Merchandise – The Final Frontier

These are the voyages of the anime website, Otaku Central. Our continuing mission – to explore strange new genres, to seek out new animes and new anime producers, and to boldly go…

  …where no anime streaming service has gone before.

Bad jokes aside, we’ve honestly struggled for a while in wrapping our heads around what we’d do on the subject of making some Otaku Central-styled merchandise that some of our members or interested parties could purchase.

The biggest concern on our end with this was centered around what we could do that would break the mold of the generic merch that most other anime streaming services have, yet would be interesting and unique enough that it would spark interest and be practical for buyers. In a similar ballpark, how would we be able to manage this as a non-profit organization that’s not in it for the money and is financially transparent in order to ensure this?

After recently getting back from the San Japan anime convention in San Antonio TX this last weekend, we were able to get a gameplan laid out of how to make all these questions and pieces fit together into a cohesive, yet still non-profit, business unit. While it’s going to be a long ways down the road for us, the framework has now been laid for how we’re going to approach the subject and make it work.

And…     it’s probably not entirely what you’d expect.

What Not To Do

To start with, I’d seen a lot of the more apparent mistakes that various other merchandise vendors have made; especially in selling merch at anime conventions.

The list of more obvious blunders consists of:

  1. Charging a massively unreasonable markup percentage considering the wholesale cost they purchased their goods at (often a 100-500% markup, or even more).
  2. Selling a bunch of knock-off trinkets or goods that have no practical use whatsoever; this is also in the same ballpark of giving the impression that the items they’re selling are high-quality whereas they’re actually cheap junk that will break down within a year of purchase.
  3. Having a selection that’s limited to maybe the most mainstream or ecchi animes in terms of items, which equates to having goods from only 10-25 animes in stock.
  4. Selling items that are particularly bulky (such as swords at the recent convention I attended), and then leaving the buyer with no alternative but to “lug” said item around the rest of the convention with them.
  5. Not offering a receipt for customers for their purchase transaction, which begs the question of if the vendor will even log the transaction on their annual taxes (highly illegal here in the States).

What’s a little funny is that most buyers may not passively think about these things at the time they’re considering buying something. After all, you do have to factor in the allure of a convention, as well as the fact that they’re seeing the item right in front of them at the time of purchase – which plays a strong part in the equation.

A lot of things are more realized after-the-fact once the buyer has arrived home at the end of the day. The lack of quality is more apparent, or it’s easier to conduct a price matching check of the same product online to find that you spent 2-5x what the value of the item is from an online vendor, etc. Interestingly, because the age demographic of the anime-viewing audience continues to decrease overall, younger more consumer-tech-savvy customers will start to price-check things more, and find some of these sales holes and avoid them.

Well, since Otaku Central is not only financially transparent, but also needs to be above reproach in that we’re genuinely trying to improve various aspects of our world today and merch is no exception to this, we needed to take a drastically different approach to merchandise than the murky road that many other vendors have already gone down.

But, what do we do?

Have Things That Have Practical Use

A lot of people might question why this part is necessary – so bear with me for a minute while we go down a bit of a tangent.

One of Otaku Central’s passive objectives is to help to convey historical and appropriate modern Japanese culture and manners to an international audience while trying to strike a balance between ​​realism and “romanticization”. It’s our belief that not only is this a better way to convey Japanese society to the rest of the world, but also to help preserve a semblance of what Japanese culture actually is. I’ve mentioned before in other articles that internationally-offered anime tends to largely warp the cultural lens that Japan is presented through, and we’re striving to help overcome that barrier to a reasonably-accepted extent. This is part of how we can do this.

Another consideration is that we’re also actively working to help make our world a better place through things such as “Going Green”, recycling initiatives, conserving energy, donating to various charitable and non-profit organizations that share our vision, being positively involved in our local communities, etc. With this in mind, it does the most real-world good for everyone that’s taken part in our vision to offer merchandise products that also help better the world by bettering the people that enjoy it.

