Newbury Comics is the largest comic store chain in the U.S. by number of stores, with 30 locations in six Northeast U.S. states. Our interest was piqued after a visit to one of their stores in a tourist area of Boston last fall (see “Explore the Store: Newbury Comics“); the store had a massive selection of merchandise across a wider range of categories than we’d seen in a store of this type in the past, ranging from comics to vinyl to licensed crochet kits. We thought there was a lot to learn from this chain, which has been successful and growing over many decades.
Newbury Comics was formed in 1978 by MIT students Mike Dreese and John Brusger; Brusger is semi-retired, we spoke to Dreese, who remains involved with the chain’s real estate and the buying of the most volatile categories. The company’s day-to-day operations are run by two co-presidents.
In Part 1 of this two-part interview, we discuss locations, volume, the customers, keys to success, and product mix. In Part 2, we discussed broken e-commerce platforms, what’s driving growth, the future, and how it all works. The interview has been lightly edited for length and clarity.
What types of locations are Newbury Comics stores in?
The majority are in the best malls in the market. Maybe 10 or 12 of our leases are with Simon Property Group that controls most of that real estate, at least in the Northeast. We’re in some interesting urban and college locations, like in Harvard Square or Faneuil Hall in Boston; Northampton, Massachusetts, home of UMass.
Of the 30 stores, probably 20, 24 of them are in malls, generally in the premier malls. We’re still in a couple of dying malls. We’ve closed at least three stores that were in malls that were failing around us. The stores that we have in malls that are failing are doing fine, the malls are just completely disintegrating around us. We’ve had stores in malls that have had 60, 70 percent vacancy, and the stores are still doing almost $2 million a year each. We eventually close them just for security concerns and because it becomes off-brand because all the abutters become junky stores.
I think we have three stores where our rents are $60,000 a month or more. This is some of the premier real estate in the country.
Do you share what your total volume for the chain is?
It’s north of $70 million right now. We’re having an extraordinary year. It looks like we might hit $100 million this year, but I think we’ll probably come in around 90 or something like that.
Who’s your customer?
It’s a very wide range, but it’s not the dollar-store customer, that’s for sure. Our products tend to be somewhat expensive just by their nature. We’re not a discounter in any way, shape, or form. We’re somewhat constrained by our pricing, by the types of leases we have, which generally command percentage rents. These days, we can’t run really super-deep discount sales because the landlord gets the same percentage regardless, which are typically in the 10 to 13 percent range. That’s a limiter.
We also have always aimed to have the best stuff. As a customer of a wholesale organization, our main mantra is we just want the best stuff. We’re pretty benign about trying to demand free shipping or extra-big discounts or anything. We want to be the best customer of these wholesalers, and we are. We’ve paid every bill on time for 48 years. In our industry, that’s a rarity. There’s folks that’ll go unnamed, but habitually want 90-day terms and do massive chargebacks for unsold goods or disputes over the misplacement of price tags and all that kind of nonsense that the mass merchants engage in.
If there’s a hot category and there’s a limited supply, we tend to get massively more than our fair share because we’re the best customer. It’s built on the idea of we’ve always been among the very best at trend in the country for pop culture, and you maintain that by having the best stuff.
So in income level for your customers…
I’d say upscale, it’s middle-up. It’s the mall customer, so it’s not like the Kohl’s customer, definitely not the Target. Of course, we share customers with all those chains, but the bottom half of a Target or a Kohl’s or Marshall’s would not be in our customer base in general.
What about demographics? Male, female, age?
It’s changed remarkably. We were initially a comic book store, and then we became almost completely a music store, or music and DVD store, and both those categories were heavy male demographics.
Now, we are in the manga, anime, what we call Japanimation-type goods, which are extremely trendy. That demographic is at least 60 or 65 percent female. We now have a very blended group. I’d have to guess we’re probably close to 55 percent female. That’s up from maybe 20 to 25 percent female a decade ago.
It’s been a dramatic demographic shift in our customer base. Fifteen years ago, we saw at some stores that weren’t in malls that malls were very female-oriented. Men generally don’t shop malls a whole lot. They’re there with a spouse or girlfriend, but there’s not that much in a mall for men in general. It’s just very female-oriented.
