Friday, October 31, 2008

What about books?

What about my wife's store, which carries nothing but used books? You might ask.

Bear with me, as this will require explanation, and perhaps some quibbling over terms.

I think there are two different types of specialty stores.

The first kind is the store that carries a product that only a small fraction of the population is interested in. This is more or less the kind of store that I was talking about in the previous post, the kind of store that I am and am accustomed to.

The other kind of store is the kind that carries a 'commodity' but carries a specialized selection of a commodity.

A commodity is a product that has a wide appeal -- say more than 20% or 30% or 50% or 100% of the population will buy -- bikes, shoes, pants...and I would maintain, books.

The higher the percentage of the populous buys a commodity, the more ways specialty stores can slice it up.

It's different dynamic and one I admittedly don't fully understand.

But based on my wife's store experience, it is a bit easier to maintain a small percentage of a larger group, than a large percentage of a smaller group.

Specialty and general relativity.

Specialty stores contain a paradox at their very core.

If the specialty is successful it will become so ubiquitous that it's no longer special.

Almost by definition, a specialty store will appeal to the hardcore enthusiast. That's why it exists.

The trouble is, while only some 'soft' (moderately interested) customers will become hardcore, almost all hardcore customers will eventually become soft.

The same holds true of the specialty itself. Whatever increased interest impelled a specialty store to open will start to become diffused. If a specialty store is successful, it will spawn copycats. Eventually, if the specialty becomes big enough, it will attract the attention of the chain-stores.

The more interest, the more product; the more product, the cheaper the competition and less "special" it all seems. In a word, supply ALWAYS catches up to demand.

At a guess, most specialty stores -- be they sports cards, or scrap book, or coffee shops -- have about a 5 years span when they are the main focus; but very few can maintain that for 10 years or longer. If the interest is strong, then the specialty is diffused, if it weakens, then it becomes harder to support. It's almost impossible to keep a -- one on one -- correlation between interest and support.

At the same time, a specialty store is almost required to carry 100% of the product available in that specialty, or at least a sample of each thing. This, in order to get say 80% of the customers. This is a valid business model, as far as it goes.

But if the customer base drops to 70% of the customers, the 100% full-service, 'all things to all people', model becomes harder to maintain. So the specialty store cuts from 100% support, which means that even fewer hardcore will stay customers, and down they go.

I finally arrived at a survival mechanism where I attempt to carry as much product as I can to attract 20% of the customers of a specialty. The hardcore are never terribly interested in my store, especially while they still have the option of going to a full service specialty store.

I will support a specialty 100% as long as I'm getting 80% of the business. Comics, almost by accident (bubbles burst, difficult business conditions) has managed to maintain a workable equilibrium. The mass market mostly hasn't figured out how to do them. (But I'm constantly aware that this could change through competition.)

But just about everything else I carry is predicated on picking up the casual customer, sometimes because they wander in, sometimes because they're in my store for something else, and sometimes -- and these people are golden -- because they stay loyal thick or thin. I think of myself as a pop-culture general store.

Over time, I'm able to carry much more of the product than I need to maintain that casual customer base; I suppose I'm always dreaming I'll get the hardcore customer back when they have no other options.

Usually, though, the hardcore customer simply stops altogether.

When the base of support for a specialty starts to sag, the hardcore customer is often contemptuous. They feel that they have options -- other specialty stores, the mass market.

But by becoming so diffused, the specialty starts to fail up and down the line. What is left, usually, is a couple of shelves at the mass market, and a few stores like mine which still carry a smattering of product.

In a sense, if I carry 8 different product lines for casual customers, at the 20% rate, I pick up the equivalent of 160% of the possible customers. Plus I can constantly adjust the level of support for each product line. It's a lot more work, it required an expertise on many more levels, and makes the store packed from top to bottom, (it requires more investment of time, energy, space, or money), but it also allows me to stay in business.

I didn't arrive at this conclusion until I'd seen one specialty after another collapse, and I was too stubborn to give up completely but too smart to keep trying to fully support a specialty that didn't return the favor.

I've always said, a specialty store will always do better in the short run, but the general store will always do better in the long run.

Sorry this is so wonky, but this is the kind of 'mom and pop' stuff that I never see written about anywhere else.

As goes the city, so goes business....

If Bend is going to have a protracted downturn, which I'm convinced we will, then how do I approach coming here every day? To I put lipstick on the pig? Do I pretend the pig isn't there? Or do I slaughter and eat the pig?

So far, as 'negative' as some people have said I've been, if anything I've let the optimistic, hope for the best, part of me control my message, and my planning.

While the more logical, downbeat part of me was sort of nagging, then shouting at me.


I thought the article in the Bend Bulletin this morning about the Bend Reserves Fund, was a perfect representation of the "Hope for the Best" psychology that dominates at the beginning of every bubble burst. The unwillingness to believe, the inability to change. While your reserves get whittled away.

Actually the emergency that the reserves were created for, hasn't really even begun. We were well within the time range when changes in behavior could have changed the outcome. There have been some bloggers who have been saying for a couple of years that the BAT wasn't working, that Juniper Ridge needed to be scaled back or mothballed.

The 'Who could have seen it coming!' really doesn't wash.

Pay as you go. They should have made the decision to move to the Bulletin site BEFORE they bought the land. They should have gone to the voters for funding of the BAT, BEFORE they bought the buses. They should have realized that they were dealing with crisis management BEFORE they funded the dreams of "Bend 2030."

I can almost guarantee you that most businesses in Bend approached this downturn in almost the exact same way as the city, though, frankly, probably most of them never really had the reserves in the first place. On the other hand, most of them can make changes much quicker, and hopefully don't have white elephants like Juniper Ridge and BAT dragging them down.

Thursday, October 30, 2008

Against the grain?

Was interviewed on Tuesday by Ethan Lindsey of OPB, about Bend business. Fairly long interview, but I know that only a few seconds may end up on air. Still, it's seems like walking onto a minefield every time I do one of these stories. A few mentions in the paper can't hurt too much, but being broadcast just allows me to make a bigger fool of myself.

Anyway, one thing that Ethan said has been gnawing on me ever since: Now, remember, this is my memory, and if I'm getting it wrong it isn't Ethan's fault, O.K.?

He said something like, someone had told him that Bend was the biggest(?) town more than 100(?) miles from an Interstate in the U.S.A.(?) Oregon (?).

Vague, I know. But the basic concept is there.

He said that some people had commented that this isolation may explain Bend's vibrancy.

This seems a little backward to me. If Bend has grown, it was in spite of the isolation, not because of it. After all, if isolation was the deciding factor then there are many many small, isolated towns in America that seem to have missed it.

No, I believe we have gone against the grain.

And I also think that you can go against the grain for only so long before you get tired of the splinters. Much easier to run your hands smoothly down that wood handle with the grain.

Funny the notions we pick up to explain things.

Hits and misses.

I've become totally addicted to the premium cable shows, True Blood and Dexter.

See, I missed The Sopranos. I caught one hour of it,once, and it was one of the best things I'd ever seen, so I know I'd like it. I haven't wanted to watch the bowdlerized versions, and haven't quite had the time to rent the entire seasons.

True Blood has one of the best depictions of addiction I've ever seen: the drug pusher is not standing on the corner with a sign around his neck saying, "Hey, Kid. You want a taste?"

No, he's a friendly kind of guy, charming, letting yourself talk yourself into it, with a few well placed bon mots.

But I have to admit, I'm getting a little tired of the 'stupid people acting stupid' southern gothic, Flannery O'Conner, atmosphere.

Dexter is a great show, too. The only real difference between what I saw last year on network is that the swear words aren't dubbed and -- like True Blood -- there is some nudity. Can't see much difference besides that.

So far this year, I've been trying out the new shows Fringe, which I'm getting very disappointed in, Life on Mars, which has great supporting actors and a bland lead, and -- I'm sorry, just completely missing the tone and feel of the early 70's. We taped the Mentalist and the 11th Hour, and have only this week gotten around to watching them.

The Mentalist is the real keeper, this year. Like the show, Life, it has a low-key charm, but rises and falls on its weekly plots. (last week was a clunker.)

