First, a little pop quiz.
How many times do I have to buy a 10.00 item, with a 40% profit margin, to make a 10.00 profit, and also keep the item in stock?
The average customer probably believes I make 10.00 when I sell that item, a more knowledgeable customer may think 2 or 3 times.
The answer is 5 times. (5xcog's6.00=30.00;4xsrp10.00=40.00;4000-30.00=10.00;+1xinventory)And not very many products sell 5 times in my store, at least not in the short run.
It is humoungously expensive to add a new product line; either you invest your money and recoup over the long run, or you add one or two items to your weekly orders and pay for it through your profit margin and take forever to get there.
I've done both. I actually prefer to do it over the long run, but by doing it slowly, I miss sales during the run-up. On the other hand, investing is lost income through interest, either because you spend money you have, or more likely, you borrow money and pay interest.
Anyway, this Fall I've been adding new books to my store at a rapid rate. New novels, lots of art and pop-culture books, whimsical and gothic books, pop-up books, lots of cartoon books, just neat stuff. As the bills have come due, and sales have been stagnant, I've been kicking myself.
Until yesterday. Yesterday I had average sales, which 6 days before Christmas, isn't what I was hoping for. But at the end of the day, an interesting pattern developed, sales in my main product line, 00.00. Sales in sidelines, 25%. Sales in my new product lines, 75%. In other words, if I hadn't added the new product over the last few months, my sales overall would've been down 75%. If I was so specialized that I only carried my main product line, sales would've been zero 6 days before Christmas! (Of course, people tend to buy what you Have, but you get the point.) Through no fault of my own, the publishers of my main product line (comics) have fumbled the ball. My new products have taken up the slack, just as I hoped they would.
I'm a great believer in diversity. I carry 8 product lines in my store, all of them with significant inventory. Yet, 6 of those product lines are sidelines, which account, on an average, to less than 8% of sales (each). They take up lots of room, energy and time as well as money.
Not only that, but I'm constantly shifting my focus, hopefully ahead of where I think my customers will be in a year or two. I think this is the biggest reason why we've been in business for 26 years, because I'm constantly trying to adapt to new realities, thinking for myself, and most importantly, getting ahead of the customer. My goal is to have an established product line at about the same time as new customers discover them. (My wife commented, "You've reinvented the store so many times, I've lost count.)
Here's the problem. When you constantly change your inventory, it is almost impossible to make an extra profit. The irony to me is that by trying to have a vibrant, relevant store, I probably make LESS money that I would if I stayed static. (At least in the short run.) I've always told myself that eventually I'd reached a point where I wouldn't have to change all the time.
Yet I've always made that choice, because this is the Best Minimum Wage Job a Middle Aged guy Ever Had.
Wednesday, December 20, 2006
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