Two weeks ago, Rich Johnston at Bleeding Cool broke a story that Hastings Entertainment, a specialty retailer here in the U.S., was set to become the country’s largest direct market comic book chain:
After the decision was made to pursue the comic industry, two test stores were chosen to see what impact a full comic presence would make in our stores. These stores would contain 32 feet of new comic releases, 32 feet of back issues, 44 linear feet of Manga and graphic novels, an expansion in action figures, role playing books, comic-related merchandise and supplies among other things. Almost immediately, these stores showed a double-digit improvement in comic sales, and a significant sales increase within the department in which the comics are featured.
After the success of these two large expansions, our team began to move quickly with two exciting versions of comic layouts within our chain. One expansion mirrors our two test stores, while the other smaller version contains mostly comic new titles and back issues with 16 linear feet each. Out of the 147 stores, approximately 27 will have our large expansion and 100 will have the smaller comic expansions by the end of the year.
Rich secured an exclusive interview with James Parker, a member of Hastings management integral in the decision to transition to a comic book focus. Josh wrote up a quick editorial on this news last week, and concluded:
I'll admit, this is a weird move. The direct market is in a bit of flux. With digital as an impending competitor, I feel like everyone is holding their collective breath. Granted, this move will make it easier for some readers who weren't served by a local store, but I've never heard of the chain. I'm not sure where they're even located. Still 127 centralized stores all ordering from Diamond could have a major impact on all sorts of things in comics. Will they have staff to service new readers? Will it actually increase readership? Who knows, but it will be fascinating to see if there is an impact, and if it's one that's lasting. But when you think about the impact that something like Wal-Mart have over the sales of DVD's or music, a sizable comic chain could have similar influence, if it wanted. Keep your eyes on this one.
I agree with a lot of what Josh said, but thought I might take a bit deeper dive into this situation because it certainly has elicited a lot of reaction across the internet and comic book community. As it turns out, Hastings Entertainment is a publicly-traded company (Symbol: HAST). What that means is that Hastings has a fiduciary responsibility to shareholders as well as a requirement to disclose tons of interesting tidbits about their business practices via SEC documents. As a portfolio manager by trade, reading SEC filings is as commonplace for me as reading comic books is for you.
Profiling Hastings Entertainment
I’ve heard a lot of people bandy about the notion that Hastings is a “national retailer” and yet I wouldn’t really characterize them as such. To my mind, they’re more appropriately termed a major REGIONAL retailer. As of March 31, 2010, Hastings operated 147 stores in 20 states:
- Texas (39 stores)
- New Mexico (15)
- Oklahoma (12)
- Arkansas (11)
- Idaho & Kansas (9 each)
- Arizona, Missouri, Tennessee & Washington (7 each)
- Montana (6)
- Colorado & Nebraska (4 each)
- Wyoming (3)
- Utah (2)
- Alabama, Georgia, Indiana, Kentucky & Louisiana (1 each)
147 stores may sound like a lot, but compare Hastings Entertainment against what I would deem as comparable national chains:
- Hastings Entertainment – 147 U.S. stores and approximately $530 million in sales
- Best Buy – 1,069 U.S. stores and approximately $49.7 billion in global sales
- Barnes & Noble – 720 U.S. stores and approximately $5.8 billion in global sales
- Target – 1,740 U.S. stores and approximately $65.4 billion in global sales
Reasons for Optimism
When I first heard this news, my initial reaction was, how is a struggling retailer beseeched with the onset of digital sales distribution going to improve its lot by selling a product that’s under the same pressure, and much more of a specialty item? I still believe it’ll be a difficult task for Hastings, but as I looked closer at the situation I saw some interesting opportunities that weren't evident, at first.
#1) Hastings focuses on markets that are under served by the current direct retailers
As I was reading through Hastings annual report, I noticed the following tidbit in their geographic disclosures:
- Our primary market areas are medium-sized communities with populations generally less than 250,000.
Being from the Northeast, I wasn’t familiar with Hastings Entertainment before this comics announcement. I knew that they were a regional operator, but I hadn’t realized that they target smaller communities. Communities that are large enough to support a robust demand for entertainment goods and services, but not large enough to entice big box retailers by the dozens. To me, this makes Hastings much more likely to grow the market, than if they were located in major cities. Remember, there are roughly 3,000 to 4,000 comic retailers nationwide. The locales range from the largest cities to the smallest boroughs, to be sure, BUT, the most vibrant comic book retailing communities are in large metropolitan areas. It strikes me as quite likely that Hastings stores may be located in areas that are not currently served by local comic shops. If my presumption is correct, this could mean getting comic books into the hands of people who otherwise wouldn’t have access to them. And that’s 100% goodness if you want to see this industry thrive.