11th Hour is kind of strange. More straightforward than I expected. Actually better than Fringe, in most ways, but I'm not quite hooked. I'll give a couple more episodes.

For existing shows, I'm continuing with Life, whose lite charm is starting to run thin, CSI: L.V. (the other CSI's are unwatchable); Heroes, which seems to be all over the place; House, the one show that seems to keep its quality up, with House being a bigger bastard than ever; Sarah Conner, Terminator, which isn't the big surprise it was last year, but still pretty good. And of course I'll watch Battlestar Galactica and Lost if they ever show up again. I've given up on everything else.

Wednesday, October 29, 2008

Huge sales = huge bonuses. But not profits....

I have always assumed that what was true on a micro level, small stores, was probably true on the macro level, large corporations. At least, certain fundamental principles and concepts.

Which is why I have always been skeptical of huge, out-sized profits, and the huge, out-sized bonuses that go along with them.

I've seen this happen over and over and over again through the years.

A new competitor opens, usually with the announcement that they will do business 'right' (thereby implying, I'm doing it 'wrong.') They are newer, shinier, with better inventory and cheaper prices; they are nicer and handsomer than me.

Soon I get reports about how 'well' they're doing, how much money they're making. They are expanding, buying a van, going on trips to trade-shows.

Inevitably, my customers will start to question me: why don't you do such and such, like they do? Look how successful they are!

(Not to get into details, but the answer to every 'why don't you' is always, time, energy, space and money.)

And then, the worm turns.

I start to get reports that "they don't have as much as they used to..."

Or..."the owner isn't there as much, and he's kind of grumpy...) (...and not as handsome, I presume.)

"They raised their prices...."

Heres' what was happening behind the scenes. They were taking those marginal profits and instead of reinvesting in the store, they were churning the money into more product that they turned over fast and didn't make a profit on which they took the money and churned it again.

Or they spent the money on themselves or on unnecessary flourishes in their store.

What they weren't doing -- reinvesting in the future. Getting a realistic margin that allowed them to replace inventory, pay the bills.

It's relatively easy to make short term sales, if you don't care about margins and reinvestment.

Random thoughts.

The huge uptick in DOW yesterday wasn't reassuring. It makes it look even more like a casino.

This election has revealed the HUGE gulf between the way I think and the way the 'Joe the Plumbers' of the world think.

While a poker tournament for charity could be lauded, I think gambling is fundamentally a flawed ethical activity. I'm shocked -- shocked! -- that someone who played (presumably) would actually steal the money....

Pronghorn has closed it sales office. Mothball time, folks. You hear that, city councilors? Probably time to mothball JunRidge.

"Is Flashback Cruz too big and noisy for Drake Park?" Err...what I've been saying. These special events have gotten out of control.

Oden out with a foot injury. Curse of Jordan continues....

Turned in my ballot yesterday, and felt a sense of relief.

Part of me expects my credit cards to lower their limits -- that's a pretty big chunk of money on the two cards if I keep them at zero. Even though I'm not using it, I still like to think it's available for emergencies. But part of me thinks they don't have the balls.

Funny thing is, I suspect they are MORE likely to cut my limits because I'm a good risk. If they can't get any late fees or interest off me, than they don't really lose anything. Combine all the good credit risks and lower their limits, and it will look as though they've lowered their overall risk. Meanwhile, the people in trouble can keep their limits because the banks can continue to collect huge fees and penalties. Sort of like the banks who are over their heads get help, the people who got bad mortgages may get help, and people who are gainfully employed often can't qualify for help. Topsy Turvy.

You know, let's keep rewarding bad behavior and punishing good behavior. Keep giving bonuses to the short term thinkers and firing the long-term thinkers. Keep bailing out the bad actors and ignoring the good ones. That should lead to...about what we see now?

Fascinating to me that the government bailout is so huge that it reaches down to the likes of Umpqua Bank and Cascade Bank. Fascinating too, that they look like they'll take the offer. Hey, I thought everything was hunky-dory?

You would have thought all the missteps and mistakes by the city council would have produced a 'progressive' slate of candidates. Instead, it produced the opposite. Candidates who seem to be even more closely aligned with the real estate interests. That's kind of weird. My first inclination was to vote out the incumbents, but given the choices....

Tuesday, October 28, 2008

"Resort" hotel, wink, wink, nudge, nudge, say no more

I don't understand.

Why do you lower a bond that was meant to guarantee that you'd build a hotel, because they tell you they can't build the hotel?

Isn't that the time to realize that the guarantee is even more important, and should either be enforced or raised?

What am I missing here?

1000th post.

1000 posts. A couple of novels worth of words.

I haven't missed a day so far.

Since I'm still a little less than a month shy of my 2nd year anniversary for Best Minimum Wage Job A Middle-Aged Guy Ever Had, I obviously have often posted more than once a day.

Actually, I'm peeved with myself that I didn't see that in time.

I could easily have hit a trifecta, if I'd noticed a little sooner. My second year anniversary is November 24th. It would have been cool if I could've hit my 1000 post on that date. But by the time I noticed, it was too late to keep my daily string going and align the two events.

Keeping the daily posting streak alive seems more important to me.

This has been a momentous month. Very unsettling, in some ways. We're halfway between summer business and Christmas. Both my birthday and my 25th Wedding Anniversary fell in October. My taxes due on Oct. 15. Of course, there's been the biggest election of my lifetime. A financial meltdown that is for the history books.

Interesting times.

Monday, October 27, 2008

Signs of the times.

Go, my friends, to and gaze upon the magnificently seedy mug shots of a guy who managed to total two cars in one day, a group of young losers who burglarized a restaurant and immediately ratted each other out, the two very, very scary dudes who kidnapped and raped a young man, observe the transient who tried to pass 5.00 bills (5.00 bills? Why not a 20.00 at least?) in a gambling joint. (Allegedly, all?)

Then go, my friends, to the front page of the business section of the Bulletin, which tells us in gigantic letters that it's BOOM TIMES! for some businesses, such a pawnshops and repo businesses and foreclosure servers.

A sign of the times, my friends, a sign of the times.

Sunday, October 26, 2008

Book Signing Results.

I did this book signing for Dan Parsons, who is a local artist on a big name title who deserves some recognition and if he's going to get it, my store is the venue.

It appears lots of people showed up; Dan was there until 6:00 still doing the free sketches, and even had to take some home.

In preparation for the 'book signing', I ordered:

40 copies of Clone Wars comic #1 @ 2.99 each.

Sold 7.

20 copies of Star Wars Legacy Graphic Novel #1 @ 17.99 each.

Sold 3.

10 copies of Star Wars Legacy Graphic Novel #2 @ 19.99 each.

Sold 0.


Paul, don't read this.

Here's what I see.

And it ain't pretty.

My friend Paul is always telling me I'm being too depressing, so fair warning, Paul.

Bend has a big hole in it's economy. The bubble burst, creating a huge crater, and there isn't anything in our local business and jobs to fill up the hole.

There isn't anything from the outside that will fill that hole. We're on our own.

The way I'm imagining it is -- everyone just got a 20% pay cut. All the restaurants, all the retail stores. Everyone else is going to cut back that much out of fear and uncertainty. Many -- those involved in the housing market -- will get a 100% pay cut, others involved in government, health care, schools, etc. will keep their income, but cut back in their spending.

Anyone who borrowed too much, or lived too much off their equity, will either leave town or quit or shrink back to living within their means.

The ripple effect will reach everyone. The money flow is being squeezed off.

The funny thing is, there seems to be little awareness that things have changed. Or that they have changed for the long run. The old joke, if you can keep your calm when everyone around you is panicking.... you don't know what's going on.

In all the financial shows I've watched lately, there has only been the most superficial comments on the 'ripple effect.' That people will lose jobs, that they will cut back in spending.

But to me, the 'ripple effect' is the whole enchilada.

The bubble wasn't just in real estate, it was also in the entire infrastructure. Too much of everything, especially businesses. And Bend was the epicenter of the bubble, and downtown was the epicenter of Bend.

Maybe businesses will be able to scale back and survive. But they have to recognize that there was a lot of easy money floating around over the last three years or so that has probably disappeared forever.

