The Indirect Market: Diamond’s Reduced Shipping is Too Little, Too Late

There was a time when I could peg upcoming releases down to the week without checking, and tell you exactly what the next issue of any given title was. A combination of the ever sliding scale of supply chain delays (which have gotten a lot better – for now), and the ever present existential dread of existing while socially conscious has done away with much of that skill.

So imagine my surprise when I started putting things together for this column and discovered that it has been nearly two years since Marvel Comics and Penguin Random House announced their partnership, moving the primary distribution of Marvel titles away from Diamond for the first time since 1997. It couldn’t have been almost two years already, right? But at the same time, hasn’t a decade passed since those days? The concept of time really ate garbage once COVID really landed, and I am not here for it.

Anyway. We’re not here to talk about stress induced cognitive decline. We’re here to talk about Diamond posting their “L”s publicly, and expecting everyone to thank them for it. I’d laugh, if I wasn’t so tired.

In mid-April 2021, nearly a month into the process of Marvel moving over to Penguin, I received an e-mail from a Diamond representative. The person in question wanted to let me know that Diamond would still be a good source for Marvel’s full line up, and that if we ordered through them, we would see no delays in getting Marvel product on our shelves. They also stated that “we are still in the process of finalizing the details as to what changes may be made to the ordering terms and discounts under this new arrangement”.

This continued to be the case until just one day before Penguin Random House’s extended deadline to sign up for distribution in May, when Diamond finally released some abysmal discount rates, alongside a plan to decrease the cost of their shipping across the board. From that release:

For UPS Ground shipments to US addresses and freight forwarders, the rates will be:

• 2.5% of retail for print products (Product Categories 1 – 4)
• 5% of retail for non-print products (All other Product Categories)
• 5% of invoice value for net-priced items

For customers utilizing drop points or receiving shipments via LTL carriers, we will provide further information soon.

This was a fairly significant change at the time, as Diamond has already lost DC from their line up, and shipping rates weren’t holding up to the decreased volume of their shipments. On top of that, Penguin Random House was offering a prose book industry standard of free shipping on orders through them, which put their rates to shame. 2.5% for print objects wasn’t ideal, but it sure as hell wasn’t zero.

That said, all of that didn’t matter, because Diamond never went through with this change. Instead, on July 23^rd, 2021, all retailers received this missive.

Dear Diamond Customer:

Through at least the remainder of 2021, Diamond is freezing current retailer discounts in an effort to avoid additional disruption in our industry.

The pandemic has brought about incredible challenges, innovation and changes, and while we know there are also great opportunities ahead, we believe a pricing pause is the best approach right now as we all learn how the industry will perform in the near term.

This pause is effective for all pricing except for the previously announced new Marvel Comics pricing tiers. 

In a corresponding decision to delay any changes on the pricing of products, we also do not plan to implement our previously announced changes to freight calculations for Diamond purchases. 

Our goals are to minimize disruption during this transitional period, provide retailers stability when placing orders, and continue to support the strong industry growth we are seeing across periodicals, collections, supplies, collectibles, and other product lines. Given this, we are taking a measured approach to changing any purchasing dynamics to help with everyone’s planning as we head into what we expect to be a strong fourth quarter Holiday selling season. 

Thank you for your continued support!

There are two things to address here. First, it seems as though someone crunched the numbers and realized that Diamond could not function by dropping the shipping rate by that amount. By all accounts these days, shipping runs at a rate somewhere between 5-12+% of a retailer’s product cost, depending on a store’s location and volume. 

Second, the discount rate freeze mentioned has remained in effect for retailers that have been dealing with Diamond since before the loss of Marvel (though it means quite little considering the losses taken with shipping costs). At some point (I can not recall an official announcement), Diamond’s terms of service changed quite a bit, in terms of product discount. New accounts receive a capped discount of 50% – which is something that Penguin Random House offers without thresholds, and with free shipment. 

Here, I will admit I am not up to date with the current terms offered by Lunar for DC and the variety of companies they serve (with DC being the heaviest hitter) and Universal, as I’ve been locked in at old terms with Universal for a couple of years now, and neither company seems to have terms readily available for public consumption. (Which Diamond is guilty of as well – which is great when you’re putting together a business loan proposal, and the companies you are dealing with are less than forthcoming with discount thresholds.) But I can say, without hesitation, these companies offer a far better shipping rate than Diamond currently does, scaled to volume.