#2) An understanding of collectibles and used merchandise
When we discuss expanding the market, it usually evokes thoughts of places like Wal-Mart increasing their trade paperback wall space, or moving big chunks of the back catalog to digital. Yet, the current core of the comic book direct market still LOVES their single issues. Even if you think the secular trend is away from issues, it makes little sense for the market to move completely away from them while such a huge percentage of the EXISTING (versus prospective) base is more than happy to spend lots of their disposable income on “floppies.” (man, oh man do I hate that term!).
At first blush, when I saw the news on Hastings comic book expansion, I wondered how on Earth a 147-store chain could deal with back issues. As Josh asked in his missive, will Hastings have comic geeks on staff who can help people pinpoint holes in runs? Will they understand pricing and grading? Who will be responsible for their acquiring inventory?
But then I dug a bit deeper into Hastings CURRENT business practices. Again, from the company’s annual report (emphasis mine):
Used and Budget-Priced Products. Since 1992, we have bought or traded for customers’ CDs to sell as used product in order to leverage the value of our CD offering. During 2001, we added DVDs and video games and in 2004 we added books to our used product offerings. Additionally, we purchase used product directly from outside vendors, although the majority of our purchases come straight from customers selling back product. In addition to used products, we offer budget-priced products in all of our major product categories in order to promote value to a broad base of budget conscious consumers. By offering used and budget products, we allow the customer to choose between a new or a less expensive used copy of the same title. During fiscal 2009, 2008, and 2007, we generated approximately 14.2%, 12.7%, and 11.2%, respectively, of our total revenues (excluding breakage revenue) from used and budget-priced products. We believe customer loyalty and additional visits are created by customers trading in unwanted entertainment media for cash or credit.
Hastings has an instantiated familiarity with used and tradable goods, including books. That makes me a lot more comfortable with their ability to stock and handle back issues than I otherwise would have been.
#3) Demand forecasting and inventory optimization
Sometime soon I’m going to devote a column to retail point-of-sale (POS) systems and how incredulous it is to me that so many comic store retailers don’t have one. Many store owners still “eyeball” demand and MAYBE use a spreadsheet to track what they sell and what they need to buy. That’s the very definition of pennywise and pound foolish. The encouraging news is that Hastings, by virtue of its size and scale, has a far more sophisticated process for managing inventory. From the annual report:
New Release Allocation. Our buyers use our proprietary new release allocation system to purchase new release products for our stores and have the ability within the system to utilize multiple methods of forecasting demand. By using store-specific sales history, factoring in specific market traits, applying sales curves for similar titles or groups of products and minimizing subjectivity and human emotion in a transaction, the system customizes purchases for each individual store to satisfy customer demand. The process provides the flexibility to allow us to anticipate customer needs, including tracking missed sales and factoring in regional influences. We believe that our new release allocation system enables us to increase revenues by having the optimum levels and selection of products available in each store at the appropriate time to satisfy customers’ entertainment needs.
So is this move the Holy Grail? No, I don’t think any singular move, even by a retailer that will immediately become many times larger than any other Diamond direct market customer, is enough to “fix” the industry. And it ultimately won’t turn the tide of digital distribution. But it CAN’T HURT, can it? Consider the following:
- 2009 Overall Sales in North America for Comics, Trades and Magazines = $428 million
- 2009 Hastings Entertainment Sales = $531 million
- 2009 Hastings Entertainment Book Sales = $122 million
Hastings book sales equal 28% of all Diamond sales right now. I don’t know what percentage of those sales Hastings thinks can come from comics and trade paperbacks going forward, but it wouldn’t take much for this to mean 3%-5% growth for the total direct market. That’s NOT a bad thing.
What do creators think of the news?
Enough of my speculation, what do people a) in the business and b) locally familiar with Hastings thinking? Since I’ve never been in a Hastings, I was curious to hear from industry people who were familiar with the store. A few creators (and Twitter buddies) were kind enough to share some thoughts, and I thank them for it.
I love Hastings. They're great stores. Especially for the sort of markets they serve. Mid-size markets, mostly. A lot of college towns. I used to work at one here in Kansas City. I was the video manager. It's a well-run company. A great one-stop-shopping sort of store. To see them adding comics to the mix is very exciting. I'm 37 years old and like a lot of comic fans my age, I got into comics through the newsstand. I was an avid collector, thanks to drug stores and grocery stores and convenience stores, for years before I'd ever seen an actual comic book store. We obviously lost that along the way. We lost that gateway. Hastings looks like they're stepping up to help fill that void. And I say bravo.