I've been saying for some time that this level of business was an illusion, a mirage. High end businesses and restaurants are going to need to come back down to earth, marginal businesses are going to have to get very creative.

Very early, some of us were wondering if we could ever go back to the 80's. Well, I never thought so. I think there is a good chance that the next 3 years will produce an entirely different mix of stores downtown. Ironically, the fact that people can't simply sell their businesses and their houses may actually help nail some of these people in place, force them to try to make a go of their business.

There was always an outside chance that people from out of town could move here and fill the hole, but I think that's unlikely now. Even if 80% of the inflow of wealthy retirees keep coming, which seems unlikely given what's happened to everyones housing prices, equity markets, and retirement accounts, that still leaves a 20% shortfall. (I think it's more the opposite, it will slow to 20% of previous levels....)

So that's what I see.

It isn't all bad. I thought this ostentatious way of life was out of bounds. A little luxury here and there was fine, but it got way beyond that.

If I sell a 1000.00 worth of graphic novels in a week, I have to spend something like 600.00 to replace them. But if I sell 500.00 a week, I only need to spend 350.00. It's a matter of scaling your business to what is actually happening, and because of all the bubbles I've been through, I'm practiced at that.

Of course, all these businesses will be smart enough to cut spending. The trick, though, is to cut spending without cutting services and selection. And at the same time not allow your margins to disappear (constant SALES!). That's a whole nother level of sophistication. It helps if, like my store, you were earning well above your break-even point and can simply scale down to the appropriate level.

It's turning out that my credit card debt debacle of the 90's is serving me well now. Living within my means, keeping away from debt, has kept the stress level at a minimum. I have to be careful, is all.

Part of that is trying to anticipate the level of sales I'm likely to get. I try to remind myself that it's very, very easy to ramp up. Pick up the phone and order stuff. But the scale down is much more difficult; picking up the phone and canceling orders is a good way of ruining your relationships with suppliers, who are the guys who make it possible for you to get inventory.

This month is turning out much better than last month, so far. Finally had a really big day yesterday, which brought me to my original estimates. I was holding my breathe, wondering if Sept. was the new norm or just a really down month. For instance, January was awful this year, but Feb., March, April, and onward were more like what I was expecting.

Still, to be prudent, I'm going to look at September as my new benchmark. Realize that that level is possible, or even 10 to 20% below that, and that good months will probably be 10 to 20% above that.

I'm getting the usual "We're doing great" out of friends, neighbors and customers. Which I hope is true. But I'm still going to be careful.

Saturday, October 25, 2008

Clean cut?

I was accused of being "clean-cut" the other day by one of my more bohemian customers. The old hippie in me quailed at the suggestion.

"You should have seen me two days ago," I protested. "I had a full beard and long silver hair, man."

I was also wearing a button down dress shirt, which I tend to favor when I'm not wearing t-shirts. But that is just the classic style my parents taught me. I don't wear hats, or anything else that I might be self-conscious about. I don't even like t-shirts whose logo's are noticed.

After my experiences with depression out of high school, I didn't ever want to stand out in a crowd again. To me, blending in is something to be desired.

I was talking to my sister, and I come to find out that the old 'depressive' genes, which I suffered from 30 years ago -- which caused me to have a lost decade -- run in my extended family much more than I was aware.

I kept saying, "You're kidding!" as she told me what was happening. It's ironic, because I remember saying at family dinners many many eons ago, that what with my Dad having had it, and me having had it, that I thought it might run in the family and maybe we should all be watching for it.

So here's my sister telling me, that indeed it seems to have manifested itself.

I turn to Linda, and say, "I wonder. Could I have any of that and not know it?"

She laughed and said, "No, honey. You're a very upbeat personality."

Which has kind of amazed me. I haven't really suffered from depression for 30 years now, not even tinges of it. Despite reading that it often, most often, comes back. I've been on the lookout for it, but I have a pretty even keel on a day to day basis.

Oh, I get upset, and angry, and sad, and all the rest. But mostly, I like myself these days, and I like my life.

I think it must be because I have some control over it, in my job, and was so very fortunate in my wife. There has certainly been enough stress over the years...but I've always considered the stress to be of my own making; I incurred the debts, and as difficult as it was to stay in business, I felt I had some control, a path that would see me through.

So, anyway. I shook the 'clean-cut' accusation off, and said, "What it is. I cut my hair as short as I can stand it, and then I let it grow as long as I can stand it. It's all about saving money."

We baby boomers are weird.

Is it over yet?

This is getting kind of anti-climactic.

Other than the supposed 'undecideds', who apparently are the sort of people who sit through an entire traffic light trying to decide whether to turn right or left, what's left? I may not have marked my ballot yet, but I know how it's going to turn out.

We're at that point in the football game where the announcers are desperately trying to find ways to keep the audience around. "Joe Quarterback has pulled off miracles before!"

McCain is doing nothing but attacking Obama. Obama has so much money he can both attack McCain, and run positive ads at the same time, and take a couple of days to go home and visit his sick Toot. And even that seems a good move.

McCain is resorting to charming terms from my childhood, like "Socialist." (Since Liberal isn't bad enough, what's next Commie Pinko?) Hoping for a doomsday event. I think I'm seeing a glimmer of relief behind Cindy McCain's frozen Halloween grin. Michelle looks exhausted. Obama looks cool and collected, as usual. Lady McPalin is sharpening her knives for the next go around.

They keep repeating the polls could be wrong. But check out the trend lines at the SLATE online site. They crossed in some of the red states a couple of weeks ago, and I'm trying to imagine what would make them turn around and cross back again in 10 days.

Obama is warning against getting overconfident. And I'm enough of a Democrat to worry.

Is it over yet?

Friday, October 24, 2008

Rewarding phony profits...

So we rewarded phony profits and gave bonuses to phony growth.

I think I've got a rough handle on what happened with the financial crisis. Little by little, Charlie Rose show followed by CNBC's Squawk box, followed by Paul Krugman interview followed by Warren Buffett interview -- more information about finance than I'd ever have believed I could sit through.

There are eerie echoes to the dot-com bubble, when every CEO was a genius and on the cover of a magazine. This time, it was every financier was a genius of George Soros capability.

But...I didn't really need all this reasoning, which has slowly trickled out as the disaster unfolds. All I originally saw was the sheer number of houses and the rising values.

All I really had to do, is look at the curve. That steep steep curve upward ain't natural, never was natural and never will be natural -- whether it's houses or pogs.

It's also seems to always come out that if it looks too good to be true, watch out.

I would say this applies to small business just as much as large business.

Profits in most Mom and Pops are going to be modest -- hell, I don't think most can even afford not to work the majority of hours, much less hire a manager and three employees.

When I was growing up, the owner of the downtown department store -- say Wetles -- could be one of the more wealthy individuals in town. The owners of each of the drug stores, the hardware store, the furniture store -- solid citizens, all.

Now? I think that middle class type store is disappearing from the landscape, leaving the big box stores and the little specialty shops. This is a much more competitive market -- and if it has been based on 'phony' local profits, we have yet to really pay the price in full.

Most Mom and Pops won't produce enough profits to buy you an SUV and a huge house in the West Hills and a lavish wardrobe.

I can't tell you the number of times I've seen competitors spend on product and infrastructure that had my customers questioning my abilities: "Why aren't you doing such and such? Why don't you do what so and so is doing?"

And I'd just have to shake my head and say, "I don't know HOW so and so is doing that. I don't know HOW he can do such and such..."

Which sounds lame. And the danger is that you get sucked in trying to keep up with the competitor. If you compete with morons, that make you a moron.

I mean, most businesses probably do earn a bit more profit than me -- just because of the nature of my business. But then again, I seem to still be in business year after year while they come and go. So...I'm not sure.

But I do believe the world of small business is trending back to my way of thinking.

Thursday, October 23, 2008

Bend Film

I'm not sure it's my place to comment on Bend Film. I don't have the slightest bit of inside knowledge. I know that it passed without much notice. I had some Hollywood types in the store a bit, but other than that, I'm not sure I would have known it was happening.

Contrast that to a few years ago. They brought in an inflatable stage that literally spanned Minnesota Street. If I remember rightly, the bubble stage was so big that it became necessary to actually move some of the street fixtures.