Now all of this is a precursor to discuss Diamond’s latest announcement regarding their shipping rates. Following up their presentation at this year’s Comics Pro meeting, Diamond Comics finally announced their upcoming shipping terms for retailers in a statement from owner Steve Geppi on Monday. The full text can be found here in Heidi’s coverage, which should be read for full context. Otherwise, take a look at this quote from “the man who wants you to think he’s buff Grandpa” himself:

“…I have heard your concerns and listened to your feedback. As a result, I have been working closely with my leadership team to explore options to become more competitive on freight, without sacrificing what makes Diamond unique, and I am thrilled we were able to make the announcement we did.

“Thanks to the addition of CGA’s consumer-centric business to the GFE enterprise, which increases our shipping volume, we have successfully negotiated more favorable carrier agreements. This allows us to pass along significant savings on UPS shipments of print goods to you. We are also in discussions with other carriers including FedEx and USPS for certain shipments. Additionally, we are consolidating numerous offices while also reducing the size of our home office by 60% this summer and moving to a hoteling system that better aligns with today’s more remote workforce.”

Now, you might not see it in there at first glance, but buried in some business speak is something that many retailers have been suspicious for a while: Diamond has been charging retailers extra in shipping in order to maintain their business structure. 

There’s been a suspicion of this for a while, and something that retailers brought up when these changes were first announced at Comics Pro. At the very least, it was clear when Diamond pulled back on their originally planned shipping charge drop over a year and a half ago that they couldn’t afford to or didn’t want to make that happen. Or, they figured they could get away with something else that clearly didn’t work out for them – necessitating this change. None of these looks are good.

At the end of the day, the facts are these: Diamond, in their communication with retails both at ComicsPRO and directly, identified points in their structure that were preventing them from giving better shipping terms. This is not a good sign, because a proper business does not need to use their shipping terms to subsidize their structure. Full stop. In addition to that, retailers are still not going to see the 1.5% shipping rate retailers were promised originally when all of this started… because a drop in 40% would only hit that sweet 1.5% point if shipping were at 2.5%. And they aren’t, not matter what volume you’re pulling down.

The truth is simple: Diamond is surviving through inertia. Boom! recently signed an extension with the company, and despite the rampant winks from Penguin sources regarding a potential Image move to Penguin, Image stayed with Diamond . Both, I believe, are silly moves if you’re considering the stability of your partners, regardless of what Diamond offered to keep them around. Also, supposedly up to 40% of comic retailers still order their comics through Diamond despite getting a worse discount and shipping.

Diamond and Geppi nearly single handedly brought the direct market to its knees in the early days of the pandemic when it shut down for two months while book distributors kept running in some capacity or another – necessitating DC and Marvel to move towards more stable distribution methods. Make no mistake: these publishers that are part of publicly traded entities didn’t move away from Diamond just for fun. Inertia is one hell of a thing unless you have to justify your actions to a money daddy – and Marvel and DC have to do just that. So they found better options. 

Now while some might view the Diamond announcement as a positive step, I see it as more of desperate self preservation. The company literally announced it is contracting in response to the demands of their customer base (the retailers) and did not do so before this moment in time for… reasons? From the sound of things, said reasons involved the lease term of office space that is coming up soon, hence the deadlines for decrease posted above – instead of pivoting like a fiscally responsible company could given the opportunity. With that in mind, what is to stop Diamond from unfreezing the current discounts legacy retailers are getting to help subsidize this move? Many would see a drop anywhere from 5-10%, and would rank Diamond as the worst source to pick up product from in terms of discount. With shipping now admittedly tied to Diamond’s business costs, and not just the cost of shipping itself, legacy retailers should be wary of what moves Diamond might take next.

The fact of the matter is, Diamond is not the future of the comic industry – unless something wild and radical happens in, say, the next year or two. Or if the world just ends, and there isn’t a future in general. Because I mean… (gestures at the world in general).

Anyway. While Diamond promising to drop their current shipping rates is appreciated, there’s too much baggage to call it a good thing. Positive, sure. But the bar has been above their heads for years, and playing child’s limbo just gets silly when you’ve been in the business for (checks Diamond’s own PR) over 40 years.

Grow up. Do better. Unless you can’t, in which case… best of luck.