Vendors accuse clubs of diminishing trading card value - warehouse stores, sports cards

Discount Store News, Nov 2, 1992 by Christopher Dauer

Trading cards are big business, and wholesale clubs have become a major channel of distribution for trading card manufacturers, but the vendor/club relationship is rapidly becoming strained.

The essence of the trading card business is an illusion of scarcity. The essence of the wholesale club business is overwhelming quantity. For instance, Topps Stadium Club cards, a high-grade, limited issue series, retails at $1.89 per pack, and often sells at a higher price. The series is driven strictly by a perception of extreme rarity, an illusion that is difficult to maintain when a wholesale club stacks up four skids of the product at once.

At Price Club, for instance, entire skids of new product disappear in under an hour; while a good portion goes for resale, card collectors have taken to joining one or more clubs to get first crack at new issues at discounted prices. Clubs have responded by upping their selections, from one or two skus at a time two years ago to seven or eight during peak periods. They have also often placed limits on purchases, so that no one can corner the market on a given issue.

Apart from the image of scarcity, there are other problems as well. Former Upper Deck vice president, sales, Jay McCracken, noted some of these. Due to a growing trend to release cards in series, a throwback to the 1960s, some card manufacturers, like Upper Deck, have started allocating shipments; wholesale clubs don't do business that way and have reacted strongly. Also, traditional dealers have complained that wholesale clubs 8% mark-up makes the dealers look foolish.

Fleer's Jeff Massien, vice president of marketing, noted that the problem, (particularly now that premium and intermediate cards, which imply limited production, have become the mainstream), has been exacerbated. "We have to be careful to limit quantities to every class of trade to retain the image of relative scarcity," he said. "The clubs, like a lot of channels, want more product, but don't want more production. Of course, it's great that they want more, it means we're not producing too much."

McCracken noted that, supply problems aside, the clubs have become very important to the industry, and are likely to increase their presence in the marketplace, both as a source for consumers and as a "resupply" for dealers. They have become, in a few short years, one of the dominant means of distribution, and one that is both highly efficient and easy to do business with. The problem, it seems, is that wholesale clubs just do their job too well.

And, manufacturers, at least in the second tier, are getting more and more leery of dealing with the clubs. One major vendor, Pro Set, went into Chapter 11, almost totally as a result of overproduction, which in turn devalued the company's products, and losses at other vendors have sometimes been enormous, with both Upper Deck and Skybox recently firing top-level management, including Upper Deck's McCracken, one of the most visible figures in the industry.

It's clear that there is too much product on the market, at least from a collector or investor's perspective. Virtually everything is overproduced, and collectors, who drive the market, are switching over to older (pre-1980) cards, which were produced at only a fraction of the rate of present-day issues.

Manufacturers have reacted by introducing truly limited edition subsets, so-called chase cards. These subsets are produced at a rate that is only one-twentieth or less of standard issues, and are generally available only by purchasing traditional packs, as opposed to sets.

And, new products, like limited edition, signed and numbered sets, holograms, autographed inserts, and so on, are attempting to put true collectibility back into the hobby.

Ironically, though, these limited edition products found their way into the wholesale clubs. Lime Rock International, for instance, produced one of the first numbered hologram sets, a three-piece Larry Bird set with random autographs. The set was added to Price Club's "roadshow," and sold out within a few weeks.