Myron, I like to go through the past week's news articles during the weekend. That way if I missed something, I'll know what I missed.
I thought you might enjoy this article:
NEW YORK (Dow Jones)--During the brief moments when John Johnson shares his workplace with Ken Griffey Jr. this spring, the Seattle Mariners center fielder will be under heavy surveillance.
As distribution manager for a United Parcel Service warehouse in Louisville, Ky., Johnson will be responsible for a slew of Griffeys, Frank Thomases and other Major League Baseball stars when new trading cards bearing their images are shipped through his facility.
"They're in sight of my office with a camera trained directly on them," says Johnson.
Card collecting has moved from the realm of childhood games to big business over the last decade, as shown by the $640,650 auction two years ago of a 1910 card of Honus Wagner, a Hall-of-Famer who played for the Pittsburgh Pirates.
The boom has increased the potential for theft and fraud as the cards journey from printing plants to hobby shops. That's why arrangements such as the one between Johnson's UPS Worldwide Logistics unit and Upper Deck, a trading card company, have become necessary.
Privately held Upper Deck, a relative newcomer to the card scene, hires UPS to protect its cards and deliver them all on the same day each time they are released. Once they reach the UPS Louisville warehouse, Johnson keeps company with the cases of cards always sitting within view of his office and an accompanying surveillance camera.
The warehouse itself is gated, with security guards on hand as sensitive shipments - ranging from Rolls Royce tires to computer games - arrive for a brief layover before resuming their journeys to their final destinations.
"Any product we keep, we know the total inventory count," Johnson says.
It's a necessary precaution because any package could contain a Griffey card - considered among the most desirable new issues by collectors and dealers - or any of the potentially valuable rookie cards that will begin entering the market later this spring. Given the right conditions, such as a player's popularity or performance, a pack of cards with a retail price of $1 to $3 could eventually yield several thousand dollars on the resale market.
Card companies like Upper Deck and Marvel Entertainment Group Inc.'s (MRV) Fleer/Skybox International unit don't want "leakage," or theft of decks at some point between production and arrival, because it devalues the secondary price of the remaining cards. Although card companies don't profit directly from the resale value of their products, there is a consensus that a good secondary market makes future new issues sell better, said Dan Hitt, manager of sports data publishing for price guide publisher Beckett.
All major card makers use UPS, and its spokespersons admit that during the late '80s boom of baseball cards, a few "bad apple" employees helped themselves to the boxes being shipped to hobby stores.
With the exception of Upper Deck, which makes its own cards at its California headquarters, card makers say thefts also occurred at their subcontracted printing plants as the cases sat idle, waiting to be loaded onto trucks.
Security measures have reduced theft to less than 1% of their product, manufacturers say. But it still occurs: One New Jersey bust in December netted baseball cards stolen from Topps Co. (TOPP) worth an estimated $250,000, according to a private investigator hired by the company.
The increased value of baseball cards has forced companies to hire private investigators either directly onto their staffs or as subcontractors to trace the path of missing cases, and UPS has changed the way it handles the shipments. Both card makers and UPS refused to provide great detail about the way the cards are protected, citing security concerns. But one major change is the packaging.
"No one puts 'Baseball cards: Steal Me,' " on the package anymore," jokes Robert Godlewski, a spokesman for UPS. Instead, the companies rely on plain packaging, often with shipment codes but little identification showing what's inside or who the manufacturer is. "The other thing is the security tape that we can use (on the packages). It indicates if the package is tampered with, and if it is, we can backtrack and do a sting."
Most major companies have trimmed the amount of time packages spend in storage, preferring to ship the cards as soon as possible after production. They rely on fewer shippers, preferring to streamline the number of eyes and hands that come in contact with their products.
Card makers also have hired their own investigators and beefed up their loss-control departments over the last 10 years. Fleer/Skybox hired a subcontractor, former private investigator Warren Hensley, to direct its security force in 1991. In May 1997, investigators from the top four card manufacturers gathered in Hensley's office to share tactics and discuss common problems. Many of the card makers use the same printing plants and distributors, so by coordinating their efforts, Hensley and his peers increased plant scrutiny.
The changes? Hensley's not talking.
"We do our best to keep things under wraps. The less we talk about how we do it, the better off we are," says Hensley.
Mike Robinius, operations manager for Dallas-based Pinnacle Brands, a unit of Acadia Partners, says different security measures are taken depending on the relative value of the series of cards being produced.
"Sometimes, depending on products, we put extra security in the manufacturing plant," Robinius says. "We also make an effort to put minimal markings on the box, so it doesn't say sports trading cards all over it. Four years ago we had Pinnacle's name on the boxes, and it was just an advertisement, 'Here I am, take me.' "
The tight security that surrounds the cards' distribution is especially necessary for a product that is produced in limited numbers. When a box of sports cards goes AWOL, companies can't turn back to their stockroom and grab another, unlike other merchandisers who mass-produce items like caps. Because companies need to maintain their cards' images as collectibles, only predetermined amounts are made, and most get ordered up quickly.
"In the good old days, when Topps was the only manufacturer, they produced a couple million cards," says Hitt, of the price-guide publisher Beckett. "Production numbers recently are much lower, because the belief is that that will tend to increase the cards' values in the secondary market. Manufacturers are encouraged by dealers and collectors to continue to push the envelope with a lower print run. Some sets now have print runs of only one card."
When news hits collectors that some of the cards have been pilfered, either at the printing plant or during transportation, the secondary-market prices deflate, said Hitt. Some collectors stay away from the affected cards because of legitimacy concerns, while others worry that the market will be flooded with manufacturer replacements, diluting the price.
"In many cases, it's just rumors" about cards gone astray, Hitt says. "But that can hurt manufacturers anyway."
If the cards arrive at hobby shops late - or not at all - companies are sure to get an earful from the proprietors. Joe Aviza, owner of A to Z Sportscards in Derry, N.H., can lose loyal customers to another dealer if he doesn't have the hot-market items available on time.
"Everyone has to have a fair chance to sell the product at the same time," says Aviza, who is a long throw from the UPS distribution manager in Kentucky who protected the cards. "If mine was sold to me a week earlier than everyone else, people would come to my store and wouldn't go to my competitors."
- Lynn Cowan 201-938-5451; lynn.cowan@cor.dowjones.com |
