Comics Economics, Part 7

Last week, due in part to the global economic recession, DHL announced that it will be discontinuing its U.S. domestic package shipping operation by the end of January 2009. Accordingly the DHL operations in Wilmington, OH will begin laying off workers at that time, and the entire facility will be shut down within six months. Also located in Wilmington is a company called ABX Air, Inc. which handles DHL's airfield and hub in that city. Once DHL finalizes a deal with UPS to handle such operations, ABX has announced plans to remove themselves from Wilmington entirely.

Those two closings will put a little over 3,000 people out of work. That's in a city with a population just shy of 12,000. Put another way, one quarter of Wilmington's population will be put out of work in the next year. And that's only the direct results of the the two closings.

What frequently happens when people get laid off? They cut back on their expenses until they're able to secure a new source of income. That includes things like going out to dinner and the movies, and buying a new coat just because it's on sale, and continuing that gym membership that's not really being used anyway... And, as the time the person continues without income increases, the cutbacks continue.

What that means is that other businesses start to get hurt as well. The mom-and-pop diner has fewer customers, as more people start cooking at home. People go longer between barber visits, or start cutting their hair themselves. These types of behaviors hurt all those other businesses in the area because, obviously, the fewer customers result in fewer sales. A business can't survive long without customers, and if 25% of the town's customers suddenly don't have income, that's going to have an impact on the local economy.

"Sean, your post here is called 'Comics Economics.' You haven't mentioned comics once yet."

How about I make my point with an address?

The Gaming Goblin
15 E. Main Street
Wilmington, OH

Yes, Wilmington has its own Local Comic Shop. I've never been there, personally, but the photo from their web site certainly makes it look like a nice, clean, friendly store. Right in the middle of town, too.

So, what do you suppose happens to a store like this when a quarter of the town's population loses their source of income? Well, I certainly don't know Gaming Goblin's client base, but I think it's safe to assume that their revenue will also drop by about a quarter.

Now, it's entirely possible that none of the people who frequent Gaming Goblin happen to work at DHL or ABX. But here's another figure to mull over: the city has only 4,867 households. That means that, statistically, every other household will be directly affected by the layoffs. How can that NOT impact other businesses in the area?

The median household income for the city is $34,880 -- around $10,000 lower than national numbers. (The median family income, at least, is on par with national numbers.) The lower income suggests that smaller changes in personal economies will have larger impacts. (i.e. People with less income use a greater percentage of what they have on necessities; people with higher incomes tend to have more luxuries they can afford to cut back on.)

Let me throw out some more chilling numbers: According to the U.S. Small Business Administration, over 50% of small businesses fail in the first year and 95% fail within the first five years. Why exactly is that chilling? Gaming Goblin opened on May 3, 2008. Because of the high start-up costs, very few businesses see any profit at all the first year or two. The reason, in fact, why so many of them fail so early is because they don't plan on NOT making a profit for the first two years. A good business plan will take that into consideration and budgets for the fact that they won't see profits until Year Three. I don't know anything about the business acumen at The Gaming Goblin, but I certainly hope that they've planned accordingly.

Now, I do note that The Gaming Goblin also has a relatively noticeable presence on eBay. That will certainly help to mitigate drastic effects from their local economy by tying them to the larger/more robust national economy. But, even so, the national economy isn't doing all that much better and overall eBay sales/revenue are down by over 50% from last year. And that's from the quarter ending on September 30, only a couple weeks into the economic downturn.

I hope The Gaming Goblin does well. I really do. I have a lot of respect for comic shop owners -- even of those shops that are run poorly and don't deserve my custom. (That's by no means a commentary on Gaming Goblin! As I said, I've never been there, and can't speak at all to how well they might run the place.) Running a comic shop takes a lot of hard work and a lot of chutzpah just to open in the first place, and it's almost always done out of a love of comics, because that's about your only reward. I sure as hell wouldn't want to try it myself.

That said, though, Gaming Goblin is going to have some tough times in 2009. Probably moreso than a lot of other shops. But if you're wondering how an economic downturn might impact a comic shop, I think Gaming Goblin will be a prime example to look at regardless of how well they do over the next twelve months.

To be continued...

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