Scott Rudge of Astound Comics in Westlake, Ohio saw the recent coverage of Palisades' demise and the connection to the Musicland bankruptcy (see 'Palisades Is Musicland's First Casualty'), and has a suggestion for toy and game companies that are looking for the big sales chains offer--ship direct first:

I have no sympathy for any of the parties affected by the Musicland meltdown. 

As a Direct Market comic book retailer who carries collector-oriented toys, I have little concern for a mass market retailer purchasing large quantities of the same product I try to sell.  Musicland (through Suncoast around here) routinely flooded the local market and then placed the items on clearance just as I received my allotment.

I have even less concern for manufacturers who treat DM retailers as second-class customers because quantities involved are smaller than those of a few big spenders.  While this is their prerogative, manufacturers should not be shocked when big customers disappear due to bankruptcy or a softening market.

I'm somewhat concerned my distribution channels seem unable or unwilling to flex some muscle so manufacturers ship me product in a timely fashion.  My suspicion is they are willing participants in the 'go for the riches' distribution system and eventually will suffer accordingly as the product-segment slaughter expands.

The 600-pound gorilla largely responsible for price deflation in this and practically every other product category is eBay.  As a smaller brick & mortar retailer, my only marketing advantage is receiving the product quickly to capitalize on its initial appearance.  Unfortunately, many manufacturers choose the short-term option and go for fast cash by providing huge accounts with initial releases of the toys.  Several weeks (or months) after eBay and the massive retailers have done their damage, I would finally receive my pitiful case or two at my pitiful discount rate.  In the end I'm stuck with dead inventory from which I rarely recover my cost.

When manufacturers' products and release schedules are completely untrustworthy and probably will end up losing me money, what is my reaction?  Clearly I will never order their stuff again. 

Do I weep for Palisades, who this week announced they were suspending operations, or Musicland?  Ha!  I laugh!  Musicland is gone and Toys 'R Us will always battle Wal-Mart, as their workers sell their employee-discounted, early released products on eBay, completing a particularly vicious cycle of total price destruction in the product segment. The retail dragon devours its own tail while manufacturers salt it to taste.

Palisades CEO Mike Horn called this 'a general downtrend in the collectible toy industry.'  By Horn's standards, World War II was 'a little skirmish around Berlin.'

What are the lessons from yet another product-segment bloodbath?  Simple: ignore Direct Market retailer at your own peril.  The number of comic and game retailers in any market almost always equals or surpasses the number of mass market retailers carrying similar products. The DM customer base is rich with dedicated, repeat customers who act on recommendations from salespeople directly responsible for their own success.

While customer traffic is significantly lower at DM retailers, the proportion of customers seeking category-specific items is significantly higher.

Releasing products to DM retailers first could allow the product time to develop a buzz or it may reveal problems with the product before it hits the mass market.  Data gathered from an initial release to the DM would allow manufacturers to gauge whether they have a hit or miss.  This kind of research would help manufacturers better plan their production schedules to avoid problems like massive returns.

The limited availability of initial releases due to the smaller quantities at each location would drive the collectible aspect of the product segment, even on eBay.  With a demand created, a subsequent release to mass market retailers would fill the demand; everybody makes money so everybody is happy.

While individual DM retailers come and go, it is very unlikely there will be a time when they will vanish entirely in one massive bankruptcy.  As an entire group they are unlikely to decide to dump a single product segment (unless screwed). The foundation is stone. 

Although there are many forward-thinking companies, I cite WizKids as especially friendly to the Direct Market.  WizKids recognizes the importance of establishing a solid base where fans of products congregate.  They also go a step further by creating promotions and lending support to afford B&M retailers some advantages over the Internet price zombies.  WizKids' release schedules actually favor DM retailers.  They do move product through mass market retailers, but after DM stores have a chance to establish and cash in on the popularity of the product.  Although they're not perfect, WizKids clearly believes continued success lies in a solid relationship with their frontline DM retailers; and DM retailers respond appropriately.

I'm not going to list the villains.  They all know who they are, right Todd?  Bad guys will become even more apparent when coping with the reality of a smaller and increasingly hostile retailer base, big inventories of immovable product, and decreasing orders for future product.

The opinions expressed in this Talk Back article are solely those of the writer, and do not necessarily reflect the views of the editorial staff of ICv2.com.