Friday, July 30, 2010

Blog dump.

The first half of July was a real challenge to my urge to be candid about my business. Sales were way, way down. Inexplicably. We'd had 7 months of beating the same month sales from the previous years, followed by small drops in May and June. And then -- bang -- a huge drop in the first half of July.

I was writing about this as it was happening -- but only hinting at it with the posts I actually put up.

For one thing, as I always say about Christmas -- they've never canceled it yet. They've never canceled July and August either. These are the big three months, the months where I can almost always count on a profit.

But by mid-month, sales were not even matching my February sales, traditionally my slowest month.


As it has happened, the second half of the month has been matching last year every step of the way. Roughly speaking, we were down 30% in the first half, but have matched last year in the second half, which means we'll be down by 15%. Still a significant number, but not a complete disaster. In fact, we may end up only about 12% below last year, if the sales over the last five days continue...

As I'll mention in the following posts, we were turning a profit even during the big downturn, but that was because I'd positioned to store for major profits, and instead we were staying in the black.

As one last slam about "Our Wonderful Downtown Promotions" I can document that each and every 'event' day was down an average of 400.00 per day. One event day we did 78.00 worth of business, which wreaks havoc with any kind of average.

To me, it's no accident that our sales jumped 30% as soon as the "Special Events" were out of the way.

Just saying.

Finally, I have to say a word about the purpose of this blog. I've always intended to be honest about the store, but frankly, I haven't been challenged. Pegasus Books has been doing well -- and we've had three of our most profitable years during the Great Recession. I saw the downturn coming and positioned my store correctly, and we've been pretty much sailing through the downturn. Knock Wood. (Not that I wouldn't have preferred the sales levels of 2004-2007; that would've been bankable profits.)

So this was the first real blip on the screen. (We had comparable drops in sales during the beginning of the Great Recession, but it was expected. As I'll continually repeat, it's the profits that matter, not the sales.) Even with the drop in the first half of the month, as I will tell you again and again in the following posts, we were in the black. It's just that it was a bit dispiriting not to be making those profits I was so looking forward to.

So I'm going to post three of the posts that I was writing while the sales decline was happening, with a note at the beginning for context.

I've always said, if I was doing really poorly, I wouldn't say a word. And you guys wouldn't notice. People don't notice what you aren't saying, you know. It's the guys who are doing either really poorly that won't talk about their business, or guys who are doing really well and don't want anyone to know.

No. Scotch that. Most business owners don't want to talk about their business at all, and I can't really blame them.

As far as I'm concerned, there is a double dip recession already happening. Whatever the economists tell you. And I'm planning accordingly.

Anyway for anyone with the gumption or the interest, the following three posts were written in the course of the month.



Here's something that no one talks about: falling sales.

Just try to get a merchant to talk about THAT, except in the most vague of terms and cloaked with a "misery loves company" patina. That is, if everyone is going through the same thing, it's O.K. to admit it -- sort of.

So I'm going submit that I'm willing to talk about it because I'm feeling pretty secure in the overall strength of my business. It's the guys who don't want to talk about it who you need to worry about.

I'm going to reassure you all that we're doing fine, thank you very much. Which is true. I'm disappointed that I'm not going to make the nice hefty profits I was planning for, and instead will make a smaller profit. And I'm also thanking my lucky stars that the same decisions that make money also save money.

O.K. We got that out of the way?

Nevertheless, we've had three months of falling sales -- Year to Year -- after 7 months of increasing sales, after -- well, the Great Recession over the preceding two years.

Still, it's something I have to be aware of, and I have to examine the causes.

Is it me or the economy?

Is it just my store, or is it everyone?

Is it just my type of store, and are other stores of my type experiencing the same?

Is it the type of product I sell, or something else?

Unfortunately, other than vague and contradictory information for the mass media, which is usually dated months in the past -- or vague and contradictory comments in business bulletin boards -- there is not real way of knowing how everyone else is doing.

Remember, too, there are always exceptions both in the positive and the negative, who don't represent the average but who are often the most vocal and visible.

So it can feel very lonely. I have a saying though, that has been true almost every time. 'If I'm feeling it, others are feeling it even worse.' Because -- well, I'm quick to react and to do something about it. I don't think denial is a very useful activity.

The temptation on my part, almost always, is to immediately assume that it's something I did. That it's my fault, and I need to fix it. More often than not, though, I find after enough time has passed, the growth or diminution of sales was due mostly to outside factors, instead.

