Saturday, September 8, 2007

I'd rather talk about business, you know. But everything is so routine right now. Contentment writes a blank page.

Up until spring, I was still in expansion mode. Still adding product. Then all spring, I was trying to fine-tune my budget. Then summer, was all about sticking to budget. Almost went off track by opening a second store, and spent almost 6000.00 on product I hadn't intended to spend. But, still made a profit this summer.

If I can turn a small profit in the fall, I'll be O.K. And then another attempt at profit at Christmas.

See what I mean? Boring.

About the only thing I can really talk about is What product I choose to order and When. For instance, I've taken to ordering standups toward the beginning of each season.

Standups are cardboard cutouts of popular figures. People think they're free, sometimes, because they see them at movie theaters and checkout stands, but no, they're made to be sold. Some people are horrified about the price point, others think it more than fair. What's interesting about them is they're unlike anything else I sell.

For instance, almost ANY other product I sell could probably be found cheaper on the internet. But standups are so bulky, and yet relatively low priced, that by the time you pay postage, you can buy it just as cheap at my store.

You might be able to find a single standup at about 5.00 over my cost, but postage would add a minimum of another 35% to the cost.

It's one of the reasons I still carry the damn things. They're bulky, and expensive to ship, take up a huge amount of room for the profit I get. I've noticed that almost no one else does them, or does them for very long. In a way, they are a perfect product for me.

No competition, even from the internet.

Profit margin is average.

They fit the theme of my store.

I'm willing to take the time and expend the space to carry them.

I have to order a minimum of a dozen at a time. If I guess wrong about the popularity of a character, I end up sitting on them for a very long time. For instance, for some reason I ordered Roy Rogers and Dale Evans. Meanwhile, I sold a dozen Johnny Depp Pirates over a couple of orders. So... Do I just order Johnny Depp and John Wayne....but wait, I like Bogart and Monroe, too, even though they sell much slower. It's a perfect long tail product.

So, it's a tricky business. I sell them for 35.00. I could make a decent profit at 25.00, BUT I have to sell 95% of what I get in, and that doesn't happen. Plus, they take a good long while to sell 95%. At 35.00, I only need sell, say 80% of them, which affords me the occasional blunder.

Why am I talking about this? Because it's an interesting case study of price points. It seems like I used to get constant complaints about my 25.00 price. So much so, that I found myself apologizing and explaining. "They're made to be sold, you know. I have to buy them in bulk, and they are expensive to ship and take up alot of space...."

Now, I knew that I was spending about 6.00 per figure buying them in bulk, and that postage would be as much as 12.00 a figure if I dared to buy them in singles. I knew they took up all kinds of room, and that I almost always had a figure that wouldn't sell, and that they were sporadic sellers.

So I decided to quit carrying them. I went about six months, and then thought, I'll try it one more time, but instead of charging 25.00, I'll charge 35.00, and I won't apologize or explain, and if they don't sell, then out they go.

So what happened? They ended up selling at almost exactly the old pace, but because they were 35.00 they were worth carrying, when at 25.00 they weren't.

On the surface 25.00 should have been enough markup, and this is sometimes all people see about price -- but sometimes other factors weigh in that are equally important. It makes sense; if someone is going to object to a 25.00 price, I won't sell at 20.00; yet if someone is willing to buy at 25.00, they probably will buy at 35.00. Even if they buy slightly less, I can afford to carry a wider variety at the higher price point, which brings up the turnover rate.

Selling them for less, doesn't help at all.


IHateToBurstYourBubble said...

You should (may?) realize that whe someone buys one of these, it is almost certainly a parent for a young child. I have a God-awful Darth Vader stand-up cutout and curse the thing everytime we move. Only been twice, but still...

Of course it's folded up in storage as it has been 95% of the time I've owned it. These are pure impulse items that will sell the same at $15.... $25.... $35.... $45... or $55. I have absolutely no idea what I paid, I just know I'd pay double what I did pay. It was for my kid, for their birthday. Didn't matter what it cost, almost.

Anonymous said...

Thanks for the story of standups. I've never bought one but it's interesting to hear about your pricing and product decision processes.

Duncan McGeary said...

thanks, jeff. I really want to do more 'case studies' kind of entries....