Sunday, September 30, 2007

I love the idea of a Bust-O-Meter for downtown businesses. If it wasn't so mean-spirited and filled with karmic land-mines, I'd do it. (Yes, I'm superstitious that way. I knock wood whenever I say the wrong thing, or someone near me says the wrong thing....either way too positive or way too negative.) I cringed when Paul-doh cheered the demise of the Shire -- bad karma, man.

Still, in my head, I keep a running Bust-O-Meter. Scale of 1 - 10.

1.) Are they locals, or have they lived in Bend long enough to get the flavor? Are they from a big city, and thus have over-inflated notions? Are they from a small town, and thus have over-inflated notions? Do they have a notion of the seasonality of Bend? The neighborhood layouts? Do they realize that most longtime Bendites consider downtown Bend overpriced? That they are under the impression there is no parking? That we've gotten houty-touty? Do they have a way to get locals to their store, or are they depending entirely on the rich and the tourists? Are they aware how much turnover we've seen? How many longtime businesses have quit lately? That gauging success on the existence of stores that have been around for only a few years is tricky?

2.) Do they open within a reasonable length of time? Any longer than 3 months, and the Bust-O-Meter starts going up. A real, work-a-day business would probably contrive to open on the same day the first month's rent is due -- or even get that free. I can't imagine paying rent month after month without bringing in income. A sign that the owner has more money than sense.

3.) Are they focused inside or outside? Do they seem to spend all their time and money on fixtures and accouterments? On recipes and systems? On playthings and computers? Do they talk about the interface with the customers? I always have to make it very clear to my employees that while it's important that all the procedures get done, never, ever put the procedures ahead of the customer.

4.) Are they spending too much money in advance? Are they leaving any space, time, money for mid-course corrections? Do they have so much money they just throw money at every problem, instead of looking for a lower-cost solution? Too much money being spent means not many creative solutions are getting done. It's just a big giveaway that the owner is probably not very flexible and adaptive.

5.) Is their product appropriate for the size of the town? Have they done the research? Are they too narrowly focused? Is it all 'high-concept'? Are they realistic about the customer base? Do they have enough diversity and variety to appeal to all the citizens of Bend, or just the 'upper crust?' Are they competing head to head with the chainstores? If not, do they have a niche product that can actually support them? (Niche being something that Target doesn't carry because they calculate there's no money in it.)

6.) Is the owner working the majority of the hours, or have they hired managers and too many employees?

7.) Do they open weird hours and close weird hours?

8.) Location, location, location? Are they a 'drive up' business that opened in downtown Bend, (a 'walk-by' zone) or a 'walk-by' business that opened on Greenwood (a 'drive up zone? Are they a destination store that could get just as many customers in a lower rent area and the only reason they're downtown is because it's 'cool?'

9.) Are they treating it like they know it's a business, or does it seem like a plaything or a hobby? Is it a dream, or a business? Do they have other options? (Like going into a marriage with the thought you can always get a divorce?) Do they give an indication that they understand that it will be hard work?

10.) Is the space they rented too big? Too small? (It's almost always the former, not the latter.)
Did they pay too much? Unfortunately, almost anyone who has opened a business in downtown Bend or the Old Mill is paying too much, currently, and it's beginning to infect places like 3rd Street.

11.) Do they seem to think that advertising and discounting is the answer? Do they talk about 'service' as if it's a magic mantra that will protect them from all harm? Have they built into their business plan so many free services and guerrilla marketing that they face burn-out down the road?

12.) Are they opening the same damn business that five other people are opening within a block or two? Do they think they are so inspired that -- even though plenty of other people are doing the same, they'll be the one's to succeed?

13.) Are they aware that -- it doesn't matter how charming they are, how hard working, how knowledgeable, how great their fixtures, their locations, their merchandise -- that it's day to day sales that count. Money over the counter. And that ain't easy. Do they have realistic expectations of income? I've always thought waiting years for a profit is nuts. So is expecting to take out a lot of money, even over the long run. You've bought a job, probably a job that pays way less than the job you left. Have you invested too much for a 12.00 an hour job to ever get it back? Will you be satisfied making less? If you are planning to get rich, opening a small business in downtown Bend probably isn't the way to go about it.

There are more factors, of course, but those are 13 off the top of my head.

I've heard all the statistics about business failures, the 2 year, the 5 year. And for Bend, I think it's all Bunk. I think the 'survival' rate is much higher in the short run that most of the statistics, but much lower over the longer run. I think Bend businesses almost always last 2 years and very often last 5 years. But I'll give credit to anyone who last 10 years or longer.

Saturday, September 29, 2007

Yesterday, in a toss off line to express my skepticism that a Warhammer dealer could be turning over his inventory more than twice a month, I said that I was lucky to get turnover once a year.

IHTBYB questioned me on this figure, and when I took a moment to think about it, I realized he was right.

While I'm not attempting to be precise, I do want to be accurate.

So, in the interests of accuracy, my store does turnover more than once, more than twice, actually.

Comics and card games especially turnover many times of year.

So why did I say that? Because over the last five years or so, most of the new product lines I've added have fallen more into the once a year category. And that is where my concentration has been. I guess I just started thinking and assuming the whole store was like that. Because it really changed my focus.

It was very freeing to realize that I could add more sports cards or anime or statues, etc. and that I could accept slower turnover as long as the other parts of the store were functional, as long as I was paying within cash flow, and as long as the costs in space and time and energy weren't out of control. The diversity has smoothed out the seasonal and industry peaks and valleys, and has given me a chance to catch passersby with product (instead of just destination regulars.) Bottom line, it works.

Meanwhile, Bilbobend wondered if all the store owners in my industry are somehow duplicitous, because I rarely get a candid and frank discussion out of them. No, I don't think they are any more duplicitous or self-deluded than any other store owners. Store owners as a breed are canny, savvy, and keep their cards close to their chest. I personally don't believe that is necessary, I personally believe that shared information is more valuable in the long run than the occasional competitive nugget the other guy might glean. But I more or less fell into this business, and have a -5- type information gathering personality. (I think like a squirrel, the more info (nuts) I gather, the safer I'll be in the winter.)

Finally, Bilbobend mentioned that he no longer goes to Powell's and wondered why I kept quoting the 'Powell's model' of business.

I had a strange reaction to Powell's. I wasn't impressed. As you might imagine, I read a lot of science fiction. I mean tons of it. Going back to it's very crude beginnings, all the way through the pulp age, on through the 'New Wave' of the sixties, and down the the great fiction of today.
I'd heard about Powell's for years, so when I went to the S.F. section I expected to find:

1). Books I'd never seen, but which grabbed me.

2.) Books I'd been looking for, but couldn't find.

Powell's satisfied me in neither case. They had more books, but even that didn't impress me.
I don't think I was jealous, I just realized that having a block of books doesn't necessarily make you any better than having half a block of books, or even a few thousand square feet. I can only read one book at a time, and I've yet to find a bookstore where I couldn't find a book I wanted to read.

My reaction was, "Big deal." My wife loves the place, and never misses a chance to visit, however.

As to their model. Yuch. Buying books assembly line. Mixing new and used. Neither one turns me on, much. I think the used brings down the quality of the new. Carrying both new and used makes all kinds of sense, in fact, I think that the majority of independent bookstores will eventually go to that. But mixing them together on the same shelf? No thanks.