I've been to two Hastings, one about 45 minutes away from me in Lawrence, KS and another in Joplin, MO. Both were a lot like a Borders or a Barnes and Noble in feel and vibe and somewhat in layout. Both exist in towns that are either college towns or just outside of college towns and thus they see a lot of younger traffic. One main difference being that Hastings had a section devoted to single issues, not just trades. The selection was mostly Big 2, but I'm looking forward to that changing as Hastings seem really eager to delve into all aspects of the [direct market], not just Marvel and DC, I just would hope that more smaller pubs – Oni, Dark Horse, Image, etc- make moves to increase their shelf space and signage and overall support of what Hastings is trying to do.
I think this will be a good thing, if not great. I fail to see how the addition of up to 140 stores carrying single issues in addition to stocking trades can be a bad thing. Most Hastings, as I understand it, are not centrally located in major city centers but on the outskirts and in smaller communities that might not have an LCS nearby to fulfill the need.
Also, we still struggle with getting more new readers and (much more important, in my opinion) women to go into comic shops and not see every stereotype about comics and comics readers on display. A big-box store that is well lit, and hopefully fully stocked and clean, would go a LONG way toward easing this constant thorn in our collective side. (And maybe push some retailers to up their game and, you know, actually "sell" the product on their shelves).
People are already complaining about Hastings using to comics to save their asses on declining music sales. I also fail to see how that's a bad thing. Our (comics fans) tendency to view the expansion and growth of the market and fan-base as a bad thing just bewilders me on every level. We're a decade removed from the 90's and that singular confluence of events that almost killed the DM then, yet people still cry and bemoan how close we are to doing that again. Um, no. We're not. Not even close. Hastings, rightly so, has faith in comics and the fan-base supporting comic books right now and they must see some opportunity for growth and expansion or (I would hope) they wouldn't be throwing this much weight and money at it. As you know, getting into the [direct market] is a huge investment, since your shelf-stock is largely non-returnable.
I shopped at Hastings before I ever knew what Borders was. I loved the used movies and cd's they carried, as well as new releases. It felt very much like a giant indy store, carrying a little of everything. The idea that they are jumping into the world of comics in such a big way gets me very excited. Hastings is going to make it possible for some of us out here in the middle of the country, not that close to comic shops to feel apart of the store experience again. As a creator, it's great to know that there will be that many more places to get the work on shelves. Gut reaction, more stores means more comics in more hands. How can that be bad? I'm excited to see how this pans out. And James Parker (from Rich's interview) spoke with me and passed his card along at a con this year. Good to see a buyer of a big chain in artist alley looking to connect with creators.
Jason is a mutant with the ability to squeeze 36 hours into every 24-hour day, which is why he was able to convince his wife he had time to join the iFanboy team on top of running his business, raising his three sons, and most importantly, co-hosting the 11 O'Clock Comics podcast with his buddies Vince B, Chris Neseman and David Price. If you are one of the twelve people on Earth who want to read about comics, the stock market and football in rapid fire succession, you can follow him on Twitter.
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Growing up in a town that was never able to sustain a comic shop for more than a year at a time, I used to buy lots of my comics at Hastings. I’m not in the same place anymore, but this is great news for the people who do live in those towns and don’t really have any other local outlet to buy comics.
That map of Hasting states looks a little like the break down of the presidential election
Interesting. I’m a big fan of Hastings, but no longer live near one. Next time I’m around my old college stomping grounds I’ll have to check it out.
This is getting sweeter and sweeter.
Before the MP3 store from Amazon, Hastings was solely responsible for the (used) music I bought.
Great article, Jason. Please, keep ’em coming.
Nice information. I’m in the northeast and no where near a Hastings (and had never heard of them either until this announcement) but it’s still good to know they are expanding the market. Bigger market = wider readership = (hopefully) increased viability for a wider variety of books.
I think the key is moving away from specialty comic stores in general. My local shop is also a video game retailer. The other comic shop near me is just as much a role playing game (non-video games) dealer as they are a comics dealer with regular events and games going down. Both stores serve seperate but related markets and I doubt they could survive if they ONLY sold comics and related collectables.