Contrary to popular opinion, I don't tend to believe we store owners are as responsible for the level of sales as much as responsible for maintaining the level of sales, of riding the waves of demand up and down. We lay out the menu, we don't make people hungry. If the food we provide is tasty enough, they'll come back. If it isn't, they won't. But that urge to eat -- that comes natural.

Comics are the best example of that. I don't tend to think I create comic readers. Mostly they come in, already primed. The more inventory I have that fits their needs, the more I sell.

Baseball cards were the first example of being unable to reverse a larger trend. I couldn't stop the decline of cards no matter what I did. In fact, I would've been better off letting it happen -- and once I finally figured that out, my store got immediately healthier. It's why I'm still here and still selling the occasional cards. Because I moved on.

This is not to say, I shouldn't do my job. I've been able to attribute falling sales over the years to things like; too little or the wrong inventory, my attitude or the attitude of my employees; over-expansion and resulting quality control failures, and so so on. But these usually either just added to an existing problem; and even if I had done everything right, I probably couldn't have reversed the natural cycle of demand.

O.K. So what can I do?

First of all, I can crunch the numbers and try to identify where the sales drop is occurring. Is it a natural statistical anomaly? (Which are pretty common.)

Secondly, I can ask myself if I'm doing something different that might be causing that drop?

Third, I can ask myself if there is something different I could do to reverse that drop?

Fourth, I can try to make my best guess with limited and dated information whether or not others in my business are having similar results?

Based on those answers, I can decide to:

1.) Take my lumps and wait for it to turn around.
2.) Throw more money at the problem (or less.)
3.) Look for alternative products to sell.
4.) Look at my pricing strategy.

You don't want to over-react. I think lots of business throw the baby out with the bathwater, once the product quits performing at the higher levels. Alternatively, lots of business stick to a failing product or approach and keep throwing good money after bad.

The answer is usually somewhere in between. Which is why I've tried to diversify my store. I can, for instance, crunch the numbers and decide to continue to carry Magic, but to order smaller quantities and price at closer to retail and see what happens. I can curtail my sports card box sales to the occasional brand. I can increase my boardgame and new book buys. I can moderate my graphic novel orders. And so on.

The only thing I'm really doing different right now, is that I have more employees. I just took an entire week off. So what if it's because I'm not there?

Sorry, the answer isn't for me to be there more. I'll accept smaller profits, if it means I can take time off. So I'm hoping that isn't it. I'll explore that possibility around the edges, question what they're doing and what they're seeing. But really, other than hovering over them, there isn't much more I can do. I'm more in danger of burnout than I am of less sales. I'm fresher and more active when I do work when I have weekends off.

Crunching the numbers, the sales are down in three categories -- and I think it's just the way it is. Certainly, they haven't shown enough strength for me to want to reinforce them.

On the other hand, comics and graphic novels are fine -- which is my main source. So I want to fully support them. Books and games are doing very well, and it may be time to support them even more.

So...the answer, at least for right now, is to let those falling categories find some sort of bottom and divert my funds into the parts of the store that are working....

Had enough? No? Here's another one.



NOTE: The following three posts were written over the last three weeks, as I realized that the sales drop was for real. I didn't want to post them, at first, because they might make us seem weak. And yet, I realized, we're actually doing pretty well, profit wise, and this is the reality of business and everyone ought to know it.

These posts are similar, and represent my acknowledgment of what was happening and how to respond. The usefulness of this blog is dependent on me being as candid as possible.

In a way, I'm saying, I can post these because we are solid. I'm trusting that by continuing to be candid, you guys can get a true sense of our relative strength and weaknesses. (I've mentioned before, if we ever got into any real trouble, you probably wouldn't hear a peep out of me -- I ain't totally crazy. heh.) Forthwith:

Here's a weird thing. This month's drop in sales for me may be the largest percentage drop in sales since the Great Recession started. And yet. And yet.

I'm still going to turn a profit.

Starting on July 16th, I had paid the last of the big bills for this month, just scraping the bottom of my cashflow reserve. After that, I have three smaller bills left for the entire month.

How can this be?

I positioned the store to make some big profits this summer. Instead, I'm going to make some small profits.

This has happened again and again in the course of my business. Apparently, the same impulse that tells me to start garnering profits, is the same impulse that should tell me that some sort of cycle is reaching it's end.

Thank goodness for the impulse. It's disappointing in the same way that you're disappointed that someone shot an arrow at you, but it just grazed your forehead.

It's clearer this time than ever before. In the past, I might have at least entertained the suspicion that sales dropped because I cut back on spending. Not this time. The store is fully stocked in every category. It's possible that if I had spent two or three thousand more on product I might have had two or three thousand more in sales -- but it doesn't seem likely. And even then, it would've been a gamble only to break even, and what's the point of that?