I think what my wife's bookstore is doing is right on. Her used books look almost new, half the time. We have a straightforward trade policy. And we are getting plenty of books in the door. Powell's is welcome to his multiple operations and employees. Too corporate for me.

But other bookstore owners seemed enamored with the Powell's model.

My Micheal Powell story. He used to come into my store to buy ARCHIE comics for his kids. Now ARCHIE comics sell randomly. They will sit for weeks, and then a whole bunch will go out. So I was selling out occasionally, which he grumbled about.

Finally, he came in one day and basically bawled me out for not having enough ARCHIE. I was embarrassed, and realized he was right.

I've never been out of ARCHIE comics since.

I've never seen Micheal Powell since....

Friday, September 28, 2007

There is one line of product that absolutely confounds me. I've talked about it before; I even carried it for a short time. I thought very seriously about carrying it again. And if I had opened my second store, it would have been a major part of it.

But the truth is, I can't figure out how what I've experienced, and what I know about business can be so utterly divergent from what others experience and from what others tell me about their business.

Warhammer, by Games Workshop.

This is a British company that creates miniature games. You've seen old movies where some nutty Englishman has a whole room devoted to a landscaped table of a famous battle, and he moves intricate armies around. Well, that's Warhammer, only in the S.F. and Fantasy realm. They have entire stores that sell nothing but their own product -- in metro areas of the U.S. and from what I understand, they completely dominate the gaming landscape in England. In fact, from what I understand, they pretty much crushed the competition partly by finding out which towns sold the most of their product and then opening company stores there.

The product itself is pretty cool. Nicely sculpted and imagined figures, that require painting. Thoroughly imagined worlds and game systems. It's very expensive, but you can almost see why.

But it isn't something you can dabble in. It's more of a lifestyle than a hobby. The fans are...well, fanatic, and they insist that any retailer that carries Warhammer have everything they want.
The company, up until recently, was obnoxiously aggressive.

My experience was: I had customer after customer tell me I should carry the line, and so I went out and bought 2 racks of figures for around 5000.00. And then they sat there. Week after week. The customers would ask, "When are you going to get more?" when I had yet to sell any I had already bought.

I would get a call from my Warhammer rep every few days, hounding me to buy more figures.

"But I haven't sold any!" I'd say.

"What's wrong with you?" the guy would exclaim. "Everyone else is selling them."

I was stunned that a rep of a company who was trying to sell me product would yell at me, hung up, and decided to quit the line.

I just refused. I liquidated the product without a second look back.

A few years pass, and Gambit Games opens and fills a wall with the stuff. By all accounts he's doing great. And then a few more years pass, and Gambit Games is closed. I'd hear constant reports about how the prices would constantly go up, that entire lines would be discontinued, how you had to carry a lot of dead product in order to carry the product that sells. Inventory creep was a huge problem.

I was saved from even thinking about carrying it by the huge expense of money and space and time it would take. On the bulletin boards, some stores would swear by it, and just as many stores would swear off it. Brad at Gambit more or less threatened to destroy me if I dared carry his precious Warhammer, and I just backed away.

When Brad went out, I thought about carrying Warhammer for a few weeks. The company itself seems to have reversed course and is willing to work with you. But I kept getting reports that,
1.) Someone was going to sell in LaPine.

2.) That the hardcore were going to create a buying club, and buy online.

3.) That D's Hobbies was going to buy Brad's stock, and carry the full line.

So I backed off.

A few more months pass. As I'm traveling around the Northwest, I start visiting stores. I go into one store, and the guy tells me he sells 5,000.00 worth of Warhammer a month. I look at his inventory, and he has -- maybe -- 2000.00 worth of product. I've gone back since, the the inventory hasn't increased.

So I'm supposed to believe he is turning his Warhammer over 2.5 times a month? Without him being inspired to buy more? (A turn of 5 or 6 times a year is considered pretty stellar in my business. I turnover my stuff maybe one time a year because I'm following the 'long-tail' model).

So that utterly confounds me.

Then I have a customer who comes in and tells me that a store in a very small town is selling 40,000.00 in Warhammer a month.

"Bullshit," I say.

At the peak of sports cards, I had four stores, and there was a single month where I sold 1000.00 a day among the four stores.

"Total Bullshit," I say. My entire store doesn't even do close to that much, including comics, graphic novels, toys, cards, games, books, and everything else in a downtown Bend store with great foot-traffic and 27 years of experience.

"Complete and utter Bullshit!"

But the guy insisted it was true. Now, I'm utterly confounded. I don't believe it.

What is it about Warhammer that causes everyone to lose perspective?

Warhammer is like a beautiful, alluring woman across the room who you suspect just might make herself available to you if you dropped everything you had and committed everything to her, but who would be high maintenance and would probably cheat on you and after she had emptied your bank accounts, would leave you.

But damn, she's a beautiful woman!

I think it's a really good indication that I should stay far, far away......
Last person in on Wednesday was a friend from Sisters who I have great respect for. We tend to disagree on politics just enough for interesting discussions, and have similar literary tastes. (He just turned me on to the book, THE RELIGION, by Tim Willocks, about the siege of the knights of Malta by the Turks in the 1500's, great fun.) Last thing he said as he left.

"People will always want to move to Central Oregon."

"Oh, man," I shook my head. "I can't believe you said that."

First two people in on Thursday. First guy had just lost his construction job. "Will you be able to get unemployment benefits?

"No, it was a three man crew and we were contract workers...."

Second guy in, has had a business in Bend for 20 years and was closing up. "My landlord wants to subdivide my 15k sq. ft. into 3 5k spaces and charge 2.00 a foot. "

"2.00 a foot....on 3rd Street?" I asked, incredulously.

"Yeah, I told him he needed to come check out what's happening in Bend."

Anyway, the guy was 61 years old, and decided just to retire.

It always amazes me how people not only can't see the end of the bubble, but will have random weird spikes.

Third guy in the store. Long time customer who works in construction and always scoffed at my questions about how his industry was doing. "Well, we're doing O.K." he said. "The real action is in commercial real estate."

"Yeah, but doesn't commercial building depend on new population and such?"

"Well, maybe. But there will always be a need for people with my skill."

"Unless building stops altogether."

"Then I'd just move and work somewhere else."

What was most shocking to me was that he had the ready answer, and that he'd obviously thought about it.

Meanwhile, all three spots in the building across the street are still empty. One has had a sign for a new business in the window for three months.

This is how I can tell the difference between a normal person trying to make a living, and a rich person wanting to start a lifestyle recreational 'retail' location; they pay rent for month after month without earning income. Crazy.

One other spot has a for lease sign. And the last spot (the hair stylists in the downstairs and upstairs left quietly....I just looked over one day, and they were gone) is just empty.

You know, someday I'll look back on all this and see that as the peak of the bubble: that a landlord would actually kick out viable tenants who were willing to pay the rent because he wanted higher class businesses. Really crazy.

Thursday, September 27, 2007

All the 'deals' are killing me. Every other offseason, (fall and spring), just as day-to-day business goes into hibernation, the wholesalers start offering us big discounts. On good stuff, too. I don't find that the material they're offering on sale to be all that much worse than the stuff I buy upfront for full wholesale price.