What do you think the key is to your success and longevity?
The main thing is just that we’re merchants, we’re not bean counters. With the exception of my son, every one of our buyers came up through the store system. Most of them were super-fans of the product, whether it was comic books (we have a notable number of comic book people still in the company), and music people.
These are people that were always in touch with what I call the real people. We used to go to Toy Fair, and there’d be these 60-year-old ladies with the glasses on chains around their neck being the buyers for major pop culture chains. We could never really quite figure that out because they were so far removed from the target demographic, just as a lifestyle thing. We’re a little bit the Peter Pan thing, a lot of our buyers just never grew up. They stuck with the product and they are fans of the actual product. They actually buy the stuff.
One of our current highest-volume buyers used to be a part-time employee when he was 16 or 17 years old doing the comic books in Harvard Square. He personally probably has 300 Batman action figures. He has a whole room in his house that’s just action figures.
I will guarantee you that buyers at Hot Topic don’t have employees like that, or FYE. There is no way. They’re measured on spreadsheets and margins and turns, having nothing to do with the essence of what the product is itself.
The stores have “Comics” in the name, but at least based on the store I saw, the periodical comics were a very small percentage of square footage, although graphic novels and manga had a big display. How do you describe your stores?
We’re the epicenter of popular culture in terms of the toy and collectible side of it. We’re not into high art or any of that stuff. Just in terms of functional everyman popular culture objects, we are extremely good purveyors of those categories with a certain level of sophistication or knowledge that’s wholly lacking in most of our chain competitors.
What’s your sales mix like now, chain-wide, between your categories?
We’re still roughly 20 percent music. It used to be 80 percent, 15 years ago. We’ve morphed tremendously. Blind boxes are an enormous category right now. That’s maybe 15 percent, up from 5 percent just three or four years ago.
We were one of the first domestic customers of Pop Mart. That’s, of course, a phenomenon that has a many-billions-of-dollars market cap, over in China, by far the most successful pop culture company in the world if you don’t count Disney as master of everything.
I think their market cap’s like 25 times what Funko is, just from a pure financial resource point of view. They’re very sophisticated. They have 1,000 stores or whatever, 600 of them, in China. They’re leading the way.
You see it with K-pop. The Asian influence is what is driving the popular culture at this point. On the music side, stuff like rap is completely dead. That was the cultural leader 15 years ago, the rappers. They’re non-existent now. They have completely fallen off the throne of what’s driving major trend. It’s way more about K-pop and anime and that type of thing.
So music is your largest category, even though it’s a smaller percentage than it was?
It depends on what you call a category. In a broader sense, you’d say toys are our biggest category. They’re probably 40 or 50 percent.
That would include both blind box and the collectible figures and Funko and all that stuff?
Yeah, everything. Those things you just mentioned are collectively at least 40 percent of sales.
You said recently you’ve been seeing a lot more Asian culture driving sales. Do you do a lot of manga in your stores, in addition to the figures and merch-type products?
Yeah, our sales of manga are almost twice the sales of graphic novels.
The comic business… I had a discussion with senior Marvel executives. It must have been 20 years ago. I told them, “Your whole category is crap. You have no idea what the costs per touch are.” [Note: “cost-per-touch”is a concept prioritized by Ikea, based on reducing the number of touches between supplier and customer. – ed.]
They basically destroyed a functional part of the business by just having an awful package to deliver that content in. It didn’t used to be that way. A comic book from the ’50s was a thick thing that had multiple stories in it. That was always my belief, that these executives simply did not understand, from the retail point of view, what the actual labor costs are in handling the product, let alone the idea that it’s a periodical.
The core collector they were catering to has no use for the product five or six weeks later, where a piece of manga can sit on your shelf for three years and still sell, as a graphic novel can. In my mind, the whole explanation is that all those comic books should have been turned into graphic novel equivalents literally two decades ago, because people simply did not understand unit economics.