Jason, As always, I love your column. It makes me think and you give us a unique perspective on the industry. Here’s my take …
This may seem like an obvious point, but Hastings’ success or failure will depend largely on what they stock. Consider:
1. It appears that roughly 2/3ds of total market sales now comes from OUTSIDE the direct market:
https://docs.google.com/fileview?id=0B3HX6YoI68IVMjFhOGMyYWMtZTI3ZS00ZTAzLWE0NzUtZDk3ODUyODhmN2Zj&hl=en
2. And of the 2008 BookScan Top 750, which provides POS data for the bookstore market, nearly 2/3ds of sales were by Viz Media, Tokyo Pop, and Del Rey. Even Dark Horse trades (4th with 6% share) beat out both Marvel and DC trades (5th and 6th with approx. 5% share each):
http://www.comicbookresources.com/files/bookscan08_top750.xls
https://docs.google.com/fileview?id=0B3HX6YoI68IVOWZjNmIwMzctOWNhMC00OWZjLWI2NzEtM2Y4YWQ0MzAxZmNi&hl=en&authkey=CN6n4bcJ
3. I’m not sure your assertion that “the current core of the direct market still LOVES their single issues,” is entirely supported by the data. From 1997 to 2009, direct market dollar sales of single issues increased only marginally (5%) from $244.39 million to $257.88 million while UNIT sales DECREASED by 25% from 100.32 million to 74.88 million. Sure, there are lots of folks like me who love their single issues. But consider the fact that dollar sales of trade paperbacks WITHIN the direct market has exploded from $15.84 million in 1998 to $77.65 million in 2009. That is a 390% increase, correct? Incidentally, the overall direct market held steady during that same period, BUT the total market size more than doubled.
The simple fact (IMO) is that there is just no growth potential in the direct market. They might appear to increase sales a bit by simply offering inventory where none was available before. But the REAL revenue growth opportunity is in sales of trade paperbacks–as the phenomenal growth of bookstore sales over the last decade clearly indicates.
My bet is that Hastings’ will devote most of their floor space to trades accompanied by a few spinner racks for single issue comics. If they’re smart, they’ll also offer a pre-order subscription service (both in-store and through their website) for floppy lovers.
@thisisegan: LOL … I was thinking exactly the same thing! I guess this means they probably won’t be carrying the Oscar Wilde graphic novel.
p.s. Naruto volumes were four out of the top 10 TPBs sold in 2008…
My Hastings store, while still out of town, fills the gap that my college town located LCS can’t fill right now. They do seem to bridge that gap between Mom and Pop style operations and large metropolitan ones. They do offer pull lists and the guy in charge of the comics calls every Wednesday to confirm my books and try to get anything else I’m interested in. So far they seem invested in bringing in and keeping customers satisfied and providing the comic shop experience in a large and convenient setting.
There is a Hastings in my college town in Richmond, Kentucky (EKU Colonels Represent!!!). I loved that store. I bought a lot of cheap anime/manga and horror DVDs there. They were also one of the last places to have a "rack" with some popular comics on it, much like the drug store when I was a kid. If I still lived there that would be even more awesome. Still, this is great news!
Hastings is pretty cool. I just checked one out for the first time while traveling through the Southwest. While the section was small, its right in there with games, Tshirts, toys and kitsch stuff. They had a decent amount of recent issues….even had a few variants. They didn’t have a spinner, but more like a small magazine type shelf with books organized on it. It looks like they bought stock from out of business (maybe?) comic shops for back issues. Really random selection (lots of 90s) but seemed like a good variety.
I think its great that a chain is bringing comics to places that don’t have a thriving LCS. I saw parents flipping through books as kids were running around playing games and stuff. I saw kids flipping through books. Seems like a good thing to me.
Great article, Jason. There isn’t a Hastings anywhere near where I live in Jacksonville, but I do remember going to one in Yuma, Arizona when I lived there in the mid 90’s. It was a great store for the area, which was a small market and was the place to pick up books, music etc. I can see this being great for those markets that don’t have a comic shop readily available. I’m curious to find out whether or not they have a returnability plan with DIamond similar to news agents.
I bought CD’s and videos from Hasting all through college in Huntsville, Tx, population around 40,000. It was the only place other than Walmart or Target to get them and damn sure the only place to find anything that was less than mainstream. It always had a really comfortable feel.
Wood, your articles have become my new favorite thing about the site! Thank you sir!
There is a Hastings in the town where I did my undergraduate work (Richmond, KY). It sells used trades and had a spinner rack of comics. Their used trades sold pretty well. I’m glad they are giving this a try. I wish I had a Hastings near me now.
Apparently JesTr and I are the exact same person… How odd.
I have a Hastings where I live in Stephenville, TX where Tarleton State University is. It has been so nice since they did this new thing with the comics…they went from having a little spinner rack and some trades to having (almost) everything you need. They don’t have alot of indie stuff, but it’s really helped out the people going to Tarleton that like comics, especially since Stephenville is the Cowboy and Texas Country Capitols of the world.
“Regional” store? Are we looking at the same map? Hastings has stores across the United States, from Washington to Georgia. Seems to me that this might be a case of “what? It’s not in New York or California? It must just be a regional store.”
@WonderManFan it’s not even in half the total United States, it’s not just NY and Cali that are missing.
Hastings is doing a good job with their current stock…their back stock is another story, but one that a casual collector can deal with. I will say, their back stock is growing and the price points on older issues are awesome, sometimes much lower than “book” value.