Ask John: Is Getting Started in Anime Retail a Good Idea?

Question:
A friend of mine is interested in selling anime merchandise online online. What are the factors that he should consider to make his business a success?

Answer:
Based on my experience with AnimeNation, my objective and considerate advice is simply, “Don’t.” A person interested in casually, occasionally selling a limited amount of anime merchandise online can easily do so by utilizing Ebay or Amazon’s affiliate sales program. Such avenues for selling goods are serviceable options if one wishes to place duplicate or unwanted items into the hands of new owners or generate some extra immediate income. Launching an online commercial store can be far more daunting and troublesome. An individual interested in purchasing wholesale goods and re-selling online for a profit will first need to acquire a re-seller’s tax license. Applications for sales tax exemption are made in the seller’s home state and are relatively painless to acquire. Bigger headaches come in the form of subsequent logistics.

Determining what to sell is an initial question. Anime DVD and Blu-ray discs continue to outsell character merchandise, but that statistic really only demonstrates how slim anime sales are in America because domestic anime home video sales are down exponentially from where they were a decade ago. Relying on sales of anime home video as a retailer is very challenging because profit margins on domestic anime home video are very slim. Ideal wholesale cost is 50% of retail, but anime home video may have wholesale costs as much as 75% to even 90% of retail, leaving very little actual profit after acquisition, processing, and delivery costs are accounted for. Acquiring domestic home video at the best wholesale rates necessitates purchasing directly from the original licensor/distributor, but doing so first requires setting up individual wholesale accounts with America’s licensors, and continually managing those individual accounts including ensuring that product are consistently paid for or returned within 90 days of receipt. Purchasing from bulk wholesale companies requires less legwork but costs more and places more eggs in a single basket, in a figure of speech.

Acquiring and selling domestic character goods is even more challenging because the production market fluctuates constantly. The companies that produce and distribute American anime character goods are not anime-exclusive companies. Since anime merchandise is only a percentage of the merchandise that they manufacture and distribute, anime typically doesn’t get their full attention. As a result, items come in and out of stock randomly and arbitrarily, frequently with little or no notice, leaving retailers selling and expecting to receive shipments of inventory that the manufacturer no longer has or produces.

Taking payment can be a headache. Credit card processing fees continue to increase, and finding a reliable, functional, comprehensible, and affordable retail sales software system can often be challenging. Working with Paypal is also challenging. Consumers love the flexibility of being able to pay via Paypal, but unlike credit card processing, Paypal transfers payment immediately, sometimes putting the retailer in possession of customer money in advance of the actual sale. Furthermore, customer complaints are an inevitability in retail business. A single customer complaint via Paypal can freeze a business’ entire financial flexibility, leaving the business unable to process transactions, pay bills, or acquire inventory for days or even weeks.

Delivering goods is also increasingly a challenge. Residential shipping fees are steadily increasing drastically, inversely to the amount that customers want to pay for shipping. An online retailer not only has to consider purchasing shipping supplies like boxes, packing material, and tape at wholesale bulk rates, but also consider how to deliver goods to customers. Using USPS, UPS, and Fed Ex are expensive options. Using bulk mail-forwarding companies can be cheaper but also less reliable.

Ultimately, for the two dollars per item on average that you’ll likely earn in profit for each sale, the effort and trouble of launching a new incorporated anime retail company in today’s depressed anime consumer market is not worth the time, effort, and expense. No major domestic online anime retail company has launched and established itself domestically in years for two reasons. Americans just don’t purchase enough anime merchandise anymore to support new retail businesses, and launching a new online-exclusive anime merchandise retail company is way more trouble than it’s worth. I’m absolutely not trying to discourage competition for AnimeNation. I honestly and objectively want American anime fans to realize that privately selling a limited amount an anime merchandise via Ebay or Amazon is tremendously more rewarding and sustainable than trying to launch a new online-only anime retail company.