Handy analogy, what?

Too big to fit the actual dimensions of Bend.

Here's where I might be accused of "stomping on their dreams" as my haircutter once so memorably put it to me.

But, maybe someone has to be down to earth enough to point out that not every dream is achievable and that if you want to create a 'world class' event, you better have 'world class' facilities and infrastructure in place.

And fundraising.

That's the sticky wicket. For-profit entities, such as my store, have a hard enough time being viable, and we have all the incentive in the world. I think it's very difficult to run a non-profit organization without the profit motive. Constant fundraising can't be much fun.

It appears to me that either a festival type event is entrepreneurial, or it becomes corporate. If it's the dream of a single individual, it depends on the charisma and energy of that individual. (Who, not judging mind you, tend to be somewhat mercurial, and who tend to want to move on to the next thing.) How many times have we seen entities go immediately downhill after the first inspirational person leaves? A series of steps downward.

If it become big enough to become 'corporate'' that is, where a board of directors becomes the main power, then the whole edifice becomes subject to politics; infighting and power plays.

What I've noticed is that these type of events can go for years on auto-pilot, but one really bad year can be enough to bring them down. A couple of bad choices, or employees, of power-fights behind the scenes, and they never recover.

Because they're obviously fragile.

Here comes the 'stomping on the dreams' part. Perhaps some of these events were just too grandiose. Too dependent on the 'newness' factor, the energetic individuals, the 'dream'.

Perhaps there is just a life-span to any non-profit organization, especially artist organizations.

I don't really know enough, I'm just extrapolating from outside information. But there is a for-profit parallel universe, if you will.

Stores can also become too grandiose for the actual town.

I have an image of a store that would be the envy of all stores. I have the resources and the knowledge to pull it off -- at least, to the point of opening the store.

But to what end? To go out of business?

The store would be fabulous, and would never pay for itself.

Build it and they will come?

But from where? And how often? And how much will they spend?

It seems to me that non-profit entities, especially events that rely on fund-raising, are doubly difficult.

I think Bend is especially susceptible to these types of over-inflated entities. We attract energetic, creative people here, some with money. Bend appears to be booming, and open to the arts. We have the tourism months that give us a boost.

But fundamentally, I still believe we are a smaller town than people realize, that the money estimates are way too high, that we have very slow periods that have to be sustained, that outside of the 'growth' industry, we have tourism and retirement, which don't pay all that well, and so on.

It's not impossible to create an oversized success in Bend, but it's probably twice as hard -- and any individual who has to work that hard is going to ask himself why he's limiting himself (or herself) to a glass ceiling represented by population and isolation.

But...we keep getting those people, bless them. I thank them for making Bend such an interesting place, and wish them the best.

Wednesday, October 22, 2008

Debt is deadly.

My main goal for the time being is not to incur any debt. Any money spent on credit cards has to be counter-weighted by the same amount in savings.

We have friends who still go out to dinner, who haven't seemed to cut back on their life-style, even though they're unemployed. Eating into savings, I guess.

I have to wonder how many people in Bend are "temporarily" dipping into equity, or borrowing. Trouble with temporary and debt is that they are usually mutually exclusive.

Our life-style is pretty modest, and I have to just hope we don't have any car break-downs, or house repairs, or health issues come up. I built up a huge cushion in my break-even point at my store, never expecting to need it.

It came a lot closer in September than I would've thought possible.

This month is actually coming in at expectations, not even at 'worst-case' expectations. Since last month was 10% below worst-case, that would average us out so far at worst case. But, the 'trend is my friend,' and suspect that Sept., like January, will turn out to be a bit of an anomaly.

As I keep saying, it's a game of expectation. September was so bad because I didn't expect it to be so bad. January could be just as bad, but because I'm expecting it, it won't be so bad....if that makes any sense.

More of the mainstream economists are now beginning to say that the 'recession' may have started as early as November of last year, with a two month swing of before or after.

Since I saw a downturn starting on the very same week in mid-August that the 'credit-crisis' was first mentioned, I believe my own personal, Pegasus recession started then.

We're at that moment when I have to go my own way; not pay the slightest attention to the activity around me. Because there is always a lot of activity past the point where there should be activity; because of denial, and lack of experience.

This is where experience counts.

Tuesday, October 21, 2008

Silver Anniversary

Today is Linda and my 25th Wedding Anniversary. I was going to make a joke of my Silver Age Collectible, and how it's gotten more valuable over time. But Linda deserves better. (Besides, she isn't silver -- sometimes she'll raise her hair at her temples and say, "Look, silver hairs." And I'll look and see nothing by blonde and shake my head. I, on the other hand, am completely silver.)

This kind of ode almost can't help but be filled with cliches, but I'm going to say them.

It had to have been luck. I have to admit it. We only knew each other for six months, before we got married. But...we both knew.

And low, these many years later, I love her more than ever.

There is a wisdom and beauty to Linda's face that was always there, but has only grown with time. If there are a few more lines, they are lines of experience and kindness.

An "old soul" as some new-ager said early on, and which immediately resonated with me.

But there is also the little girl delight, that hasn't been tarnished or diminished by life. There is the joy she takes in my love and trust. The melting she'll do in my arms, that never fails to elicit the same melting in me.

Such trust was given by both of us from the beginning. If it hadn't worked out, I suppose such trust could have been foolish, right? was the trust, the absolute trust, that made it strong and enduring.

I still enjoy hanging out with her, as much as possible. We're going to take the day off and wander around, go to a movie or two, Secret Life of Bees for her, and if we have any energy leftover, maybe Max Payne for me...., go out to dinner (nothing fancy, probably Shlotzkies, and drive around and walk around the parks.

And I find myself excited to do such simple things with her.

Just enjoying her company.

Monday, October 20, 2008

Dan Parson's Star Wars

I hope you all caught the article on Dan Parson's doing a Star Wars signing at Pegasus Books this coming Saturday, Oct. 25, 12:00 to 4:00.

He'll be doing sketches for people (I'm going to ask for Yoda -- I wonder who is most requested?)

I'll have plenty of #1 issues of Clone Wars for sale, the current mini-series, and stacks of Star Wars Legacy books, which I highly recommend for reading.

Mostly, I'm doing this for Dan, who is a local artist on a high profile and excellently done book. He deserves some recognition.

I'm hoping I can get at least 20 of you blog readers to show up for the signing. The sketches are free, by the way.

(P.S. I want to reproduce the entire Bulletin article on the Pegasus Blog, but I don't have access. Anyone want to reproduce it in the comments section here, so I can transfer it? Otherwise, I'll just type it out, I guess.)

Sunday, October 19, 2008

Prying my cold dead hands.

I was out on my back porch shooting at squirrels.

Didn't like that street light much, so I shot it.

My neighbor come over the complain.

So I shot him.

Police showed up, all upset over something or another.

Offered them a beer.

But they were really rude.

Good thing they have internet in jail, or I'd miss my daily posting.

Some people really don't get Bend, you know?

Saturday, October 18, 2008

Cherry pick.

There's a huge difference between this slowdown and others that Pegasus Books has experienced in the past.

I'm am fully inventoried. I'm able to replace the evergreen product within budget.

I probably should just cherry pick for the foreseeable future.

The question is, what does it mean to 'cherry pick?'

Does it mean just replacing the evergreen product, and bringing in the best of the new product?

Does it mean buying decent product when it gets cheap?

Or both?

That's going to be my dilemma going forward. I recently ordered a bunch of what I considered decent offerings at really low prices. None of it sold. Meanwhile, the evergreen product -- which I'm paying full wholesale -- has continued to sell well.

I hate to shorten the window to only the near term. Getting more of the same stuff I already have seems like it could eventually come back to bite me. But at the same time, ordering stuff that may sell eventually but not in the near term, even if relatively inexpensively, is expending money at a time when I maybe should be conserving it.

Back in the mid-90's, which the collapse of all the 'bubble' product, I started to ask myself, "If I don't order this, will anyone noticed?" Which is a very different thing than asking myself, "If I order this, will it sell?" The latter represents a risk in the short run, the former a risk in the long run.