While this isn’t meant to discriminate against any purely recreational products or anyone who enjoys them, it’s meant to show that Otaku Central only has a limited amount of resources and effort available – so it’s most prudent of us to do the most good with it in our world.

Have Things That Are Distinctively ‘Ours’

The story behind this is that nearly any vendor on the market today can do the necessary legal planning and work to make officially-licensed anime goods, or can forego legality and make illegal knock-off goods – and few consumers either care, or have the capacity to tell the difference between the two. Remember that poster you saw at an anime convention that didn’t have the official series logo for the animation it portrayed? Well, that poster wasn’t an officially-licensed product and was subsequently illegal for the distributor to sell without at least one license.

My point is that it’s so freaking hard to otherwise tell in today’s world what’s legal and what isn’t in merchandise without diving into a massive amount of legal paperwork and semantics. That’s something we aren’t interested in, and now that you as a potential consumer may know about this, it may not be something you want to risk dealing with, either.

​You also have to factor in that Otaku Central doesn’t want to convey in any sense that we’re giving either certain anime series or certain publishing houses preferential treatment in what branded merch of theirs we could potentially try to sell; and then, there’s the debate about markup percentage, and how a non-profit organization should actually handle provider markup, and so on.

If we went down this road, it could get really ugly really fast, and have a pretty high chance of tarnishing our name due to either a misstep or false accusation/assumption.

Negatives aside, there are a number of positive things to doing our own merchandise. For example, it gives us 100% control over what we do and how we can use it. It gives us direct control of what we have – and liberates us from any kind of contracts, sales agreements with other vendors, or other things that could chain us down to the ground.

And direct control is what we want. I will briefly mention to you (without naming any specific names) that the concept of Otaku Central is something that some organizations wanted to “buy into” for the purpose of future ownership or exploitation options, and this helps reduce the “footprint” we have for that to potentially happen down the road.

We are who we are – not what some other for-profit organization wants us to be.

Charge A Reasonable Price For Goods, With Low Markup

This first begs an explanation of the way that this fits into Otaku Central in terms of where the profits from it go, and how we plan on using them.

Merchandise for us is intended to be something that we either break even on financially, or incur a slight loss on in terms of human labor necessary to make the system work. To be honest, it’s something that we use for a combination of publicity, because users have asked us to have it, and because we can make a change with it. We aren’t in it to make money.

That being said, there is a markup that we will add to our items from the wholesale cost we purchase them from our producers for. This markup will fluctuate a little bit depending on sales, turnaround time, and how much we have to keep in inventory at any point in time to strike a favorable balance between demand and volume discount rates from our suppliers. For the most part, this markup is used to help cover the labor costs of our staff in the area of merchandise design, inventory management, etc – and this portion of OC functions separately than the rest of OC in terms of the money it works with, because there are a number of variables that otherwise need to be accounted for.

The markup will typically be between 10% – 20%, and the majority of this markup covers our work spent to always offer products with free shipping; if it’s ever higher than this, it’s likely because the item in question either has a really low turnaround percentage relative to time, or because it required a large amount of development time for us to produce to justify an increase.

Having a business model where we’re only trying to break even, at best, on our merchandise also empowers us to sell items at in-person events (such as expos and conventions) for a price even lower than what you’d find on our website. This helps offer an actual incentive for buyers to pick up merchandise at expos, simply because it’s offered at a better rate than they’d normally find – and in business terms, the boosted item sales numbers almost always account for the reduced amount of markup – so it evens out in the end for us.

Tired of seeing T-shirts for sale at anime conventions for over three times the price that they’re offered at (for example) on Amazon? Yea, we were, too.

Using free shipping on all our items also empowers us to sell items at anime conventions with the option to ship them back to the purchaser’s residence for no additional cost. So, if you buy something from us, you can take comfort in knowing that you don’t have to haul it around the rest of the convention floor with you – we’ll get it to your doorstep in two business days without any additional headache.