But with revenues on the predictable decline, it mandates that I spend some of my savings.

I hate doing that.

I mean, it make sense that the wholesalers are trying to boost their revenues in the off season. And since I'm in a position to take advantage of the deals, and with Christmas coming up, I'll go ahead. But it kills me, especially since my store is already packed to the gills.

But every time I sell that 'odd' item that I got at a huge discount, I know that its the right thing to do. As long as I subscribe to the 'long-tail' model of business, which has been very effective over the last 5 years or so, it behooves me to keep bringing in as much variety and diversity as possible, and if I can do it at a discount, I need to do that.

Wednesday, September 26, 2007

Can't beat that. As long as Sally Heatherton exists, we bubble busters are unnecessary. She proves by her very existence everything we're trying to say.

When I first read some of her comments on the other blogs, I figured she was satire, but she was just close enough to real to wonder. She even scolded me for being cynical. I was flabbergasted.

Once I read her blog, it became obvious.

But I had the strangest reaction at first. I so wanted for her to be a real person. Some kind of cross between Gordon Gekko and Martha Stewart. The avatar of all dumb blond real estate agents. The sweet-bitch of all sweet-bitches.

I wanted her to exist, and I wanted to see her in the Thunder Dome against BilboBend. My money would be on Sally. She'd fling Bendbust against the ropes a few times, while touching up her hair and buffing her fingernails, then slam him head first into the mat. IHTBYB would scream revenge, jump into the ring, and she'd casually skewer him with one of her nails. She'd turn to me with a gleam in her eye, but I'd be backing away, shaking my head.

"I'm with you," I'd say. "I never really believed there was a bubble at all!"

I don't know how long she can keep it up. I once thought of making up a anonymous poster who was be as dumb and snobby and greedy as Sally, but realized how hard work it would be. And I never would have gone so far as to create a full blown persona, with her own blog. I think there's a book there, if she (?) can keep it up.

My best friend is convinced she's real. "I've met her....well, seen her at the club!" He wants me to pass on the following:

"Sally, I really need to meet you. You're exactly what I've been looking for! My wife is threatening to leave me unless I sell my condo development. She just doesn't understand how much money I'll make once this correction is over.

"Could we meet at Northwest Crossing? No one will see us there. (don't worry, my wife doesn't read blogs...). We could sample one of those tasty little Central Oregon know, I've looked all around here and I can't find the vineyards? Anyway, I need to see you.'re just the kind of woman I've been looking for...

"After, we could go up to one of my condo's. I have one fully furnished for just such occasions."

A little pathetic, (he's pretty desperate), but I told my friend I would pass his message along.

Tuesday, September 25, 2007

What's the worst possible burn rate for a downtown business.? If one had unlimited funds, the go ahead to create the best space possible, full-time employees, and a great location? With the advantage of much of your original stock donated?

Apparently, about 200k a year.

I'm assuming not a whole lot of money was made.

The Praegitzer Gallery on the face of it would seem to be a bad example for a downtown business, and yet it had many of the same characteristics I see over and over again. Too much money spent up front, not enough money returned. Nice looking businesses that never really have any real hope of making a profit, much less a return on the investment.

The more money you have to spend, the more you have to lose.

You can have a great location, lots of capital, all the knowledge and expertise in the world, enthusiasm, motivation, wonderful displays and full inventory -- and still not make money. Because it all comes down to the math. How many people are customers? How much profit do you make? What's your overhead and your break-even point?

Let's say you create a wonderful business, but without knowing it (and sometimes you can't tell without trying, which is why business is basically a gamble) you need 250k population, and 1 million tourists as a base to turn a profit, and you have 200k population and 800k tourists. Then you're within striking distance -- not utter failure (like a burn rate of 200k per 14 months) but enough to think you can do it. So you slowly bleed money.

You can cut costs, improve your business, gain new regulars. But the math of population won't change. And even if you succeed in reaching a profitable cash flow, I keep going back to the return on the investment. This going to take years and years, if ever, and there is the pesky little problem of having to reinvest all the time to keep your business vital.

So people with lots of money and time tend to burn through the cash at -- what is to me -- a truly astounding and alarming rate.

Went by Northwest Crossing and actually got out of my car and walked around a visited the shops. Saw three customers in the fifteen minutes I was there. Saw one guy walk out of the cafe with a drink with a name tag on his shirt, who crossed the street and walked into the bank. The two women sitting outside at a table, waved at him familiarly, so at a guess all three customers I saw actually work there. Nice stores, though.

No one walking around. The surrounding buildings are husks.

And Riley's Market, which they are apparently hand crafting, since it's been -- what? -- 6 or 8 months since they started? I'm sure it will be magnificent looking.

Monday, September 24, 2007

I'll probably talk a lot about this in the future, when it actually comes to pass, but I'm preparing myself for the new Point of Sale computer that Diamond Distributors will be offering us sometime in the next few months.

I'm tempted to keep to my clipboards, but I won't. I've always underestimated the cyper world. I resisted going online, now I can't imagine doing business without it. I thought no one read blogs, and I've been surprised by the synergy, and the interest.

But, hey, look at this blog. You got it. Basic template; nothing else. I can point and click and I can type.

Paul-doh's first entries talked a bunch about how local small businesses were idiots for not adopting new technology. I winced, because I know it's true. I have no real excuse except I'm intellectually lazy and a technophobe. It looks like such a vast chasm to me.

I hired a friend in high school to help me through Algebra 2. He explained and explained, and occasionally I got a glimpse, but I had fallen too far behind. I gave up.

That's how I feel about software programs of all kinds. I get my resolve up, and start to read the manuals, and I'm lost in the first few paragraphs. I google for simple answers, and that sometimes gets me through a specific project, but I don't come away understanding what I just did. I look at "Dummies" type books, and instead of getting lost in the first few paragraphs, I get lost in the first few pages.

I went to a computer expert once, and paid him an ungodly amount of money to lead me through some basic stuff, and he just got impatient and did it for me and I never learned a thing.

My friend Aaron is a whiz, and sometimes he's even patient enough for me to write down in longhand, step by step, what he's doing. But six months go by, and I've lost it again. He's a friend, and I can't call him every time I need something. Linda and I have saved the 'Aaron answer' to once a year, and we feed him and entertain him when he comes over. I daydream about having his capability, and combining it with my down to earth business knowledge.

Linda tells a story of a guy coming to here church and playing beautiful music. She went up to him and said, "I'd give anything to be able to play like that."

And he said, "No, you wouldn't. Or you would have....."

After I graduated from college, I was so disillusioned and fed up, I swore I'd never, ever take another class. I would figure things out on my own. And I had always felt that I was an auto-didact; winging my way through school at a B average level with background knowledge from reading. That worked great for the fine arts, and the social sciences, but not so much for technology and science. I even figured out ways to get around that. I'd take a second year course in science, which didn't require pre-requisites, and avoid the 'gut' courses that I knew I'd have trouble with. I got very good at the playing the game of avoidance. Or I'd really study up the 3 days before a final, and it would be barely enough to get by.