The difference this time is that I have plenty of great inventory in stock. It's not like I'm depriving the store.

So far, in cases like this, I've always set myself a budget and then tried to order the best material I could within that budget. The irony is that if I set a strict budget, I'll end up spending that entire budget no matter what.

I'm going to try something different this time: just cherry pick, both sale product and evergreens, and see how much I really need. Keeping an eye on sales, and having a vague 'outer limit' to how much I can spend.

I'm thinking that way, I may actually come in under budget.

Friday, October 17, 2008

Joe the Plumber

Does any small business owner -- Joe the Plumber, or not -- think that the government can do anything to help them? Seriously? What are they going to do, hand you money?

Most of the damage to businesses will be done long before any programs come into effect.

Listen to John Thain, CEO of Merrill Lynch, talking about that 750 billion dollar bonus: " least for the next quarter, it's just going to be a cushion."

Did anyone think that wasn't going to happen?

As angry as the government bank handout made me, I figured that the overall economy needed to stabilize to do my store any good. That is, everyday people coming in and spending money because they're not afraid we are going into the Great Depression II.

Never thought they'd do anything to help me directly, and still don't think they'll do anything to help me directly, nor any of the people struggling with their house payments.

Discretionary spending is....well, discretionary. I'm seeing some of the same ups and downs that you see in the stock market. No one in the door for a couple of hours, then a rush of business...

So, I'm not expecting the candidates or the government to do much but try to stabilize the situation.

Joe the Plumber is an idiot.

Thursday, October 16, 2008

Full ninnyhoodness, Part Two.

The stock market, up more than 900 one day, down more than 700 a couple days later.

This is like me calling my wholesaler and telling them I want everything in the catalog; then calling them a couple hours later and canceling. And then calling a couple hours later ordering everything again.

These are supposed to be smart guys?

This morning headline from USA Today, "Stocks down after initial flurry..." or something like that. Meanwhile, stocks edged up again. I've noticed they've thrown in the towel and the headline says, "Stocks lack direction."

Good call.

After ignoring a recession, that in my opinion started a YEAR ago, they suddenly decided it was important.

Ninnies, I tell you...

A small thing.

It's a little thing. But maybe it means something. I'd planned to buy a big screen T.V. this Christmas, but I've changed my mind.

I'm guessing the whole country is making similar decisions.

Wednesday, October 15, 2008

Texas Hold-em

Tetherow is on hold due to lack of financing.

In reality, commercial credit dried up about 10 months ago. All the building that you've been seeing? It was all approved and collected long before that.

The rest of the developments have been like a player at a Texas Hold-em game, sitting on their money, hoping for a big hand that never comes as the pot gets bigger and bigger and finally the big blind is coming around.

Pretending to be players. Applying and drawing up plans, building the occasional house, or talking up the golf course, or whatever. Throwing the occasional chip on the table.

But the big blind is coming around and it's more money than they have.

It's put up or shut up time.

They're getting up from the table while they still have a bit of money. Or like Linen's and Things, finally throwing in the towel. (heh)

As I said the other day, the financial crisis creates convenient cover. It also paradoxically means there are a lot of people who are going to have to stay in Bend even if they wanted to leave. They won't be able to sell their houses, or find a ready job elsewhere. They'll have to adjust their lifestyles to the real level of business; not the illusion of the last five years.

Heck, they may find it's not so bad. So you don't get to go out to dinner every other night, or buy a new SUV every year. Bend is still here, and that's why you moved here, right?

I've always said that's Bends genius; we welcome your money, we smile tolerantly at your high falutin talk, watch as you come down to earth, spank you gently on the bottom, and say, "Welcome to poverty with a view."

About Tetherow. It seems to me that when they say they're "still spending money" that what they're saying is, we are still selling houses. As in, a sub-division. It's that pesky "Destination Resort" designation that's being put on hold.

But doesn't that mean that all those permits and approvals were given under false pretenses? Now they're not even bluffing about building a Hotel. But they'll still put their hand in if it's all aces.

Of course, our local government is very unlikely to withdraw the approval now, and they know it.

Meanwhile, in the real economy, the recession is still here. It hasn't gone away.

Was watching Charlie Rose last night, and one of the economists said something interesting: "Those that sell to higher income households are going to have real trouble."

But I thought that's why Bend was immune? All those "higher income households...." would spend money freely?

We went all in, with an ace and a king, but every card flipped over has reduced our odds, and the last card is being turned.

Good luck to all of us.

Tuesday, October 14, 2008

Full ninnyhoodness

The stock market. Or as John Stewart said last night, "They're just fucking with us."

Got twelve big boxes of books in yesterday, but only had time to deal with 2 of them. Going to try to work on the other books today. It's a matter of slight adjustments all over the store. So I'm going to try to keep the store from being too disrupted during the business day while I slowly morph the store again.

We have a starving cat in the neighborhood, but it's so illusive, we usually on catch glimpses of it. I'd feed the damn thing if it would let me. Let it be an outdoor cat; maybe win it over enough to take it to the humane society. Or...let it just come around once a day for a bowl of food.

Very sad.

Monday, October 13, 2008

Resting on my laurels?

Pegasus Books had so little inventory at the beginning, (1984), that I spent years spending just to catch up. Or chasing bubbles, only to get there just as they popped. Fortunately, some instinct early on told me to have something else in the wings to fall back on, even if it meant diverting capital from the best-selling product.

Basically, I finally had to borrow money from the banks a couple times to reach the scale I needed.

And then made the mistake of borrowing money to open second, third, and fourth stores. Only to have to scale back again, relying on my credit cards to get me through.

Then spent years trying to both pay back the credit money while looking for product lines to diversify into. And so on and so on.

What I'm trying to say here is, I thought the day would come when I would have the store I wanted, and I could rest on my laurels.

Never happened.

Never will happen.

If anything, the rate of change has speeded up.

I find myself constantly adapting to survive to new conditions. Constantly having to change.

Here I find myself -- in the midst of a true recession -- adding yet another new product line, chasing the customer, just when I swore I wouldn't. Just as money becomes tight. Just as my store is bursting at the seams already.

But new books are selling at twice the pace I expected. (I kick myself a little for having been frightened away from new books over the years by all the stories. But I console myself when I remember that the walk-by traffic used to not be there, nor the sources -- both my wife's store and book wholesalers who were willing to sell to me--or the internet to facilitate the process, nor did I want to hurt the Book Barn.)

I've figured out enough good and reliable sources. I've discovered that I can change the store, morph it into a kind of pop-culture bookstore -- almost a real bookstore -- at a pace I choose and can afford.

Usually it's a race between bringing in a new product quick enough to be taken seriously and to create enough new customers and sales to pay for the new product. Get too much product too fast, and you go into debt. Don't get enough product fast enough, and you won't garner enough new customers fast enough.

Books are proving to be something that I can bring in within cash flow, because the majority of customers aren't regulars, but walk-bys, and or tourists.

They see books in the window, they come in and see books on the shelf, and they think I'm a bookstore. They may ask for a particular book and I don't have it, but that seems unavoidable. There are one hell of a lot of books in the world.

I'd originally envisioned just doing a moderate number of books, not having to move much around, and concentrating especially on carrying fiction.

But I started brainstorming this weekend about how I might be able to carry small sections of non-fiction, as well. In other words, become a full blown bookstore. And as my mind started churning, I realized that I could probably increase or refine my used book section as well.

Without spending a ton of money. Mostly it requires removing dead product, and sticking them in boxes. (Old toys, mostly.) What little 'display' space I have left would be turned completely over the product. (There is quite a bit of wall space that is used to little effect; selling older comics face out on the wall, for instance, hasn't sold many comics over the last few years. Or another example, I created a little castle by my games that I've enjoyed -- I suppose they add to the atmosphere -- but it hasn't help sell much in any direct way, and putting boardgames there instead would be a better use of the space.....pity.) There will be more consolidation. I think I can pull it off. I'll have the outlines in place by the end of October, and hopefully have it smoothed out by Thanksgiving.

It's amazing how I can find new places to sell stuff. I hope the floor won't collapse under the weight. I've penciled out about 25 rough categories of books that will cover most everything.

