will be there on a semi-regular basis. And they need to know that they can count of a steady and unimpeded revenue source. Giving a regular discount, to the regular customers, does the exact opposite. And that prevents them from doing other things like store repairs, affording to have other employees and even hold in-store events (like Free Comic Book Day or a creator signing). Everyone always complains about how so many shops look like "holes-in-the-wall", but they never stop to think how expecting a pull file discount might be forcing the shop to look that way. It's cause and effect, my friend, and consumers need to understand that.

I don't know if any of this makes any sense to you, Thom, or if you really even care. I just thought that if you knew some of the story about comics retail that the vast majority of comic buyers don't know, you might come to see that a shop that won't give a pull file discount isn't being greedy. They just want to stick around and continue to do business for many years to come.

Lisa said...

I do understand wanting to offer incentives to regular shoppers, and we do. But they should have to do something to earn them. We've got punch-cards for manga and games, bonus points for in-store subscribers who meet purchase minimums. These things require the customer to make the effort every time to earn the points/punches and then redeem them. We also do some of the things James mentions. But just handing people 15% of my money - that we can't afford.