Be Financially Accountable

It amazes me walking around the dealer’s floor room at many anime conventions how few dealers actually have the capacity to offer a receipt for their sales. This raises multiple concerns in my mind when I see it happen:

  • Does the dealer have an actual LLC or S-type business license from the state they’re operating in?
    • If they don’t, don’t expect a darn thing in terms of refund accountability – because even though they’re presenting themselves as a business at the convention you’re at, they’re really NOT, and the item you bought from them is something they’ll argue was a private-party sale for the sake of taxes, which is highly illegal based on the context they did it in.
  • Are they doing accounting-style bookkeeping for the items they’re selling?
    • If they aren’t, this denotes two things. Firstly, they don’t manage their own inventory numbers – this implies that they either purchased their inventory at such a low rate that they aren’t worried about doing inventory checking on it, or that they don’t think they need to – which further re-inforces that they aren’t actually a legitimate business presenting goods, and are filing everything as private-party sales on their taxes. Secondly, it shows that there’s no liability on their part for what you just bought from them – it could be defective or broken, and you have no way of getting your money back on it simply because there’s no paper trail that they sold it to you.
  • Is the merchandise they’re selling even legal?
    • Remember what I mentioned earlier about officially-licensed posters always having to have the official logo from the animation they’re about in order to prove their legal authenticity? Well, for example, if that logo is missing and there’s no paper trail to prove that you actually bought that item from that “dealer”, then the liability in court for you owning an illegally-produced poster falls on you​. Granted, the odds of you getting taken to court over this are incredibly low, but in OC’s case, we have to be upstanding beyond a shadow of a doubt in this area.

For Otaku Central, we have to keep accounting records of all our sales not only because it’s legally correct, but also because – as anyone who’s taken any measure of bookkeeping education will attest – it provides you with invaluable data in terms of managing your inventory, running reports to find out what’s popular and what’s not, and helping you know what to offer in the future.

While we do open up our inventory options to majority vote to an extent, we also want to know what’s popular so we can look into options for catering towards that down the road. As low as our markup percentage is, things like this give us absolutely vital insight so that we can follow trends with minimal error – which is what empowers us to sell things for as low as we can.

When Will Otaku Central Start Doing Merchandise?

2020 at the earliest.

A number of things have to happen first, such as setting aside money to empower this as well as finding the right people to drive it. We also have to get “off the ground” as an organization, which will happen towards the tail end of 2020.

As with many aspects of our organization, we’ve definitely taken criticism from outside parties that our timeline for things keeps getting pushed back further and further. I’ll be the first to admit that we’ve done this before on multiple occasions.

Part of the reason for this is that the scope of what we’re going to encompass as an organization has exponentially grown beyond what we’d originally anticipated, and our timeline was pushed back further each time this happened. Another factor is that the total amount of staff we’re planning on having at our official go-live point has been progressively reduced because the amount of training and personal drive our existing team has has slowly skyrocketed.

We learned that in our case, it’s a massive help to have an incredibly-talented core team for Otaku Central as opposed to having a larger highly-distributed team of workers – especially with our pay bracket structure. It allows us to function much more cohesively as well as fire on “more cylinders at once”, so to speak. Since this is the direction we’re moving in, it takes additional time to acquire the training the core OC team needs to get to this point – but it will massively pay off for us in terms of operational efficiency when we get moving.

Thank you for your patience with OC thus far – it’s something that the rest of the OC staff share, believe me.

And, that patience is what’s setting us up to, quite literally, become the anime revolution we’ve advertised ourselves as.

Caleb
Caleb Huggenberger is a 31 year-old systems engineer, owner of the non-profit animation streaming service 'Otaku Central', and Eastern culture enthusiast. Outside of long work days, he enjoys electronics engineering, cast iron campfire cooking, and homesteading on his acreage in the Indiana countryside.

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