I wish I didn't feel like I needed to do it, but it's time to adapt yet again. To be honest, I enjoy it as well. Makes me feel alive and engaged.

I suppose I'll never see the day when I can rest on my laurels.

Sunday, October 12, 2008


There is an irony in the national economic collapse in that it may actually help Bend businesses, in a totally backhanded way. It provides cover to do the things that need to be done.

The actual physical sales level is important, or course, but just as important is the psychological frame of mind. I've seen more businesses just give up, than be forced to give up. The same conditions that one businessman may shrug off, is enough to make another quit.

It's a game of expectations.

Bend was going to see a downturn, no matter what. We were just too overbuilt. But it could have happened here without being as noticeable elsewhere.

That is a very lonely place to be.

It's hard not to take a downturn personally. It's hard to distinguish between outside factors and factors inherent in your business. It's easy to figure it's your own fault, instead of being able to put it at arms length and say, "This is the way it is. What do I do now?"

Even more dangerous, is blaming your customers, instead of realizing that they are reacting for their own good reasons.

One thing I've noticed over the years, is that you can't figure out if you're the only one while it's happening. No one will tell you. Every business will tell you they're doing great. Every customer will act like everything is just fine. The news media will be way behind the actual events.

It's take 6 months or more before you find out what actually happened.

That can be a miserable 6 months unless you can deal with it, realize that if it's happening to you it most likely is happening to others in your field.

So the national collapse may actually help local businesses make the transition mentally easier than if it hadn't happened. It will make the actual circumstances worse, of course, but as I said, it's the expectations that are even more important.

In short, misery loves company.

The collective problems make it easier to recognize and grapple with your own.

(NOTE: I almost feel as though I need to attach this to every post about the economy. Just because I talk about the bad economy doesn't mean my store is in trouble; in fact, when I stop talking about it, then you can worry. I see this as more like have termites in the house; I don't tear down the house, I don't go running out into the street screaming, and I don't ignore the problem. I simply deal with the problem. I hope to never again hear the phrase, "Well, I hope you're still here next time." I'm doing fine, dammit.)

Saturday, October 11, 2008

Reagan of Last Resort.

I don't watch the Fox News, but I do channel flip past it.

Yesterday they were doing a documentary on Reagan. How timely.

Today, the bottom scroll was warning what a filibuster proof Congress would be like.

In between a steady stream of Acorn and Ayers and Rezko, of course.

Methinks they're worried.

It's only prudent.

Had a big day, yesterday, which brought my sales up to original estimates for the month.

So here's hoping that September was an anomaly. January of this year also sucked, but was followed by more normal months. So I'm hoping that Oct., Nov. and Dec. will be more in line with what I was expecting.

I'm actually kind of optimistic about December, strangely. I think people will kind of let loose a little -- the election over and there will be a honeymoon period with Obama, and hopefully most of the panic on Wall Street subsiding. A dead cat bounce, if you will.

I believe I have the kind of interesting but relatively inexpensive product that people can feel good about buying, books, toys, games.

All bets are off for January, though. Going to be careful there. I think every business should probably expect a 20% pay cut next year, even if it doesn't happen.

September is my new benchmark; I expect to hover about 10% above that, with some months being 20% higher; but I also have to expect that I'll occasionally do 10% below that, or even the black swan 20%.

It's only prudent.

So far, so good. Lot's of businesses will cut back spending; but being able to keep up your service and selection; without cutting into your margins (constant SALES!) takes a whole nother level of sophistication.

Because of my experience with bubbles like pogs, beanie babies, pokemon, I'm pretty practiced at smoothing out my spending in a seamless way that hopefully the customer never has to notice.

I've actually been intrigued a bit by how easy it's been this time to keep ordering the stuff I need within budget. Part of that is that the store finally reached a very viable level about 8 years ago, whereas before I was almost depending on the occasional bubble. The base so far seems pretty solid, though I'm glad I added books and games in the last year. It might have been more dicey without them.

For some reason, my income never seems to really change. Which probably means I'm imprudent on the way up, and prudent on the way down, making my base the same.

The intriguing part of owning a business has always been negotiating the pitfalls. Keeps life interesting.

Friday, October 10, 2008

Euro crash.

Turns out, the European markets open at midnight here in Oregon, just before I start getting ready to go to bed. Usually reserved for reading, but last night I was curious.

Holy shit.

Markets drop 10% instantly, and or are suspended from trading.

Calm English guy talks about how equity assets are the only thing left to sell for cash.

I kind of like listening to the accents; makes me feel cosmopolitan. But there's one guy who absolutely mumbles, in an English accent. Can't understand a word he says, but when I do make out a word it's non-sensical. The Euros seem to be a much more dapper crew. The Aussies on the other hand look like they just got out of bed. Germans seems grimly amused; the French have one raised eyebrow; the Chinese appear to be gloating.

Talk me down from this, RDC. Show me how this is just 'normal.'

It was kind of funny. They have two charts running on the screen; rising stocks and losing stocks. But since no stocks were actually going up, the 'rising' stock chart was listing losses of 2.8 or 3.5 or 4.7; those were the winners. The 'losing' stock chart was more like 28.2 or 22.6 or 18.9.

Thursday, October 9, 2008

Poor eggs.

Linda and I have managed to save up 85% of what we owe in taxes, so I'm going to pull the last bit of what we owe out of savings and just get it out of the way. Should be able to replenish within a month or so. Supposedly, we still have that 1200.00 refund coming our way, so that will pay for part of it.

Interesting article on the 'resellers' in the paper this morning. Certainly seems to be borne out by Linda's sales at the BookMark, and my sales downtown. And if calls from people trying to sell comics, toys, cards or books are any indication, people are clearing out their closets.

Selling of homes uptick. Great. Best sales day I ever had was when I had a storewide 2 for 1 sale. Of course, I didn't make a dime in profit. My focus has always been on jobs, and this wouldn't seem to be enough to make much difference in that direction.

Maybe we should elect McCain (not really!). But the federal government and him seem to have the same approach.

Let's try this! Doesn't work? O.K. How about this?

Or this?

Would you believe?

All right, I'm really serious about this?

I find myself settling into the new retail mode. It's always a game of expectations, as long as you stay above your break-even point, it's a matter of ordering the proper quantities. Of course, it's compensating; if you sell less, you have to buy less, and so on. Especially after a long boom, though, it can be hard to change your thinking. This time, perhaps because of the national and local news is keeping me company, I've made the transition rather easily and quickly.

Over in Redmond, they're going to bull ahead with the Sixth Street renovations, no matter it's affect on local businesses. Cities just have a different time perception than small business -- they figure they have to break eggs to make omelette's. Not much consolation to the eggs.

Wednesday, October 8, 2008

Obama, McCain comics

Comics coming in today.

I'm going to be mean and make you buy them as a pair.

Tuesday, October 7, 2008

Heavenly Downtown.

I always joke that I promised Panga, my cat, that some day I would get her a better place to hang out.

And, by golly, I delivered, going from a pillow on the rack next to the register, to her own spot on a desk in the backroom. I had to take that away from her for display space, but she's found a private spot behind one of the bookshelves.

Ten years ago, when I was....lets just say, younger...Pegasus carried only comics and cards. Now...the works...books, games, toys, etc. etc.

Boy, I must be really successful.

I decided to pamper myself. Downstairs in the basement, I have a convertible chair my Dad built, that can be spread out to create a kind of cot. If I ever get kicked out the house, I'll have a place to sleep.

It's all so delicious.

It's so comforting, after working all day in my store, to go down those stairs and hang out. Looking at the bare rock walls. (Real rock!) I get radio reception down there, and I'm thinking maybe I could hook up a micro wave.

All the comforts of home.

And, of course, I'll always have books and comics and toys to decorate the place. I need to move around some of the storage boxes, but I'm sure I'd be the envy of every geek and nerd out there.

Ah, the good life.

Aren't I just so darned special?

Monday, October 6, 2008

Thanks for the bailout, dumbasses.

Wall Street to all the rest of us: we got ours, we're getting out of Dodge. Suckers!