NOTE: (Since I wrote this, I did decide to up my budget on product....)

Besides, starting next week, I have a fresh new budget for August to spend, that is going to more than fill up all the categories yet again.

Here's a bit of anecdotal observation, and I can't vouch for it except as a feeling.

Who are my summer customers?

If I had to describe them, it would be like this: They are usually relatively well off and willing to spend money on vacation. They are intellectually curious. And they have a taste for the offbeat.

My store is like catnip to them. They compliment me lavishly, tell me that 'wish' they had a store like mine near them. They buy stuff old and new, fresh or stale, and they buy in larger quantities.

I just don't think I've seen many of this type of customer so far this summer. I've seen lots of 'local' tourists, that is locals for whom a trip downtown is a bit of a visit. I see locals. I see older tourists who are buying up my 1.00 books and nothing else.

I don't know. I can't quantify it.

All I know, is it is time to react.

Yes, there's more.



People who read this blog probably think I'm a pessimist, and negative person about business.

Actually, the opposite is true.

I always think I'm going to do better than I actually do.

I always think I'm going to turn a profit.

I mentioned before that I thought we were nearing a nexus point, because it was my intent to try to earn a profit this summer, starting in July, and all through the fall, and into Christmas.

Thing is, every time I've ever tried to do this, I've experienced an abrupt falloff on the very same month.

Well, it's happened again.

I have a kind of vague suspicion as to why this occurs. In my 30 year store history, I've probably had 10 or 12 occasions where I experience a period of steady growth and/or stability.

The first 3 or 4 times this happened, my inclination was to take this success and expand.

The second 3 or 4 times this happened, my inclination was to consolidate and diversify.

The last 3 or 4 times this happened, my inclination to diversify and/or turn a profit.

I'm not talking about a daily profit that pays my wages -- Pegasus Books has almost always paid me a minimum wage, at least. I'm talking about the kind of profit that pays for extras, or even more importantly, pays for some sort of post-store-owning life.

Anyway, consciously or unconsciously, I seem to have tapped into some sort of cycle, some sort of rhythm to business -- where I'm inclined try to capitalize on success, at the very same moment that success becomes problematic.

A.) As you can imagine, expanding based on success, only to see a falloff, really hurts.

B.) Consolidating based on success, by which I mean paying down on debt, and trying to diversify the product line within cash flow, while not very satisfying, at least keeps the store alive.

C.) Trying to 'profit' from success, and breaking even, is even less satisfying, except in the most "I dodged a bullet" way.

See, the same steps I take to "make a profit" are the same steps I should take in the face of a downturn.

Ironically, by taking those steps, I've probably saved myself from disaster, and survived all these years. If I was simply responding to a downturn, it would probably take me at least three months, and probably more like six months, to adapt to the new circumstances. Instead, I seem to match the downturn, step by step.

It's apparently an intuitive process. It took me a long time to realize what was happening.


Anonymous said...

You are one of a minority...the realistic business owners of Bend. Is there a club?
The un-professonal business owners we worked for in Bend were delusional, at best, and megalomaniacal most of the time. The megalomaniacal were atypical of the general Bend business owner but the delusional seemed to everywhere...

Anonymous said...

You would have to be delusional to have a business in Bend.

Look around the majority are grifters sucking the city-hall tit. Or shaking down the downtown merchants,

Everybody in Bend has an angle,

Then you get old birds like dunc, or other guys flipping burgers for 30+ years, ... but then every small town has a few min-wage guys cutting hair that can talk shit and entertain, ... and why don't they leave? My guess is that small fish in a small town enlarge themselves, no other reason to suggest why little fish rot their lives away in Bend.

On the other hand why does this little desert town attract so many parasites?

My theory is the town is created on illusion, of wealth and recreation, and of course fraud attracts fraud. Other grifters see grifters making easy money, and want the action, .. look at KURATEK, in just a few years city-hall gave him 2 mil $$$. There is GOLD in Bend, and its sucking on the city-hall tit.

But guys like Dunc ( DP aka dunc-pussy ), yes Bend is full of them, are they non-delusional? Is there a fucking club of min-wage barbers? By definition these guys want to be the #1 fish in the small pond, so there are no clubs, ... where ever these kinds can hold court, they can be found.

It's not a bad thing. Same thing as the folks who come to this rock, its not like they're bad, but they're no different than any other small town, and having plain-jane hang out at the barber or coffee shop or bar all day. Solving the worlds fucking problems, and dissing the status quo.

But would you really go to your barber for real financial or legal advice?