My science and math scores were always higher on the placement tests than I would've thought. Because I was using my fingers to count, and using long and evolved logical routes with pencil and paper to get to the answer, without understanding any of the underlying math.

If all this technology was intuitive, I'd be O.K. But I have to actually know something. I'm hoping I can throw it all in Patrick's lap, and after he's learned it, he can teach me. I knew there was a reason I gave him such a big raise.

I'll muddle through. It's time.

Sunday, September 23, 2007

Slapped down, baby. And probably deserved.

I've tried not to use foul language, or attack other people. I don't even think I have a 'acid pen' tone. But many of those I converse with are a bit more out there than I am.

I don't mind that. In fact, I enjoy it. When it goes too far, I try to ignore it. I decided not to do what Paul-doh has done and allow any post whatsoever, but I respect his decision. I have held to right not to post comments, but I've never really had to do it.

I realized early on that when you are posting actively, that your opinions can get mixed up with others, your tone conflated with theirs, and so on. I'm not sure what the answer is. Being bright and cheery and positive, when you are trying to ascertain the truth doesn't work. Some truth isn't bright and cheery and positive.

I hope that there isn't 'guilt by association.' But, I feel the discussion is interesting enough to take the chance.

Still, Sally Heatherton's comment on Bendbubble2 was so honest and refreshing, it made me laugh. I thought she was being satiric. But she was being forthright, with her own name attached, and I think she made a valid point. I respect that. And I cringe as to what the response is going to be.

I'm responsible for my own comments, and no one else's. I can live with that.
This week's epic post on Bendbubble2 got me thinking about bubble psychology again.

First of all, there are going to be a huge percentage of the readers who simply won't or can't see the analog between something like pogs and beanie babies and houses. Nothing I can say or do will cure them of this inability. That's fine. Concrete thinkers have their place in the world, too.

And, indeed, I have to admit there are some BIG, BIG differences. But the principles are the same....just scaled to a much larger size. Of all the bubbles I've been through, comics would be the closest to houses in that they've been around a long time and are still a viable model and have an inherent value, but went through a short burst of 'irrational exuberance.' I could tell it was crazy, but was almost forced by the demand to extend further than I was comfortable with.

I'll never forget the conversation I had with the high up mucky-muck from Diamond Distributors. (The only time I've ever tried to work my way up the ladder.)

"I'm concerned. My orders are twice what my sales were last year. That doesn't seem right."

"What are you complaining about? Everyone else is happy!"

Nevertheless, I tried to be careful about my ordering, but the industry had other ideas and delivered product so late that all my caution was for naught. My comic sales dropped in half. then dropped some more. Sales probably bottomed out at about 75% from the peak.

Our little industry dropped from 12k shops (probably a third of them never should have been opened, and another third were viable but badly run shops that crashed when the going got tough) to 2.5k shops.

Good stores and bad stores both disappeared. The distributors shrank from one in every region when I started (ten or more) to a single survivor. Diamond Comics was forced to help out with payment plans for many of the standing shops (including me.)

The drop lasted 3 years, then hit a plateau for about 3 years, and then a slow climb. After being slammed by the sport card bubble, the magic bubble, the comic bubble, the non-sport card bubble, I was determined to diversify so much that no one product could kill me. I totally de-emphasized the collecting value of everything I sell. No more buying and trading off the street. The massive influx of customers never returned. The psychology turned so negative that only the 'true believers' stayed. (True believers in pogs, beanie babies.....0%; non-sport and pokemon, 2%; sports cards, 3%; magic, 20%; comics, 30%. guesstimates.) Comic shop numbers seem to be stuck at around 3k (though the level of professionalism is up 1000%.)

Most of the comic shops who survived did so by emphasizing the art and story, the entertainment value of comics. And the industry responded by creating some masterpieces. The format changed from monthly comics almost exclusively, to stores like mine where half the sales are graphic novels. We survived, and twelve years later are finally reaching the sales levels we saw back in 1995. (Of course, with inflation and without graphic novels, the actual number of comics is probably still down 75%.)

Pogs, Beanie Babies and Pokemon were all recognizable fads that I handled by not investing too much in infrastructure and by taking the profits and putting them into something else. I tried to keep my skepticism. I didn't follow it all the way to the top.

I tried to force myself to step OUTSIDE the bubble, which require thinking in ways none of us are used to. What if? I ask myself. I would pick the worst case scenario -- the earliest date that I thought it would crash, and then...and this required willpower when the money is rolling in....I would start to get out 1/3rd sooner. So, I figured Beanie Babies had roughly a year, so I started getting out four months early. I knew from researching how pogs had played out elsewhere that I had 6 months of big pog sales, so I started getting out at the fourth month (again, it took willpower, because pogs were reaching their peak.) Pokemon had about 2 years, and I started getting out about six months early. And so on.

I'd seen a computer model once of burst bubbles, and it basically showed that no one made money who went even a minute past the peak of the bubble. You have to get out before, and very very few people do that. They think they can detect it, and get out then. But usually there are people who are just a little smarter or a little quicker. Sales will fall faster than you can cut.

There is a weird period of grace, which probably depends on a certain number of stupid people with money who will buy just as thinks are going south. I don't wait for that, but I've seen it.
We are way past that with houses.

So again with an arbitrary estimate: I figure houses have way more intrinsic worth than comics, so the drop will be much less severe or long-lasting. So lets say, the drop is only say 25% as bad.

That's going to hurt. That would be able 20% drop in prices; or, if it takes place over a two or three year span, 30% in 'real terms.' A correction indeed.
For once, I didn't find that much to quibble about in the two articles in the business section of the Bulletin today.

First off, after reading papers in other towns lately, I still think both the Bulletin and the Source are exceptional newspapers. You just have to be aware of their quirks.

With the Bulletin, I usually add about 50% value to the negative aspects, and subtract about 50% from the positive, and that lends an answer that is close to what I think is happening. With the Source, I just ignore all the trendy crap and mine it for real news. I love the snark, and I think they're a bit more willing to tell the unvarnished truth.

The biggest problem, as usual, is the headline: "Economy endures the housing slump." If you read the article, there is a big caveat. The headline should continue......" So Far."

Money is disappearing out of the local economy, whether a person loses their 40 hour a week job, or whether two employees lose their 20 hours a week of overtime. (More actually.) I suspect there are way more undocumented employees than anyone is admitting. And with housing starts so low, I don't believe the companies are going to stay fully staffed forever. And my favorite bugaboo: why does anyone think that commercial building will save the day? In my opinion, because commercial building is so much more expensive and has such a long lead time, that people are going to lose even more money in that sector. It's just going to take longer.

The comments from retailers were 'damning with faint praise', I thought. And as far as electric and plumbing and other skilled labor positions -- they've never had enough of those, so I expect them to be the last to drop employees.

The other really noticeable thing in all these articles (and I see it in conversations in my store as well) is how layoffs and slowdowns are always happening to 'the other guy.' Not one construction outfit says its happening to them, but all of them say they 'know someone.'

Very suspicious.

Another undercurrent was that bidding competition is heating up. The result of that will be lower profits for whoever wins the bids. Irony being that those who are most responsible will lose bids to those who are most suicidally competitive.

At any rate, this is so early in the downturn, that no one should take too much comfort in the fact that the consequences haven't been far.

