Wednesday, July 21, 2010

My own little stimulus package.

I made some rather Large orders of books and games yesterday. I was scheduled to make these orders anyway, as part of my regular August spending, but I decided to go Bigger than I'd originally intended.

I've been thinking how, in an odd way, my decision parallels the national debate of austerity versus stimulus.

First of all, I waited for the full three months of falling sales before I declared it a trend. This is a fail-safe mechanism for me, because I can overreact to short term gains or losses. But there is now little doubt that -- at least for me -- I'm going through a double dip downturn. (I've got some independent information that it isn't just happening to me, too.)

Secondly, up to now my focus this summer has been on profits, not growth. As a result, I've been able to 'balance the budget', if you will. But sales have been dropping, and there is the danger of continued decline, or 'deflation', if you will.

Personally, I think the falling sales are more dangerous. So I've reversed course, and decided to prop the sales up again. (This has been my goal for most of my career, as long as I was taking enough home to pay the bills. What I'd been hoping to change was the ability to bring home 'extra' profits -- extra in the 'putting it in the bank' sense.)

Just throwing money at the problem isn't very useful. Fortunately, I have two categories in my store that are showing signs of strength -- even growth. Books and games. I have a long list of product that I can order that I either 1.) have sold in the past, or 2.) am pretty sure I can sell in the future.

I have the luxury of growing the categories with salable product. (There is also the side bonus that being proactive is much more fun and interesting, and my engagement in the process often, in and of itself, encourages sales.)

On the other hand, I don't get the sense that buying more Magic will help. Or toys. Comics and graphic novels are pretty well stocked -- these are mature product lines that are already selling about as well as they are likely to sell and I'm already keeping my inventory up and buying more might boost sales a bit, but wouldn't be terribly cost efficient. I don't want to just "buy" myself into sales growth.

By buying more games and books, I've probably insured that I'll increase sales through August and hopefully through the end of the year, but I've also probably given up my chance to make the 'extra' profits. That goal will have to wait for another day. Now is not the time for foregoing growth in viable product lines.

I suppose the big difference between me and the federal government is that I'm not in debt. I have no loans out, my budget is currently balanced, and turning a profit. There is a chance that if this new product doesn't sell in a timely manner that I might have a budget deficit, but I'd be surprised if it happens. It wouldn't hurt us much if it did.

Also ironic -- and typical for me and Pegasus -- is that I'm buying heavily into a product -- BOOKS -- that many other people seem to be having doubts about. I've been selling more books than ever, and I still see a path to selling even more, (trends that are evident, authors who sell who I can buy more of) so that's where I'm headed. Contrarian, as usual.

One of these days I'd really like to prove the store can be Very profitable, not just modestly profitable.

Maybe now isn't the time to try to prove it.

As everyone keeps saying, "Breaking Even is the New Black."


Jeff said...

Good to see that you're going against the grain and investing for the future. Not to make you nervous, but it seems like you're the only business doing it.

Duncan McGeary said...

"...but it seems like you're the only business doing it."

That's more like a reassurance....

I'm more comfortable following my instincts when it's against the grain, than following everyone else when it's against my own instincts.

Duncan McGeary said...

I should say, it's been the being careful up to now, and responding quickly to the two downturns, that has given me the wherewithal to make these orders.

It's time to give it a little acceleration, so it doesn't stall on the next hill.

RDC said...

Keep in mind that you are a niche store, the transition from physical books is still early. As the conversion takes place they will move more and more into a niche market. Consequently, books as a category should serve you will for many years, as long as you keep that niche focus. On the other hand you will increasingly see main stream retail outlets dropping their emphasis on physical books and see major issues with the big box stores that are dependent upon physical book sales. 10 years from now you will probably not see a Borders or Barnes and Noble type store, just as you nolonger really see music stores focused on CD's and you see the demise of video rental companies.

Duncan McGeary said...

At this point in my career, ten years is a pretty long window.

I'm trying to stay aware of the dangers of e-books. I've had the example of anime and manga, where the transition to pirating took less than a couple years....

But I think I'll be able to sell select books for a long time to come, and, because I'm diversified, I can constantly adapt to the flow of actual business.

The only real danger is that EVERY category of product I carry drops -- and even then, I can look to add another product line.

Books and games are relatively new products for me -- and they are approaching 40% of SALES!!!

Thank god I added them, even though they were an extra expense at the time.

Jeff said...

"the transition from physical books is still early..."

I can understand why printed newspapers may go by the wayside (I read all my news on computer), but I have a harder time imagining a day with no paper books. They're pretty cheap to produce, and a lot of people actually like to collect them (myself included).

Do e-books really have that much of a cost advantage? Or a convenience advantage?

Duncan McGeary said...

I don't worry that people will stop reading paper books, or that paper books will stop selling.

I worry that a 10% or 20% drop might be enough to put such severe stress on the industry that it the whole thing will fall apart.

I'm assuming that the transition, while painful, will be JUST slow enough for everyone to make adjustments, even if they aren't all happy about the adjustments.

And the irony is, most significant towns will probably have at least one independent bookstore, done as much for the love as for the money, when B & N's and Borders are long gone....

RDC said...

In my case I switched to e-books a couple of years ago. Baen Books started putting all of their books into that format and I was reading books by several of their authors (Weber, Drake, etc.). Today I seldom buy a physical book. They are just too inconvenient to deal with. I carry a library of about 500 books on my cell phone (Motorola Droid, used to do the same on my older Palm Treo). Anytime I have a few minutes to read I can pop into the app and pick up where I last left off. If I run out of books to read, not likely, I can go and buy and download new ones. When I used to do a lot of business travel I would have to carry 7 or 8 books for a 3 or four day trip. I would read one between San Diego and Dallas, another between Dallas and DC, etc.

I do not see me ever going back to buying large numbers of paper books and I am getting rid of my physical books when I can get electronic versions (i reread books frequently).

If you want to try it and you like science fiction, Baen books has a free library with some books from pretty much all of their authors. Usually the first book in a series for example. They support several different e-book formats (I have FBreader for epub format, Borders book reader, and Wordplayer (also epub) on my Droid. There is a Kindle version for Droid but while I have loaded it, I do not care for Amazon's business practices and how they restrict your own ability to manage your library. Too much like Apple.

Duncan McGeary said...

Do you know how much I didn't want to post that, RDC?

RDC said...

Its not the first time.

Really though what Baen found out was that creating their free library it kicked up sales of both the electronic and paper versions.

Since most money is made on books within a relatively short time of printing and release they have found that by making backlist books free they allow more people to experience an author and increase the market for the authors new releases.