ICv2: For our readers that aren't familiar with the background, could start out by giving a short history of your businesses, DCBS and then the start of Lunar Distribution.
Christina Merkler: DCBS was started in June of 1999 as an online‑only store. We both came from a background of retail, department store retail, actually. [Co-Founder] Cameron [Merkler] created a website and was off to the races. We opened our Diamond account.
That was early web.
Christina: It was very early; the first website was Microsoft FrontPage. We just built it by word of mouth. We determined the discount that we wanted to start with because what he felt lacked on the Internet at the time was a consistent level of, "Well, what would I get?" It was a lot of tier discounting, and things like that.
We started out with that, figured out our margin, and then went from there. Then we built that system to the point where we were using Excel pivot tables and they broke because our customer base grew. The first six months, he did it all on his own, and then once we hit six months, he was like, "Hey, I need you. [laughs] I need some help now."
We had it in our home for probably the first five years, and then finally moved on to a warehouse. We'll be 26 years old in June. We went through multiple warehouses and growth. Every time we moved into a warehouse, we thought we couldn't possibly fill it, and then we'd fill it a year later, and then we'd work through that.
Where are you based?
Christina: We're based in Fort Wayne, Indiana. In 2005, we started InStockTrades. We felt that there was a market for just collected editions.
Cameron Merkler: We had seen how cool and how explosive that category of merchandise was, but with DCBS, there's so much pre‑ordering. I thought we could be selling these things in real time, as they're coming out. We just decided to concentrate on that, but have it be its own website, its own rules, its own payment system, and that type of thing.
Didn't you also have a brick and mortar store?
Christina: We bought a building downtown in around 2015 that had a big warehouse in the back and in the center, and then we renovated the front space. We had a coffee bar in there and had a comic shop in the front.
DCBS was still the money maker. It was the one that was paying for that building and the staff. We just couldn't give the proper amount of resources to that store, but it was open for two or three years.
Then we made the decision to move the company to Memphis. We moved InStockTrades in 2014. InStockTrades moved down to Memphis first, I stayed up in Fort Wayne and continued DCBS. He took care of InStockTrades down in Memphis, and we were there to be closer to Diamond, not just for the savings in shipping costs, but the biggest was just turnaround in reorders, turnaround in replacements for damages and shortages and things like that.
That summer happened to be the summer that Diamond had the problem in Olive Branch, where they did a software update and then for like a month, they didn't know where anything was in the warehouse. Had we been in Indiana, it probably would've been the end of InStockTrades.
It was a rough time, but InStock stayed there. DCBS moved down there in 2017 and it was not a good experience. It was very difficult to keep staff.
There's a lot of competition for staff, right?
Christina: Exactly. It's a very different work environment there. Everybody goes through temp agencies. You can't organically get people, or get them in a different way. It's just how the workforce is there for warehouses specifically. Cameron managed for many years before that, but we had a much smaller team. Then when we needed a bigger team and we started to grow, it just did not work.
Cameron: InStockTrades is much simpler to run because we have a lot of SKUs, but it's a much simpler product line since it's one style of book. It was easy to just have a certain amount of staff, a small staff that could go through and pick an order.
If you have a $50 order on DCBS, you could be picking 20 items, but if you have a $50 order on IST, you could be picking one book. It just made things a lot easier to run.
Christina: Then a year later, [laughs] a year later, we moved DCBS back and went back into our building. We had not sold it, so that was actually quite nice and very fortuitous for us when the pandemic hit. Then InStockTrades actually got moved back to Fort Wayne in 2022…
You're all back in Fort Wayne now?
Christina: Yes, we are all back in Fort Wayne, but in 2020, the pandemic hits. We have a conversation the day that Diamond announced their shutdown. We started running the numbers and saying, how long can we survive without new product?
We weren't feeling super comfortable [laughs] with more than six months. We knew that there were a lot of other stores that were probably feeling the same way. The difference was that Indiana was not completely shut down and many of the states around us weren't as well.
Cameron: Same with Tennessee.
When I talk to people about that era, the people on the coasts say, "It was great for Diamond to shut down." Everybody in the middle says, "No, that was not good."
Christina: I believe the number was 60 percent of stores were still open at the time Diamond shut down. So when we got the call from DC to just say, "Hey, can you help us get product in the store until Diamond comes back?" we had to think about three seconds. We were like, do we save ourselves, or at least save everyone else that can be saved, etc.?
Not necessarily save, just protected, whatever that meant. We had to figure it out. We had three weeks to figure it out, and we built a distribution company in three weeks.
Did you approach DC to help get comics for yourself?
Christina: No. DC reached out and they were like, "Hey, what's the likelihood that you could help some stores that are still open?"
We were like, "Yeah, we can probably do that." The day we decided we're going to give this a try, we went down to the warehouse and talked with Taylor, who is our director of operations.
We said, "What do we do? What are the things that people have been upset with Diamond about? Every time we've gone to a Diamond Summit, what are the things that always stand out? That's how we're going to build the system to begin with."
The first was damages and accuracy. We had custom boxes made for DCBS and IST. We looked at those boxes and we said, "Can we double‑stack them? Can we do this? What do we do to protect the corners?" We just built a box based on that and built a system in which it would be protected the best way we felt it could be. We've always had those standards at DCBS and IST anyway.
You had a lot of experience shipping consumer orders.
Christina: We had a couple of hundred stores that we took care of initially. The second big thing was shipping costs.
How did stores find out about you?