Saturday, September 22, 2007

Was in the Bookmark when a woman introduced herself as owning a used bookstore. She had many of the same ideas as us (except not carrying much hardcover -- she took away the thought of selling them for 1/3rd instead of 1/2 -- which is funny, because usually I'm the guy who says don't go lower, but hdc's are a bit different.) I mentioned my blog entry about my packed store and she said something like, "Oh, I don't want to go there!"

So, for everyone who read yesterday's blog -- it isn't THAT bad! I was exaggerating for a bit of effect, you know. Yes, it's packed, but still worth visiting!

That's the hardest thing to break through -- preconceptions. I know I have them too. Usually after going on and on about how most bookstores are too picky in accepting books and extending credit (the point, I say, is to gain customers, the book transaction is secondary), or that they don't carry enough hardcover or non-fiction, etc. I'll usually have a bookstore owner advise me to sell online, or carry first editions, and because of MY preconceptions, I don't entertain the notion for long. In other words, we all have preconceptions. We all do what we're comfortable doing, or have the time and energy or space or interest or money to do.

(By the way, the answer as to why a business doesn't do something is always............. , time, energy, space, interest or money.....)

When I talked about the explosive growth of Bend, she threw out the usual "It's happening where we come from, too!" And again, I try to tell them about Bend doubling size, and then doubling again, and the median prices and so on....

I'm sort of glad to see the "Don't Worry, Be Happy!' folk show up on the bubble boards. Without them, I'd still think we hadn't even begun the process of recovery. It's interesting to see the obtuseness of their minds, and how few of them can really express themselves without using platitudes.

I'm not wishing for a downturn. I have mostly benefited from the bubble, up to now. But I also know how hard bubble bursts are on the unwary. It seems prudent to point out the emperor had no clothes, because, you know, maybe he'll buy himself a parka.

I had falling sales from 1995 to 1997 in every category; Sports cards had plummeted in the early 90's, magic and comics in the mid-90's, and so on. There was nothing I could do. The hard part was being unable to predict future sales. I can handle downturns -- I've even made money on downturns -- but I have to be able to make accurate orders and estimate accurate overhead.

Clinging to false hopes is the worst thing anyone can do.

I was telling Chuck Arnold of the Downtowners that I thought the economy of Bend had rebooted. The last 3 years were an illusion. We're back to early 2004.

But I think we'll be lucky if it just reboots, no harm done. I'm still hoping, but keeping an eye out.

Friday, September 21, 2007

O.K. I admit it. My store has gotten too crowded. Don't tell Linda, who has felt that way for years. In fact, the Bookmark is almost the 'anti-Pegasus', with it's wide aisles, and single product.

But, I have to admit my store has probably gone from crowded, to cluttered, to "oh my god, is this all going to fall on me!"

Every week I go through the same song and dance. "I've run out of room! I give up! Close the doors!"

Pat just shakes his head. He does think I'm some kind of wizard about finding places for all the new product. I amaze myself sometimes. There always seems to be another way to consolidate or combine. But the store is actually becoming difficult to maneuver around. When even I back into stuff, or trip over stuff, it's probably time to change.

What to do? My sales have gone up with every addition. I've diversified into a nice steady flow of business. I can order just about anything, and it will fit somewhere in my store -- if I had the room. Hard to argue with results.

But I've noticed, for instance, that I've gone from getting compliments about my store, say 5 years ago, along the lines of, "This is the best comic book store I've ever seen," to very few actual compliments, but lots of, "How do you keep track of all this?" or "You've got a lot of inventory!"

Of course, compliments and 50 cents won't buy you a cup of coffee. And every time something sells out of a crowded nook and cranny -- something I crowbarred into place -- it seems to confirm my suspicion that the more stuff I have, the more I sell.

Still, yesterday, I had a sense that I've gone too far.

I know all about sales. That, I've decided, is not the answer. I'd rather remove product and store it in the basement. I can't expand, because both stores next too me are solid. I looked very seriously into opening a second location, but you know all about that.

Mostly, I'm going to try to order just a little less, just a little less often.

Of course, I have been trying to do that with Manga for about six months now, and I've probably decreased the footprint by, oh, maybe a foot. Hardly noticeable.

But at least I'm willing to admit that maybe it's gone too far.

If only there wasn't so much cool stuff yet to get!
In the guest column today, Patrick McGinnis relates that his "friends Steve and Lance, sold business, equity-rich, and now, after taking requisite down time to plot their next moves, both now run small businesses in town." (Bulletin, Sept. 21, 2007)

This kind of comment is made to me all the time. "Oh, I sold my house for a lot of money and started a business in Bend." As if it's a completely natural thing to do.

Here's what I hear.

"So you built that house way up on that cliff?"

"Why yes, isn't it wonderful?"

"May I ask? How do you get up there?"

"Why I flap my arms real hard and fly!"

"Well.....that's all right then."

They took their equity money and opened a small business. I thank them, the city of Bend thanks them. Now spend the money quickly, and learn to live like the rest of us.

Here's something to think about. Long term businesses in Bend, shops that have been around 15, 20, and 25 years are closing up, moving, selling, or completely changing focus. These are shops who have been around during the hard-times, and -- think about this -- have been around during the last few years of boom. And they are saying 'no more.'

If you have had a lifestyle that was such that you can sell out and have so much left over that you can move to a small town and open a business, I can almost guarantee you that what that small business brings in won't satisfy you.

If you are willing to live wisely, not spend money like you're in Silicon Valley, and adjust your aims downward, maybe you'll make it. Not by hiring a manager and five employees and buying every fixture new, and spending a fortune on upgrades. If you are willing to work you and your family, make a bit more than minimum wage, and cater to locals with small boosts from tourists, maybe you'll make it.

I just think that's a very hard transition to make. I'll tell you a secret. All those long-term businesses that are closing? They came in the waves of equity refugees in the 80's and 90's and their savings are gone and they're tired of working 60 hour weeks and their wife has finally put their foot down and said enough.

Look around you. There are a couple of hundred thousand residents in Deschutes County. Not millions. Tourism is helpful about 4 months out of the year. And the housing boom is over.

But thanks for bringing your money to Bend.

Thursday, September 20, 2007

To continue our tour of downtowns and bookstores. Downtown Kennewick made little impression, mostly service and light industrial. Not much in the way of retail. Pasco seemed to be almost entirely Hispanic.

No, all the shopping is done in Big Box strip malls; imagine Bend's Third St. as nothing but one big box after another. I never I thought I'd compliment the Forum, but it is relatively easy on the eyes. Tri-cities are as though you unwound the cluster of boxes in the Forum, and each had street frontage. They must just have endless amount of space there.

So row after row of faux 'village' exteriors, (Potemkin village, that is), facades with a bare rudiment of architectural detail. About as bland as architecture could be. All beige and tans. They look like they are made of plaster and balsa wood. Yet another thing we are bequeathing to our grandchildren; buildings that I predict are going to be huge, ugly, rotting corpses upon the landscape someday.

Hard to believe that Americans have decided that is what they want in shopping.

The only town we saw that I thought had real charm was Walla Walla. You can see why they're afraid of being Bendized. It did, indeed, remind me of downtown Bend 20 years ago.