Appaloosa was pretty fun, more laconic and leisurely than I expected between the shoot-em ups. But I had this funny, weird reaction every time they'd spout one of their folksy-isms. I couldn't help but think of Sarah Palin.

The October Fest did us some good this weekend. I'm slowly coming around about these events. Though I've always thought they were more useful on in the slow season.

Every time I drive by the big, empty corner downtown with the signs, BOOMTOWN, I can't help but think it apropos.

Is it just me, or are all the money measures doomed this November? Some of us have been trying to warn the city of Bend to pull back from their ambitions. Maintenance. The gravy train is stalled at the bottom of the hill.

Sunday, October 5, 2008

Tech adoption rates....

Several guys have told me that they are already adopting the new e-book technology.

I could come up with all kinds of "Yes, buts..."

but I won't.

I'll take their words under advisement.

I have had the unfortunate experience of having ordered tons and tons of anime video's, just as DVD's were coming along. Several other merchants warned me not to get into videos, but to wait for the DVD versions. But I stupidly read some so-called 'Experts' who had all kinds of facts and figures about how long it takes for new technology to be adopted by the 'majority' and so thought I had plenty of time to make the transition.

The experts were wrong; there was a very quick adoption rate, at least among the technologically savvy otaku. The videos become obsolete and worthless overnight and I had to essentially start all over with DVD's.

Even that effort became moot in the end. Best Buy arrived in town, and then the DVD technology was overtaken by 'downloading'; legal or otherwise. What are called 'fan-subs'; reaching the American audience not long after airing in Japan, instead of waiting years for the official version.

I am pretty much committed to bringing in new books, and I'm hoping I'll get at least 5 years worth of use out of the inventory before it becomes obsolete....

The e-book thing is not something that small stores are going to be able to compete much.

There is also that little matter of audio books, which seem to be getting bigger and bigger.

Maybe I'll just be left with the old folk, so should start stocking up on Big Print books now.

Saturday, October 4, 2008

Geek Formula....

Linda and I knew we were going to open a used bookstore at least 10 years before we did; if you want to get down to brass tacks, probably 20 years before we finally did. I started carrying used books at Pegasus about 8 years ago, and got the chance to observe which books really sold and which books didn't... and why.

So I had a number of years to look for opportunities to stock-pile books; I bought out portions of three different bookstores over the years, made sure my family knew I wanted the inheritance of the family library (it was a lot of books folks, and high quality books), found access to used books from out of town bookstores, and just kept on looking for books everywhere I could.

I also watched the operations of used bookstores, trying to figure out what they were doing right and what they were doing wrong and how I would do it differently. (For instance, we noticed that most used bookstores were messy and disorganized and crowded and we wanted to avoid that.)

And I did as much research online as I could, reading every article, every news story I could.

Then we brainstormed it, looking at it from every angle, and tried to think outside the box. Tried to winnow it down to basics, and with the mantra, "Keep it simple, stupid."

So when we opened the Bookmark, we had worked out a bunch of premises that we thought would work. Trading policies, displays, tactics and strategies. And we did some things that we saw no one else doing, and didn't do some things that everyone else was doing.

And I'd have to say most of the business plan worked well. We had to refine the formula a bit, but mostly it proved out.

I'm now trying to do the same thing on New Books. I've come up with a beginning formula that I'm going to try.

First I should say that I developed this formula with my own store in mind; that is, I'm in a high traffic downtown, without a lot of repeat customers, and with limited space.

The other point I'd make in advance is that I think that most new bookstores would do well to carry high quality used books; and the opposite, most used bookstore would do well to carry some new books (though my own wife refuses to do so, and well, it's HER store.)

And the final premise is that I'd be delighted if books account for 25% of total gross sales, and I am not really expecting it to exceed 20% of gross sales, so I can do things that maybe another bookstore couldn't do.

Here's what I have come up with:

Most new bookstores seem to expend about 80% of their time, money and space on;

A.) Latest Releases (which they hope will turn into...)
B.) Best-sellers (which are often...)
C.) Oprah books (and/or...)
D.) Book Sense selections, picked out by the American Booksellers Association.

It appears to me that 20% is everything else:

A.) Classics
B.) Mid-list books by bestselling authors.
C.) Cult and/or Favorite books
D.) Discounted and/or used books.

I'm going to the exact opposite percentage.

I want to try 80% classics, mid-list, cult, and discounted.

I want to try 20% new releases, best-sellers, Oprah, Book Sense.

By all means I'll carry the Best-sellers and Oprah and Book Sense and New Releases. But I'm going to try not to let this be my real focus. Amazon and Borders and Costgo are likely to get these books sooner, in greater quantities, and to sell them at major discounts. They will have huge advertising budgets, big displays and endcaps (for which the publishers pay them) and will have the ability to pretty much return 100% of their books for credit.

Instead, I plan to carry other titles by best-selling authors, the two books before and the two books after the mega-hits. Most stores don't seem to be doing this. The so called mid-list product is going by the wayside in pursuit of the Next Big Thing.

But in my opinion, many of these mid-list books have a great selling point; the very best-seller the other stores are carrying, nestled in the other books by the same author, casting a glow on an author the customer knows, but a book they don't.

New releases are just fine. But it seems to me that I have hundreds of years of history to look at to know what are good and classic books, which have stood the test of time. Again, most stores aren't really carrying a lot of these older books. Even books of current authors that were the good books of say, five, ten or fifteen years ago have dropped off the radar.

Often I can pick up these mid-list and classics for a very good discount.

Or I can get them used.

My biggest advantage as an owner/operator of a bookstore is my own love and knowledge of books. I should be able to carry in the store just about every book I ever read and loved, and every book my friends and family ever read and loved; and the books that the culture at large has decided in their collective wisdom should be passed along to others, to the next generation, the 'cult' favorites.

I don't know if this is going to work. Maybe I'll realize that best-seller, new release method is the right one, but with all the difficulties that both new and used bookstores are having, it's time to try to think outside the box, and because I'm not depending on books to survive, I have the luxury of experimentation.

Friday, October 3, 2008

First and long.

I admit, dramatically increasing my new books is a bit of a hail mary pass. (I should make clear -- a hail mary on the success of books, not on the store....)

Forgive the sports analogy, but it does explain my reasoning.

I've been having some success throwing long, and discovered the corners and safeties are slower than my receivers. There is a decent chance my guys will get to the endzone first and if I throw a perfect strike, they'll be the one's to catch it.

My line has been holding well, and it's only first down.

Any hail mary is a gamble. But it's only first down, and I'd have three more downs to get 10 yards.

Unless I'm intercepted. And I have confidence in my own throwing and my receivers to think I can avoid that.

(It's really true -- any situation can be explained by football or baseball....)

I think playing it too safe could also be dangerous, though. Even in the midst of slowdown, I'm getting middle-aged readers in the door who are willing to buy books. I may really need that kind of customer going into the future.

I've been trying to figure out what's going to happen. There has always been turnover downtown -- let's say 10% as an arbitrary figure. But that turnover has been obscured by businesses selling without fanfare, or being immediately replaced.

If that turnover rate goes up even 5% say, to 15%, and only half of the businesses are replaced that used to be replaced, than suddenly we will see the 10% vacancy per time period. Which will be noticeable.

I'm not sure how we avoid this. The boom money is gone, probably forever. We still have people moving here, perhaps, we still have rich people, perhaps, we still have tourism (though I suspect people will be cutting back on frequency, duration, and cost of trips.)

But even if the boom money was responsible for only 10 or 20% of our sales (I suspect it was much higher) that is a very significant amount of money to disappear.

If housing prices drop by 30 or 40 or even 50%; if new building all but stops; there will be considerably less money floating around.

So let's say, business drops only 10% downtown, or more likely a minimum of 20%, and possibly even 30 or 40%; how many businesses are prepared for that?

You all can relate, if you compare it to household income. Most of us live pretty close to our income. Not many 100k income houses spend only 70k; or 50k houses only 35K. Hell, a 5 to 10% saving rate would be spectacular.

Most businesses are no different. They'll have the amount of inventory, employees, and leasing space as their income allows, within a few percentage points.

My store is pretty rare in that I could sustain a 50% drop, at least for several years. Wouldn't be fun, but I could do it.