Christina: I think DC communicated that to them. DC communicated, and then UCS [formed by retailer Midtown Comics, see "Retailers Tied"] took one‑half of the country. We took the other half. Since they were in New York…
You had a territory?
Cameron: Stores could go to whatever distributor that they wanted to go to, but initially they were just assigned, like, "Here's where your preferred distributor is, but if you want to go elsewhere, it's certainly fine."
You were both east of the Mississippi though.
Christina: Right, exactly. Just because we were a little farther west we got that Western territory. We started it out and we actually serviced a couple of hundred stores that first month. It was all a blur. [laughs]
How long after the Covid shutdown did you get your first shipment?
Christina: 04/'20.
A month later?
Christina: Yeah, it's a month. 04/20 release. That's why 0420 is our number. That's the Lunar number. There are a lot of… That's our anniversary, that's our whatever. Which is also kind of...
Funny?
Christina: Funny.
[laughter]
Christina: It's easy to remember though. 04/20. I remember it was Batman #89, third printing or something. It was one of the first things that we fulfilled. We had a team of four, plus Taylor. Cameron was still in Memphis because he was still with InStockTrades down there. He came up and helped out. I was in the warehouse picking orders with the staff. It was just a team effort.
We were really there to help out until Diamond came back. I think what it created for us, luckily, was that DC forced Diamond's hand in not just being shut down indefinitely. What that really brought us was the ability to not have to worry as much, I guess.
I don't know how to explain it, but because they did that, they, I hate to say "force the hand," but they did. Once Diamond shut down, people were like, how long is this going to last? Because if it lasts too long (and I think that if there hadn't been something that spurred them to make sure that they came back), we could have been in a much worse situation. Genuinely, I believe history will show that DC saved the direct market.
What are some of the differences you've found between your retail and your wholesale businesses? Obviously, you're dealing with bigger quantities, but beyond that… The logistics, did you have to immediately expand your space and staff to handle all this product?
Christina: Yeah, that was the big thing.
Cameron: Initially, at our warehouse on Calhoun Street, we had a section in the back that we weren't even using. It was storage for boxes and just excess stuff. We were able to clear that out.
That gave us immediate space for Lunar, but we did quickly outgrow that. We had to get another warehouse. We were operating out of two warehouses for a while. That wasn't ideal. Then we got another warehouse to combine everything in. It just kept cascading bigger and bigger.
Christina: Staffing was definitely something that we had to ramp up. Those first couple of months, we were able to work within this four- to six‑person team and it was fine. Once DC decided that they would like to continue with us, it became a whole other ballgame because we had six weeks to onboard a thousand new accounts.
Then when UCS decided not to continue after the end of the year, we had three months to onboard the other thousand. It was quite harried, but it worked. Luckily we had that space; that was the saving grace for us initially. Then once we reached that, we said, "Now we need an even bigger space." That's when we moved to the two-warehouse scenario.
Cameron: Trying to get more space at that point in time would've been really difficult. Having space available to cut down the development time of getting up and running helped dramatically.
Christina: Yeah, absolutely.
What about IT? Did you use the same system you were using for consumers to take wholesale orders?
Cameron: No. Initially, we did base the system on that because we thought this was a temporary situation, but once we realized it was going to be more ongoing, then we had to redevelop it from scratch. It's the same developer doing the development, but yeah, we had to develop it just from scratch all the way up. Add new functions every week just to get things going.
Is this homegrown software or did you build it on top of something?
Cameron: Yeah, it's all homegrown software.
Then on customer relations, one of the things we hear about Lunar, is it's all email; you don't talk to people. Why did you make that choice?
Christina: Because we want to be the most efficient distributor out there, and that's the only way you can be.
How does it make you more efficient?
Christina: First of all, we have a paper trail in every communication that we have with our customers. We got a lot of feedback from publishers and from other distributors that said that the phone was something that prevented them from being efficient, that it ended up being more of a therapy session sometimes, or…
Is that bad? Retailers need therapy.
[laughter]
Christina: It's bad for efficiency. Also, we do talk to our retailers. We just do it through our retailer events. We found a better way to service them in those aspects, like being at ComicsPRO, attending conventions and having mixers or breakfasts, or things like that where they have the opportunity to speak to us in person.
Most things that a retailer comes to you for it's like, "My FedEx package is missing," or it is stuck in whatever. Being on the phone is not helpful because they usually have to get on the phone with FedEx to solve the problem.
Cameron: And they need time to research it.
Christina: That's the other problem, is that most of the time when you're on the phone with somebody, and I know this because I used to do it with the Diamond rep, is I'd have to wait for them to type it up and to look up things and do those.
The opportunity to look at an email, do the research, and come back with a solution much more quickly than you can when you're on the phone, and may have to get back to them and follow up.
We still have to do follow‑ups in email. We just have found that it is a different thing for customers who are used to a different type of service. Most of our feedback is, "I actually like this. I wasn't happy about it, but I actually like it because I can go back and research the things. I can do those things."
What is your backlist operation like for retailers? After the first week, what kind of services do you provide? Do you warehouse backlist for your publishers?
Christina: Yes. We warehouse all backlists that publishers are willing to hold with us. It's much like Diamond and PRH in that way. We offer direct ship options so that they can get it shipped in a day or two out to their stores.
Click here for Part 2, where we talk about their views on the direct market with Diamond Comic Distributors in crisis, about why limiting the number of publishers could lead to a healthier market, about bidding for Diamond assets, and more.