We shot down the Freeway to Portland to visit son Toby and Lisa. On our way home over Santiam, we went through Oregon City, which seemed really beat up. Visited our last bookstore, a 'paperback exchange' that seemed to consist almost entirely of romance novels. Gave me the willies.

Then on through the towns I mentioned earlier.

Bend really does have something. It just has a vibrancy and a charm that most of these places don't have.

Wednesday, September 19, 2007

There seems to be a growing tendency on the Bendbubble2 blog on the part of critics to say...."it's all been said...."

Actually, I think the housing bust is just starting, that it is going to be long and slow and torturous, and that the majority of those involved in the bubble still don't see it. The dynamics of a bubble have been plain to see since 2005, based on articles and blogs I've read. But you had to want to see them, you had to have some common sense. If you didn't see it then, you're probably not seeing it now. You're a dog who's getting beat and doesn't know why.

Some of them say things like, "yes, there was an excess, but now we're getting back to normal..." as if they can pick 'normal.' I doubt we'll settle on the optimal level on the downside anymore than we settled at the optimal level on the upside. More like a safe crashing through floors.

One of the things that had up to now puzzled me about the housing bubble was that there had been very mild denial, and almost no anger. But now the denial is starting to show up. The anger is next. Get ready, IHTBYB, because it's going to be your fault.

My own guess is that winter will be hard, but hope will be nurtured until spring. The activity of spring and summer will take place, with lots of fuzzy information, but by fall we'll ALL KNOW.

Then a winter for panic to incubate. Followed by panic selling in 2009. And then a long long time before people begin to believe again.

Think as you will, but I'm running my business on the basis of the above scenario. It doesn't hurt that good financial sense works in good times as well as bad; reduce debt, keep overhead and spending low, tend to your knitting.

If I'm wrong, and the economy keeps tooling along or picks up, it's very easy for me to pick up my spending. If I was wrong the other way, it's almost impossible to reduce spending in my business once I've committed. (I order product up to six months in advance, but I can get existing product in two days if I want it.)

So, this is going to be a very Darwinian process. Hell, I just read a letter in the trade publication from a sports card dealer about the importance of 'positive thinking.' How pathetic is that?

Some will never get what happened. They'll save face by blaming someone else -- the 'credit crunch', the fed, the Bend government, whatever. Hopefully, they won't fall for the next fad or bubble.

But the whole 'argument', if that's what it is, has just begun. I doubt even IHTBYB will have the gumption to keep it up; Bendbust, maybe. I'm almost ready to say, "believe whatever you want, if you aren't convinced by now nothing I say will make a difference...."
I have kind of a different take on the latest O.J. Simpson fiasco.

Back when sports cards started to go south on us in the early 1990's, many of the established card shops started selling sports memorabilia. It was the new wrinkle, and supposed to save the industry. I'd already dipped my toe into that world, by buying collections that included bats, jerseys, autographs and so on. It was always a bit of a chore to convince the collectors they were real (they were) but not impossible.

But the sport card hobby had attracted the worst kind of fly-by-night dealers already. And it didn't take long for me to realize that the memorabilia market was a con man's playground.

Really, you could take any sport card dealer aside and ask him to define "ethics" and he'd brush you off because he was too busy screwing someone. Awful business.

Being in Bend, there was no real way for me to vouch for the authenticity of anything, so I opted to stay out. Up until then in the sport card business, I'd had a knack of zigging just before the hobby zigged, and zagging just before the hobby zagged. This time the hobby went zigging without me.

It's too bad. The sport card hobby seemed so innocent and fun, at first. But I realized that if I stayed in the business, there was no way I could keep the slime from rubbing off on me. This isn't even a rant; it's what I truly believe.

It was the first of many steps away from the wild west horror show that the sport card industry became. A reflection, in a way, of the way the sports industry as a whole has become: cheating, lying, money-grubbing and infested with egomaniacs.

O.J. fits right in. It's a karmic revenge, a payback. He is surrounded by the most sleazy people you can imagine. Watching a few minutes of Larry King last night reminded me of what cruddy people these sports dealers are. I won't go into all the things they do, but if you buy anything from these guys, you are probably being ripped off.

Tuesday, September 18, 2007

We are just back from a four day trip to the Tri-Cities area of Washington.

We've really taken to liking these 3 and 4 day trips to areas we've never been before, and have no real reason to visit now. They've turned into bookman holiday's, really, because we visit every bookstore, new or used, and every comic shop we see, and we seek out others. We buy from almost every store, and get ideas -- both what to do and what not to do -- at almost every place we see.

I also like to try to get a sense of the towns, and especially the old downtown cores.

And the other thing we do, is pull off the highway to actually go into all these small towns, instead of whipping bypass them. And whenever possible, we take the 'scenic' route, which usually seems to add about 1/2 an hour to any 2 & 1/2 hour trip, which seems like a small price to pay to see terrain and towns we'd never see otherwise.

One observation I'd like to make right off the top: Old Oregon and Washington are still there in the rural and small towns. Every road you go down, there are people out there. It doesn't look anything like the life you see in the Movies and T.V. So you find out things like, that the hills above Sutherlin and Sublimity, (the Silver Falls area), are packed with tree farms, hillside after hillside.

Or you see that the Yakima Reservation terrain looks alot like the Warm Springs terrain.

Or you drive between Oregon City and Malalla and see farmlands as far as the eye can see. (Which I shudder to think might be subdivisions without the Oregon Land Use laws.)

And if Bend thinks it's unique in it's outdoor life, it's anything but. There are recreational areas everywhere in eastern Washington and Oregon, and all over rural western Oregon and Washington.

Maybe this is obvious to everyone else. But I think I've spent most of my adult life speeding down highways and interstates, in a hurry to get somewhere, when it's the little towns and hamlets in between, or the hills and dales and hollows behind, that are most interesting.

On the way up, we went up Highway 97, through Goldendale and the Yakima Reservation, stopped at Toppenish, and then took the back road to get to the Tri-Cities.

The Tri-Cities; about 163,000 population combined, or about twice the size of the Bend urban area. Kennewick around 65k; Richland and West Richland about 55k; and Pasco about 45k. Very flat and spread out, and the big boxes seem bigger and less clustered. Interstates connect all three cities so that, for instance, when Linda wanted to got to a church on Sunday in Richland, we left our motel in Kennewick an hour early, just in case. Instead, we got there in maybe 5 minutes, or less time than it takes for me to get from Williamson Park to downtown Bend.

We stayed in Kennewick, but visited Richland first. Richland's downtown is very spread-out, with lots of older, but large government buildings, health facilities, etc. Very little commercial that I could see. There were a couple of old, rundown strip-malls where you would normally have found a downtown core. Maybe I never found it, but I drove all over while Linda was in church, so either they never really had a commercial downtown core like most towns, or it got replaced.

They had a very nice used bookstore, The Bookworm, which also had a branch in Kennewick. Neat, orderly, nice selection of new and used. All the things that we usually don't find in used bookstores. Not really very big stores, but nice.

