In a bold move, Marvel Comics has changed its terms of sale to retailers serviced by Diamond Comic Distributors to eliminate the monthly order form as the basis for calculating wholesale prices, and to delay the date by which orders must be finalized to as little as three weeks prior to release date. The cumulative effect of these changes is to begin to break down the monthly order process and pricing system that has been in place with few changes since Phil Seuling, one of the founders of the direct comic distribution system, established it in the 70s.
Instead of using advance order dollars as the basis for pricing, Marvel will use the average monthly purchases for the previous twelve calendar months. This eliminates the pricing impact of phantom orders (for product solicited but not shipped), a negative for retailers, but adds all filled advance reorders and reorders to the volume used to calculate discounts, a benefit for retailers. Over-all, for as long as discount thresholds are left the same, this seems like a boon for retailers, especially those selling significant quantities of book backlist items. It eliminates the artificial necessity to re-solicit backlist for retailers to order during the monthly order process to have that volume count toward discount, and instead allows retailers to order product when it's needed and still have it go toward calculating wholesale prices.
One drawback for retailers that may be close to a discount threshold is that it will take some time for increased volume to be reflected in the wholesale price paid for the books. Increased volume could be due either to additional locations or increased volume through existing locations for the retailer, or due to increased numbers of releases or greater salability of product from Marvel. On the other hand, during periods of market decline, either on a macro or local level, discounts will stay at higher levels (lower prices) for a time. It's probable that more retailers now are in the former situation, which is already leading to some concerns (see our Talk Back section for some retailer comments). But over the long run, the moderating effect on discount shifts should be a positive. This pricing change will also eliminate the seasonal fluctuations in prices now experienced by some retailers close to the discount thresholds that has the doubly negative impact of reducing discount during those months when volume is lowest, when stores need the gross margin most.
The effect of the pricing change, in conjunction with the ability to order, increase, or cut orders up to three weeks before the release date, will allow retailers to order with much more current information than has previously been the case, reducing risk and maximizing upside. Milton Griepp, the founder of ICv2, has argued for weekly order cycles with cut-offs as close as possible to the release date since the mid-90s, and this new Marvel policy is a significant move in that direction. Given that direct market retailers are taking the risk of ordering non-returnable (and that Marvel, in particular, has made it policy to avoid over-prints for retailers reorders), anything that can shorten the supply chain and allow retailers to place more informed advance orders is a good thing.
With these changes in its terms, which put the company at odds with the other 'premiere' comic publishers and with Diamond's own terms, Marvel has begun the move toward a more rational supply chain in the direct market comics business.