Once COVID hit and you had all the wage increases, it just destroyed the unit costs of trying to deliver these little, tiny widgets that are worth $3 [or $4 or $5, ed.] versus an $11.99 manga. The economics make very little sense unless you’re running a minimum-wage outfit with no fringe benefits.
Nobody wants to be in that business of selling things that have a shelf life of three to five weeks, that have enormous labor costs per touch versus the amount of margin generated. That’s still the case today. Nobody seemed to get it. Go look at the Japanese model. They’re just printing money with a much better package.
Despite all that, periodicals have been booming in comic stores the last 18 months or so. Are you seeing that in your stores, too?
No. They’re stronger. We see a lot more DC selling through. That’s the boom. Marvel isn’t booming, at least from our numbers. Some of that’s probably just trend. Our total sales are definitely not booming. They’re flat at best for the periodical comic business.
The whole subscriber thing and all, the cost per touch of that is just completely out of control. It’s very hard to service a demanding subscription customer with the current labor economics. Keep in mind, we’re paying significant healthcare, significant 401K. We’re a real employer.
So many competitors’ employees come in and say, “I’m working. Half my wage is comics and trade and stuff.” They’re being paid under the table. That’s the way a lot of the industry’s run, just baseball card shops or whatever. These are not serious businesses from an employee point of view. It’s a temporary job for a super-fan, but not something you’re going to make a career out of.
What about the games category? You had TCGs in the store we saw, and also board games and some dice, RPG-related products.
Those are very marginal; the space required versus the turn rates just aren’t there. The flip side of that is, of course, game cards, which are in a hyper-bubble. That’s the driver, is game cards and sports cards, although Fanatics’ dominance of the sports card market is very unfortunate for the variety and the offerings. We’ve been cut off from Topps from a couple of seasons. It’s very problematic for a lot of people that built their business around sports.
The majority of our sales were always in the game card category, and that is beyond a bubble at this point. It’s going to be very interesting to see where it ends up. I play poker a lot, and a lot of that crowd got their money out of crypto. A lot of those crypto guys have been dumping money into these game cards, and it’s fueled a lot.
When you see these guys fighting each other at Costco to grab case packs and throw them in the back of a pickup truck that has four wheels on the back, these are not kids seeking the latest card. This is rampant speculation that will not end well.
You don’t do any play in your stores?
No, you could never do it with the real estate costs we have.
And no singles sales? You don’t do back issue comics, right, it’s all new stuff?
That’s largely true. There may be some vestiges of the old limited editions and stuff that are in a couple of stores, just like we sell used vinyl records in a few stores, but that’s usually based on a manager that really wants to do it.
Our stores are not run by planograms. There is a tremendous amount of control at the local level over the look and feel of stores, so there’s much more of a sense of ownership, not to say we haven’t gotten more organized over the years.
You have a fair amount of clothing, caps, all kinds of apparel in your stores. What’s the trend there?
For us, it’s de-emphasized. Our T-shirt sales are rising again. They were in decline for some time. That’s an industry where if you went to the MAGIC Fashion show 15 years ago, there might have been literally 15 companies that had recognizable multiple licenses. Now it’s down to about five. There was significant consolidation in that business before COVID, and then COVID just train-wrecked the entire thing. There’s only four or five companies now that are really in the licensed T-shirt business for the popular culture. There’s always some stray licenses and stuff, but that’s an area where the suppliers have rapidly consolidated.
It’s bad for us in the sense that the smaller suppliers sometimes put out more interesting licenses. The flip side is the big boys are very bland in what they’re willing to take chances on, and they don’t discover stuff early enough. We still do OK. They cheapen the product. Even we had to go back to making a lot more 30-ounce T-shirts. We converted everything to 18-ounce when we were a major Amazon player.
Our peak year on Amazon, we did almost $20 million. That’s down to maybe $2 or $3 million now. We were one of the leading sellers there when it first opened up to third party. We had high-level executives that asked us to start selling toys when they were in litigation with Toys “R” Us. I was one of the elected representatives of third-party sellers. I’ve had an hour and a half interrogative with me and one other person with Jeff Bezos on the other side of the table in front of 500 people. We go back a long way in those very early days of third-party selling.
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