In one of the old strip malls, we found a gigantic used bookstore/comic store called Adventures Underground, which has been open since June of this year. The owner was a 26 year old and his wife, who had apparently been selling books online for some time. They had 5500 sq. ft. in ground floor space, (by contrast, my wife's store has about 2200), and another 2500 behind a wall and yet another 8000 sq. ft. of storage above! (which wasn't part of the rent.) He had about 60k books, about 5k new. He had a decent selection of graphic novels, with an actual emphasis on independents (which is unusual). He was discounting almost all the new material, and he told me that he was doing so well with the used books that he could afford to discount.

This sounded so much like me when I started, I winced. I was bringing in so much cash on sports cards that I thought I could afford to hold prices below what I could actually get. What I didn't see back then, and which hard experience taught me, was that the time would come when I would need to make every cent I could just to survive. There is no reason not to make the money you can when you can, and every reason not to set a 'discounting' precedent that you can't drop later.

"How many Harry Potter's did you sell?" I asked.

"About 60," he said.

"How much did you make on each book?"

"Almost nothing," he grimaced. "Maybe 2.00."

"So you made 120.00 on a 1000.00 investment. I sold 10 Harry Potter's at full price, so I made 175.00 on a 175.00 investment.

"Thing is, Harry Potter was a seller. Take the same discount on a book you get stuck with, and you will lose money."

Couldn't convince him. He was certain he needed to discount to make it.

He had a glorious amount of space.

Unbelievable. I was so envious. His rent was only 30 cents a foot, vs. mine of 2.10 a foot, but it was a balloon rate, which was going to double up in six months. He'd sunk an unbelievable amount of money into opening his business. (Ten times what I invested 24 years ago in mine.) His bookshelves were the expensive type, and he had lots of them. He also carried boardgames and card games and a smattering of role-playing. No toys, no statues, no t-shirts etc.

It was obvious his focus was on books. He'd all but given up on new comics, and had a small batch on the wall, though he had a fairly large amount of back-issues in beautiful but expensive racks. It was a little strange that he had so few new comics when all it would take to build it up was a few hundred dollars, when he was spending tens of thousands on other parts of the store.

The thing that really killed me was that only about half to two/thirds the display space was being used. As the owner of a store that has to fight for every inch, it just about made me want to go around rearranging everything. He has all this space to display stuff cover out and he's just letting it sit empty. I don't know, a huge window space that had almost nothing in it. A behind the counter that was relatively empty. That kind of thing.

On the other hand, he had a very sophisticated point-of-sale computer system.

Basically, he had the Powell's bookstore model, and the space to possibly pull it off. If the expenses don't kill him off first. His overhead (I'm estimated what he must be paying in loans, as well as his rent) was horrifying humongous.

I may be paying 2.10 a foot, but its only 1000 sq. ft., every inch of which is packed with material. My overhead, at a guess, is less than a third of his.

He told me a daily total that was actually higher than mine for this time of year, so maybe he can pull it off.

He didn't seem all that interested in what I had to say, (don't discount, get more comics, be generous in trade terms, fill out your store by displaying more merchandise, etc.), I think I was just some blowhard off the street to him. But that O.K. I tried.

And I learned quite a bit from him.

More bookstore visits, tomorrow....

Monday, September 17, 2007

Was in Walla Walla over the weekend, and I'll have more to talk about other towns on the trip later, but first up: Walla Walla.

We were warned not to mention we were from Bend. They have a fear of being "Bendized." Bumper stickers saying, "Don't Bendize Walla Walla." We stopped in a bookstore called, if I remember right, Earthlight. This bookstore had books in every nook and cranny. Books stacked to become, in effect, tables. I kind of liked it -- I've always liked bookstores like that. I was tempted to say aloud to Linda, "See, you can keep taking books in!" But I was afraid I was offend the owner, who was very nice to us.

I asked him how long he'd been in business. "35 years!"

"Ohmygawd!" I exclaimed. "When I tell people we've been around for 27 years, they're amazed. I'm very impressed."

We talked about books a bit. He started out as a new bookstore, and morphed into a combo (which is becoming more and more common, we're noticing, especially among more recent used bookstores.) Everyone seems to want to follow the Powell's books model, of mixing used and new together. I like the idea of carrying both, but dislike the idea of mixing them. Anyway, we had that kind of talk.

He said that the reason Walla Wallan's were up in arms was because Bauhofer's outfit wanted to build a destination resort.

But Linda and I had already taken on the mantle of Bendites. We whistled the Empire theme from Star Wars as we drove into town, and practiced our lines. "We are from Bend. We are here to assimilate you!"

We went into the local comic book store, North Star Comics, but Linda felt they were so unfriendly, she steered me out of the store. Now, I trust Linda's instincts on these things. She tends not to take offence easily, unlike me, so if she was feeling the vibes, then it confirmed my thoughts. The conversation went like this.

Woman greets me as I walk in, staring at my purple Bizzaro t-shirt. "Yes, I'm a middle-aged guy in a Superman t-shirt. I own a comic shop." I meant it to be friendly, but maybe I was too forward?

She shut down. "Oh."

Me, puzzled. "Don't you even want to know where my shop is?"

"If you insist."

"We're from Bend."

Linda says the owner (?) turned right around and walked away. I was glancing around the store, and Linda was steering me to the door.

It looked like a nice enough shop. Maybe a bit of a 'clubhouse' atmosphere; regulars sitting around, in an exclusive sort of way. Lots of Warhammer and gaming. But I really didn't get a chance to look around much.

One of the things I noticed on this trip, as well as the other trips, is there is a lack of curiosity on the part of store owners that to me, is stunning. At least the questions of, "Where you from?
How big is your store? What do you sell?" would seem appropriate.

So we walked around downtown Walla Walla, and it was very pleasant. It did remind me of Bend circa 1990 or so. Probably twice as big in area as Bend, but well kept up. A mix of regular and tourist type businesses that was nice (unlike Hood River which was all upscale and touristy, and reminded me of Sisters for Sunday foot traffic and Bend in the mix of shops.)

They have a couple of colleges, in their favor. Saw lots of wineries on our way in, but that isn't our thing. Anyways, a very pretty town.

Sunday, September 16, 2007

I was just talking to a Downtowner who wondered if it made any sense to talk about the negatives.
Of course it does: If you are a small business owner planning to expand, to add newer fixtures or inventory, to bring on new employees....
Anything that would add to overhead, especially overhead you can't cut down, then 'talk' about the negative may be exactly what they should hear.
Acknowledging that there is a problem is the first step.

Saturday, September 15, 2007

Seems as though a few more of the real estate folk have found Bendbubble2, and the Bend Oregon Economy Board. Will be interesting to see how that develops. Interesting that they've noticed, even more interesting that they are engaging in discussion.

I hope they don't get completely shouted down, because that doesn't do anyone any good. But based on some of the comments so far, I'm wondering if there is much of a middle ground.

One thing I always hated about what happened in the sports card market is how long and how strongly the 'think positive' elements held sway. They weren't willing to acknowledge problems, much less help solve them. The solution, eventually, was they all went out of business.

Anyone left was well aware of the problems.

Friday, September 14, 2007

The "Curse of the Bambino" may have ended with the Boston Red Sox World Series victory, but the "Curse of the Mike" lives on.

I'm sure I'm not the only Trailblazer fan who had a flashback when the Blazers drafted Greg Oden instead of Durant.