But I'm guessing most businesses can't sustain even a 20% drop over the long run. Doesn't matter how rich they are.

As I've been saying for a couple of years now, I hope I'm wrong about the depth and length of the downturn. So far, if anything, I haven't been as negative as perhaps I should.

I got a kindle, you got a kindle, we all got kindle

There has been a bit of discussion about the future of books in the comments. RDC is already using Kindle, and Tim believes that books will be obsolete in 10 years.

I just don't believe that's going to happen; I'm more or less staking my future that it won't happen. It's a moot point, in a way, because I can't play that game. It would be the end of an entire industry; bookstores, printers, publishing as we know it.

But my gut feeling is that books are here to stay.

For one thing, Kindle has zero appeal to me, and I read lots and lots of books. In the end, many of my decisions are based on the idea that what I like, others will like.

Nor do I believe it's an anti-tech reaction. I don't play video games but I totally get their appeal. I totally get that they will probably get bigger and bigger and more sophisticated and complex. In fact, they are the real threat to books.

Not reading at all is the real threat to books.

In a way, it's not about the actual content.

I almost titled this entry with that phrase -- It's Not About the Content.

I happen to be someone who doesn't feel the need to keep every book I read. I've been writing them down in a notebook for 30 years now. I figure I can always track them down again. I save maybe 5% of my books on bookshelves.

But I really like having bookshelves and books and looking at them and touching them and smelling them and carrying them around. It's a nerd thing. Especially the touching and smelling. (Joke.)

There are two kinds of gardeners. The practical kind, who grow vegetables and herbs to actually eat. And flower gardeners, who like digging in the soil, planning projects, and seeing the results. Non-fiction readers are like vegetable gardeners; fiction readers are like flower gardeners.

Book readers want evidence of their prowess. I read this! the book on the shelf says. In my opinion, the very ephemeral-ness of a online version will keep it from becoming the dominant form. There are very few personality types who only value the content and not the form.

Maybe that makes us shallow. I don't know.

But if I'm going to read Moby Dick, I'm going to have that carcass on my bookshelf, by god. And if I love a book to death, I want to really OWN it, possess it, and show it off. I want tangible proof I read that sucker.

Having just received a couple of big shipments of books in my store, I can tell you that the covers are very impressive -- they make me want to pick up the books, leaf through the pages, read the back blurbs. The physical, tactile feel of a book is a big part of the pleasure.

From comments Tim has made, he reads non-fiction, technical books mostly. And for that kind of reader, the 'content only' reader, Kindle will be great. Maybe all of us will have a Kindle along with books. But my store is already designed for the fiction reader, the 'good book' reader.

Non-fiction is a vast world, and information becomes dated much quicker than fiction. Maybe non-fiction is appropriate for Kindle.

But fiction is more enduring. And books are physical manifestations of that.

Besides, sometimes just looking at a book brings back memories of it's content, what I was feeling when I read it. I don't know about the rest of you, but that feeling is sometimes the most enduring thing about a book. I may forget the plot, the characters names, but I remember the 'author's voice.' That's what stays in my thoughts and emotions, and just looking at a book can instantly brings it back.

I can look at my hardcover Lord of the Rings, and feel a wave of nostalgia.

Most arguments against Kindle have to do with cost, technical ability, readability, transportability. If these were the only issues, they could be resolved.

Books lose.

But much like the picture phone not really being a technical, cost, usability issue, but a cultural, personal issue, books will need to keep loyalty based on more intangible, human desires.

Anyone who reads quickly develops their own repertoire of favorite books, and that makes us individuals. We want our peculiar and idiosyncratic choice of intellectual life lined up on our bookshelves. I can visit a friend and look through his or her books and get a decent sense of where they're coming from..

I doubt we want to give that up..

Carrying a Kindle tells me nothing about you; if everyone is carrying around a Kindle, it makes us all exactly the same, somehow.

I got a Kindle, you got a Kindle, we all got Kindle. Plug us in.

Thursday, October 2, 2008

3 Epochs of business, and now a 4th?

I feel as though my business has survived through 3 different epochs.

The first was the hardscrabble 80's.

The second was the growing population and competition of the 90's.

The third was the go-go 00's (up to now.)

I think we're about to enter into a fourth epoch.

If you had asked me a year ago, I would have told you we're likely to slide back into the 90's era type business climate. With the excess gone, but a still viable economy.

Instead, I'm beginning to wonder if won't resemble the 80's more.

My experience with the 80's was -- it was a very hard time to survive. Most of the businesses I knew of were very down to earth, very common sense. There wasn't a lot of fluff. There weren't a lot of silly businesses. Everyone was just getting by.

If you wanted to advertise, you thought long and hard. It was more a "use it up, wear it out, make it do, or do without" kind of atmosphere. You didn't buy yourself a new car and put your business logo on it; you tried to find used fixtures or built them yourself. You didn't renovate anytime you felt like it; or eat out much; or buy unnecessary luxuries.

What I remember about the occasional 'high end' businesses that would come to downtown, is that they would open with a certain amount of arrogance, of showing the poor benighted locals what a first class store looks like, and then an inevitable realization that it wasn't happening, resulting in a sudden disappearance into the night, or a sort of half angry/half dismayed complaint, and a withering away.

No one was getting rich. Everyone was just getting by, and that was counted as success.

I'm not sure people are ready for that again.

"Beware of Geeks bearing formula's...."

Warren Buffet was on Charlie Rose last night. He uttered the above phrase, which really struck me because I was intending to talk about my 'new books formula' today. I still will, (tomorrow), but....well, remember the above warning.

He called this an economic "Pearl Harbor" and used the word Depression. (An increase to 9% unemployment would mean a loss of 3 million jobs.) He's an Obama supporter, thinks it's disgraceful that his secretary pays more taxes than he does, equates capital gains with payroll taxes, and is quite the liberal.

Mostly he spouted common sense, but not anything I haven't heard from someone else.

He has a great deal more confidence in the economic types like Paulson and said, if anything, Congress should be forthcoming with even more money and less meddling.

He has also, I believe, invested something like 8 billion dollars of his own money into G.E. and Goldman Sachs, so he's definitely betting Congress comes through.

What I really noticed was that he had tons of cash laying around for "2 years" and was just looking for the right moment to reinvest. In essence, he's buying into blue chip companies at distressed prices.

The Sage of Omaha -- the richest man in the world -- has probably just increased his wealthy by a hefty chunk, because he was holding cash when the big guys needed it.

I've been kicking myself for not following my original instincts and trying to extract cash out of my business back in August 2006, instead waiting another 8 months, by which time it was really too late.

On the other hand, I added new books and boardgames instead, and that's proving to be the one bright spot in my store.

Still, cash is King. As Buffet just proved again.

Wednesday, October 1, 2008

Forgettable month.

As in, I'd really like to forget September. I'm hoping it'll turn out to be like January, just a bad month in the middle of mediocre months. But the drumbeat of bad news seemed to have a noticeable effect.

I still came out even, all bills paid, all credit cards down to zero, all merchandise paid. But it was designed to be a profitable month, for tax purposes.

The good news is that books are doing very well. Yesterday, it seemed as though I had every book that anyone asked for; people off the street are buying books. So I'm pretty proud of myself for recognizing that, at the same time I can kick myself for not having done it sooner. Of course, I really didn't want to impact on the Book Barn, which was having a tough enough time already. I sort of started the process a year before they left, but didn't want to make too much of it.

But now...I'm really ready to get rolling on it.

It's turning out that one of my new suppliers, the source of half of the books I ordered last month, is a two week turnaround; so I have yet to receive any books from them. My regular supplier is only two days away, so they've been delivering. And used books are selling much better in conjunction to the new books. I'm going to miss the ability to put a table of .50 and 1.00 books out on the sidewalk this winter. That was one of the more successful marketing tools I've ever had.

Linda's store is also doing 'well', (that's all she'll let me say though you can perhaps extrapolate from my newfound enthusiasm for books....) and she was able to make up the difference on the taxes.

So, all in all, it's like having gone through a hurricane with only a couple of shingles ripped off the roof, and a bunch of refuse in the yard. More bad weather coming, but another month under my belt to prepare.