Friday, July 20, 2007

Pegasus, too.

I went through my brain-storming session, where it's important not to be negative.

I've been going through my motivation phase all along, and will eventually really sit down and decide -- even if the project pans out -- if I really, really want to do it.

Now its time to look at all the minuses.

Minus One: Really high rent. Yes, it's less per foot, but it's 2.2 times the space.
It's higher than the spaces nearby, it's higher than my wife's store which is actually a better location. I understand the landlord has to pay for his improvements through higher rent, but that shouldn't be MY problem. I've already gotten a bunch of concessions from him, and got him to lower the rent a bit. I'm pretty sure that he won't want to go down too much from where we're at. I've tried to arrange it so we'll be open for a Grand Opening in November, be open during the busy holiday season, have the concessions kick in during the slow winter months. So I'd have a couple month before summer to absorb, and then into the busy season.

Minus Two: The visibility isn't really equal to my wife's. There's trees and cars blocking the vision from the intersection. The space is still raw, and I'm having to visualize the improvements.

Minus Three: The cost. Well, duh. But once I decided I wanted to keep both stores, I realized it would require a real investment in inventory. Plus, if I'm going to do this at all, I want to store to look nice. As long as I'm buying new fixtures, I want them to be modular and consistent.

Minus Four: Employees. Always a risk. I'll have four months. I'd probably hire 2 or 3 different people at 20 hours a week and distribute them through both stores, and see which ones are really interested in continuing.

Minus Five: Work and stress. I had a moment of clarity this week. I was exhausted, dropping things at the store because I was trying to hurry, not quite keeping up. That's O.K.; it was Wednesday, shipping day, and it's always that way a bit. And then yesterday, a normal day, feeling overwhelmed by customers even though the sales didn't really reflect that. And then the thought of ADDING to that -- sobered and scared me.

The cost of walking away. The existing problems at the current store continue. Future problems will still have to be dealt with. Feeling foolish at changing my mind in front of the whole world. De-motivating my current employee who seems really jazzed about being manager. Having to tell the landlord that I've changed my mind -- not wanting to leave him hanging. Because of that, I probably only have 10 days to 2 weeks to make a firm decision. Or at the least, to tell him I'm wavering and he should continue to market the space. (I sort of assume he's already doing that, actually....)

I'd basically have to do about half as well in sales as I do in the downtown store, with twice the space. The economy of scale, the savings in buying merchandise, is such that it pencils out at much lower numbers than the original store. But I don't want to do it half, assed either.

Because I'm leaving the P1 unchanged, it will probably take much, much longer for P2 to gain enough of its own customers to be profitable. But once it does, it will be addition to the customer base instead of substitution. There will be some synergy, some money spent by current customers in both stores, but I'm not counting on that. I know that Linda's store, while paying the bills from the very beginning, also took a year and a half to two years to really get solid.

I know that our little 300 sq. ft. space in the Mountain View Mall generally did only about 60% of the downtown numbers, non-fad years, despite all the foot traffic. Christmas brought that up a bit, but it certainly shows that a second space isn't a sure thing when it comes to sales.

Those are the negatives as I see them. Pretty intimidating. So I'll need to be clear that I will have ways of overcoming those negatives, and the desire to work it through.


IHateToBurstYourBubble said...

Hmmm... I would also wonder about the Landlord Confiscator Syndrome: the propensity of landlords to see you doing well and think, "Hey, my location is basically making that possible. I'd better raise the rent to 200% of what that guy is making (which is usually overstated in their mind anyway)." It's a miracle it hasn't happened to your downtown store. Happening to everyone else downtown. I would find & talk to the last tenant.

I would also worry about the employee thing. Been there, done it. Finding one good one makes it seem like the entire labor force is easy-cheesey. Uhhh no. Give everyone a drug test... half will walk when they hear that.

Plus, you've driven everyone else under... or at least outlasted them. I've done the "Succeed & Expand" thing, and it's very tempting... but "Retrench With The Core" has always worked better for me.

Not to dash your hopes, or even suggest that you listen to me (a bad idea), but I am HYPER-CONSERVATIVE (and that's an understatement) when it comes to business expansion. I don't even know the business or industry, but I would ride the wave of easier competition on your downtown gem....

That's just me.

NOW: Please disregard the above advice.

Duncan McGeary said...

That's good advice, and in line with my thinking.

If it wasn't for the uncertainty of downtown, I'd just hunker down. I did finally talk to my downtown landlord, who seems surprised that my lease was more than half gone.

She basically said I was paying lower rates BECAUSE I was the only tenant who hadn't had improvements made.

But the store probably can't go another 10 years without renovations. So, I may have to pay for them through higher rents.

She was still bullish on commercial prospects, though she admitted that maybe housing was getting a little soft.

But the best news to me, is that there doesn't appear to be any plans to tear down the building or add another story, or something. That was my biggest worry.

I've expanded before, and while it worked in the short run, because they were based on sports cards, they turned into albatrosses. But even at the end, the Mall store was profitable, and we sold it to get our debts down more than anything. (And also because it was becoming clear to me that the Mall was doomed....) If I may pat myself on the back, it's an example of me seeing future patterns developing and reacting in time to do something about it. In talking to the other merchants in the mall, none of them saw it coming...which was part of the problem...

I'm also conscious though, that if you want to be the main comic guy, or card guy, or game guy, you HAVE to be bigger. Right now I feel in jeapardy of someone with more money than sense opening a bigger space than me. I don't think in the long run they'd find Bend an easy nut to crack, but that wouldn't help me much in the short run. I only have 1000 sq. ft, trying in effect to be the main supplier to 7 different product categories. That will never change.

I've also had the experience of the last three years where every single inventory improvement resulted in sales -- until I simply can't pack anymore material into the store.

What would happen if I had twice the space? (Or functionally, three times the space...) I could both pursue inventory to the highest performance, but could also display current inventory much more effectively.

I have timeline that makes sense, and extra cushion in the downtown store, and cash. Even credit, if I had to fall back on it.

And my wife is not only O.K. with it, but is actually encouraging me. (Ulterior motive on her part -- she needs me to take her excess books....)

Bewert said...

Your last comment may be talking yourself into it. Not always a good sign...

Is there no way to expand your current space if adjacent stores close? There is an economic firestorm coming our way here, and I would err on the conservative side. Unless you do a majority of your sales over the web, ala Webcyclery.

BTW--on the subject of the Cascade Classic closure and other events downtown--those are usually the only times I go downtown. I live above Old Mill, off Reed Market by two blocks, and generally shop at Fred Meyer for basics. Downtown is pretty yuppified for me, so unless something unique is happening I don't bother.

But then I've never had any interest in comics, so I'm not representative of your market.