Sunday, August 31, 2008

Buying over and under trends.

I feel as though over the years I've become pretty good at detecting trends. Maybe because the product I carry is so trendy.

I have product that gets hot for awhile, and then completely dies: Beanie Babies, Pogs. Stuff that is hot, then cold, then hot: Magic. Product that is super hot, and then trends down to a low level: Pokemon, sports cards. Stuff that has trendy waves but stays pretty solid: comics. And even product that completely dies off, and then comes back. Dungeon and Dragons.

So it's really important that I gauge the trends correctly.

What's I've learned to do is: buy over the top of the trends, under the bottom of the trend.

This will take some explaining.

What set this train of thought off was that the last week of August has been just awful. This has happened pretty much all this year. I've asked other comics, game stores, etc. if this happens to them, and they say no.

Maybe they don't keep as detailed records as I do. But if they are telling the truth, I need to figure out a reason for this phenomenon.

The only thing I can come up with, and this has always been a tentative assumption until something better comes along, is that enough of my regular customers are having trouble making their paychecks reach the end of the month, that I'm kind of left hanging.

Tourists shouldn't fall off because it's the fourth week: indeed sometimes I see a surge at the end of summer from tourists. 'Rich' people shouldn't fall off spending in the final week, either, and I'm assured we have such people around Bend.

So, it's the working stiffs. Who just happen to be most of the people who subscribe to my comic lists.

I've lost a bunch of strong subscribers to jobs out of town. I've gained a few smaller subscribers. So that is another sign that the working stiffs are having trouble.

Which made me realize that my sales during the last four strong tourist months, December, June, July and August, have been pretty good. Down only 4.5%, from a very strong, high product buying year.

But my sales in the non tourist months have been awful. Especially in October and January, probably the two slowest tourist months of the year.

So...I'm going to assume that this fall is going to be terrible. This Christmas will be O.K. and next spring will be awful.

Why would I be so negative?

Because it's important that I arrive as estimates that are ahead of the curve.

Look, many businesses could survive at lower levels of sales. They cut expenses, they order correctly, they hunker down. doesn't work that way. Because most people are reactive. They have a bad month, and they cut expenses. They have another month, and they cut expenses. And so on, always riding the trend down. And losing money every step of the way.

So it's a double whammy. Not only do they end up at a lower level of sales, but they're much weaker arriving there.

So it's important to see the trend and spend appropriately.

When the trend is upward, you might only earn, say (totally made up figures, folks, don't read too much into it) 15k and spend 17k, but if you make 18k the next month and so on, the damage is ameliorated. You error into the upside of a trend, and increase your sales.

That is essentially what I've been doing since about 2002. Pushing sales for all I was worth, just trying to break even. Keeping my overhead the same, but increasing my inventory. This is what I call going over the top of the trend.

I thought I'd have a couple years to take profits, but couldn't resist one more year of adding new books and boardgames. And looking at my sales figures, I'm not too sorry I did.

So I've had more like one year of taking profits, and a bit of profit taking on the way down.

Take the above figures: Let's say, instead, that I made 15k but only spent 13k. And that the following month, I earned only 14k and so on. This is what I call coming up under the trend.

This may hurt sales, but you can't buy sales in a downtrend.

You can't really fight the trend, only adjust to it.

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