Question: No Funny Business at Newbury Comics
The two college students who started Newbury Comics have become serious business owners. Mike Dreese and John Brusger started Newbury Comics in 1978 with $2,000 and a valuable comic book collection. Their first store was actually a tiny apartment on Boston's popular Newbury Street, which they rented for $260 per month. Three decades later, the company operates twenty-six stores in Massachusetts, Maine, New Hampshire, and Rhode Island. It still does business on Newbury Street-in a spacious storefront that rents for $23,000 per month. How did Newbury Comics grow into a multimillion-dollar business? First, the owners identified a need that they could fill. They understood what kind of comic books collectors were interested in buying, and they enjoyed dealing with these customers. They also realized that customer needs can change, which is why they have tested hundreds of new items over the years. Second, Dreese and Brusger thought of their business as a business. As much as they liked comics, they recognized the profit potential of carrying other products. Over time, they started stocking music and added movies, novelty items, and clothing accessories. They were among the first U.S. stores to import recordings by European groups such as U2.
Today, comic books account for only a fraction of Newbury Comics' revenue, whereas CDs and DVDs account for about 70 percent of the revenue. Third, the entrepreneurs didn't do everything themselves- they knew when to delegate to others. As Newbury Comics expanded beyond comics and opened new stores, the owners hired professionals to negotiate leases, make buying decisions, and select the exact merchandise assortment for each store. They also hired technology experts to design systems for tracking what was in stock, what had been sold, how much the company was spending, and how much each store was contributing to total sales. Now, if a new CD or DVD is selling particularly well, the buyer will know within three minutes-in plenty of time to reorder and satisfy customer demand. Fourth, Dreese and Brusger have paid close attention to Newbury Comics' financial situation. They're careful to pay suppliers on time, and in exchange, they can get fastselling products even when supplies are limited. Consider what happened during the Pokemon fad. Newbury Comics originally ordered a small quantity of cards, which quickly sold out.
Every time it placed another order, it sent the supplier a check by express delivery. By the height of the fad, when demand was so high that the supplier could not fill every retailer's order, Newbury Comics still got its shipment. By the time the fad faded, the company had sold $4 million worth of Pokemon cards and made more than $2 million in profits. Newbury Comics remains profitable, although Dreese notes that sales growth has slowed during the past few years. As a result, he says, "We have all had to grow up a little" and improve the way Newbury Comics operates. The company has formalized its store payroll budgets, assigned employees to check the quality of customer service at each store, and begun offering more products for sale online. Despite the company's success, Dreese does not expect to expand beyond New England. A new superstore has opened in nearby Norwood, but he knows that a key strength is being able to restock quickly-and that means locating stores within a half-day's drive of the distribution center in Brighton, Massachusetts. Because Newbury Comics owns six trucks, it can resupply every store at least three times a week. Many competitors are far bigger, but no competitor knows its customers and its products better than the team at Newbury Comics.22 For more information about this company, go to www.newburycomics.com.
1. This chapter cites five advantages of small business. Which of these seems to apply to the owners' experience with Newbury Comics?
2. This chapter cites three disadvantages of small business. Based on what you know of Newbury Comics, which of these is likely to be the biggest problem in the coming years?
3. Newbury Comics was started without a formal business plan. If you were writing its plan today, what critical risks and assumptions would you examine-and why?