RATIONALIZATIONS OF A SPENDTHRIFT.

I've mentioned before, the time to stock up is during the lulls, not the booms. One of the reasons this happens is because my wholesalers, who are also enduring a lull, are putting out some pretty good product at a discount. If you have the cash -- it's a great time to be a contrarian.

The kicker, for me, is that I need to be certain to pay myself back when business picks up again.

I've also mentioned before that the store, and I believe most specialty stores, needs at least a 40% markup to survive. But I also believe that I don't start making a real profit until I get to more like 50%. Since only about half the product is offered to me at 50%, and since it is the most unpredictable and least efficient sell-through (comics and graphic novels), and since the other half of the product I pre-buy averages out at about 40% markup, my overall markup is more like 45%; assuming I'm not trying to add or build a new product line, and that I'm selling what I'm ordering, and that not too much of it gets damaged or stolen.

In other words, nearly impossible to get 50%, and in fact, usually works out at 40% or less.

So how to make money?

There are two choices. Either I cut back to only that product that makes 50% margins, and I order that very tightly so that it sells out. Obviously, that would cut my sales in half or more. Even at the full 50% this isn't survivable.

Or I actually buy MORE product. The periodic sales that my suppliers offer probably average out at about 60 to 65% margins. But the lists are full of marginal product, mostly stuff I passed on the first time. Why would I buy that?

Because a lot of it will sell, nevertheless. While my store is a reflection of my tastes, my tastes are not a reflection of the overall public.

The best example is one of the first I noticed: I got a t-shirt in by mistake that was the ugliest thing I'd ever seen. In the same shipment I got a t-shirt I did order, that I thought was classy and cool. Guess which one sold first?

That has happened so many times, I learned that there is a ton of stuff out there that I'm simply missing. Yet, it would be pretty dangerous to buy that stuff at full wholesale -- following my own instincts is still the best overall policy.

Something that I thought about trying, but passed on the first time, which is offered for nearly twice the discount? That's worth trying. Because I'm diversified into 8 product lines, I can almost be certain that at least one or two of those lines will be on 'sale' from one of my suppliers on any give week. Overall, this stuff doesn't sell as well as the pre-ordered product (it's on sale for a reason, after all), but just enough of it sells that all things being equal, its a wash. I make about the same, even with the discounts, as I do on the stuff I originally chose.

So why do it? There are five benefits that I can see.

1). It helps to have a constant flow of new material to keep peoples interest. Discounted product can add as much as 25% to what comes in.

2.) Satisfying new customers. Just cause I didn't like it, doesn't mean it isn't someone elses favorite thing. By ordering outside my comfort zone, I sell stuff I wouldn't have sold otherwise.

3) Great way to build inventory at less risk. As I've said before, 80% of the inventory in a store is filler -- the stuff that didn't sell. But you have to have it. Why pay full price? And why not constantly change that filler with new material, even if you have to take the old filler and put it in the basement. I guarantee that 80% of the stuff will sell eventually, even the stuff not actually stocked on the floor. Someone will say, "Gee, I always loved those old S.F. puppet shows like Thunderbird." And I'll say, "Funny you should say that, cause I have a couple of books on that."

4. Great way to discover something that actually does sell well, but which you were unaware. You need to experiment constantly, and if you can do it at a better discount, that reduces the risk. (Most experiments fail.) It's fun to get it in, opening packages is just like have a birthday every week.

5.) There comes a time when higher sales mean I can get the same overall gross profit even with a lesser sell-through. So the risk is somewhat compensated by increase in sales.

My theory is that this helps bring my overall profit margin to closer to 50%. I never quite get there, but I keep thinking someday I will.