This time we drafted a slightly suspect, but possibly dominating center instead of a flashy, potentially amazing forward.

Back in the day it was a slightly suspect, but possibly dominating center named Sam Bowie, instead of a potentially amazing guard named....what was that guy's name.....I'll remember it in a second....rhymes with "Like"....had some sort of deal with a shoe company called Nike....Oh, yeah, I think his name was....I think it was something like ......drumroll......Micheal freakin' Jordan!

Mikey loved stickin' it to the old Trailblazers. Sink a miracle shot and shrug his shoulders apologetically and then turn around and do it again and mug for the camera and then do it again. Bastard.

For those of you who are basketball fans, Sam Bowie turned out to be a decent but constantly injured player, and Jordan turned into....MIKE.

So Greg Oden is out for the year. They assure us that he'll make a complete recovery. Heard that before.
It also shows how unpredictable the fortunes of business. The other day I told you about a new product line I thought might be the Next Big Thing. Come to find out, it's been delayed because of all the Chinese toy recalls. It's been pushed back to the end of the line. So, the whole back to school moment, which is when Pokemon, and Pogs took off because kids talk to each other about what they did that summer, is gone.

I ordered twice as much Basketball boxes this year, than last, in hopes that Oregonians will be looking for Greg Oden rookies, and that the Trailblazers could have a good year.

I'll be back to ordering normal quantities the rest of the season. Even if Greg Oden comes back and has a good career, the moment is past....

Thursday, September 13, 2007

I'm trying to imagine the impact of the housing implosion on my business. So far, there hasn't been much, if any. The customers I have, who work in the trades, seem to be doing O.K. so far. can kind of tell the margin of error has shrunk for them. The guys who were turning down work a year ago, still have work lined up, but aren't being approached anymore. Guys who lost one job, seem to be able to still find another job. But you can feel the extra cushion starting to deflate.

Like I said, so far, I've seen no slowdown of foot traffic. No real scaling back. But I tell -- I can feel -- it coming.

So, as a thought experiment, I've tried to remember what business was like back at the beginning of 2004. I was just going into a new lease, and I was a bit worried about the jump in rent. I decided to stay because I felt I would lose business to a larger extent than I would save in rent if I moved. Within a year, the extra foot traffic paid for the increase, though probably not as much as my landlord might think; since only about 25% of my business comes from non-regulars.

Meanwhile, some of my neighbors looked at the same rent, and jumped ship. (In the interests of accuracy, 3 out of 5 left.)

There were many more long-term businesses here back in 2004. A steady stream has left, to be replaced by 'high-end.'

Before the year 2000, I can't think of many retail businesses in downtown Bend who both positioned themselves as 'high-end' and stocked their stores as 'high-end' who survived for very long. (There are long-term businesses who actually do a fair amount of moderate business who are high end on the surface, but also have local customers...) I believe that the high-end has worked downtown in the last 3 years only because of the bubble. That there has been such an overflow of business, that these types of stores seemed reasonable, almost natural.

I don't believe that under normal business conditions, much less a downturn, such an influx of fancy shops is going to work. I think the whole downtown is going to go into a period of shock. But it will take 3 or 4 or even 5 years before the consequences come home...

So if we bubble busters are right, the downtown is in for hard times.

For some reason that I've never been quite able to figure out, my store tends to perform the opposite of most downtown businesses. When the rest of downtown is riding high, I tend to be struggling. When the rest of downtown is struggling, I'm kicking butt. Perhaps its because I'm a leading (or a lagging?) indicator. Perhaps it's because I'm always planning for slow times, and building or diversifying or paying off debt in the good times. Perhaps my product just does well in slow times. But recessions and slowdowns don't scare me much.

A depression such as we saw in the early 1980's ? -- yes, that would definitely concern me. I'd hate to be paying these rents if the foot traffic dried up.

I'm not a doomster. I think we are indeed going to go back to normal business. I think a lot of home equity money is going to get sucked up in 'high-end' businesses that look great on the outside, but are losing money on the inside. Business owners are optimistic. So if the bleeding is slow, lots of owners will hang on for a long time, hoping things will turn around. So I don't expect anything dramatic to happen.

Just a slow devolution to normal business -- which is tough going, not particularly lucrative, and not something you can waste a lot of money or time on. Owners will have to suck up and work their own businesses, or get out. Because, I think a small business in downtown Bend isn't going to be something that can be done by absentee owners much anymore.

Businesses downtown are going to have to try to downscale a bit. Carry a bit of product that locals might actually want. Get back to reality.
'Berserk' llama bites woman.' The Bulletin, Thursday, Sept. 12, 2007.

"...described by state police as brown, hairy and aggressive."

I've got the perfect answer for Mr. Bill Dolf and his canal trespasser problems. He needs to get himself a 'berserk llama' who gets enraged by joggers. Lets see District Attorney Dugan try to get past that!

Wednesday, September 12, 2007

There is a new product coming out soon, that I think is going to be the NBT (Next Big Thing.) It's a spin-off of a previous fad product, in a different format. Something about it tells me its going to really take off.

Now I could be completely wrong.

I've always wanted to get in on the ground floor of a fad. I got in early on sports cards, and leveraged everything I had to follow it up the curve. But I never had enough money to do it right, and was mostly playing catch up. And, of course, I didn't get out when I should have.

The lesson I took from sports cards was to buy more diversified product, but less of each. So when Magic the Gathering took off, I was able to pursue it a bit better then sports cards, and it was a much smaller curve, but at the end of the curve -- instead of getting out -- I followed the example of sports cards, and diversified, but with less of each game.

Wrong. Ate all those games.

Comics took off for a year, and by now I recognized a fad when I saw one. So I was very careful to cut orders for the fall and winter, 4 months in advance of when I thought the fad would fade.
My timing was exactly right, but I was foiled by the comic producers who dumped all the spring and summer solicitations into fall and winter, and I was screwed. I'd tried to outthink and outtime a fad.

Next up: Pogs. I remember sitting at the dinner table with my parents, telling them about these little circular card board do-dads that I was convinced were going to be the NBT. "What do you do with these things?" Dad asked. "You play a kind of tiddly-winks, but most kids are just going to collect them." "Why?" Mom asked. Needless to say, they didn't loan me the money I was hoping for.

Still, I leveraged Pogs to the max. (Financial genius -- leverage and a bull market.) It was my no hit ballgame, my perfect score. Too bad all the money had to be used to pay off my sport card, comic, and Magic debt.

Non-sport cards. Probably should have stopped buying sooner.

Beanie Babies. Again, played it almost exactly right. Used the money to diversify into games and toys.

Pokemon. Huge fad, which I did well with, used the money to diversify into Anime and graphic novels, including Manga.

Yugi oh. Never really got any traction, for some reason.

Then.....nothing. At least 8 fads in the first 16 years. No fads in the last 8 years. Can't really explain it. I'd become accustomed to waiting for the NBT. There were some developments outside my store -- D&D game came back big, and all the D20 games, and so on. Mostly, the NBT 's were in entertainment industries outside my working perimeters.

Now, one of the things I decided after I had time to think about this, was that I would become more of a reactor, then a leader. That is, I would make absolutely sure that it is a real fad before I got heavily involved. That fads always left wreckage in their wake, and I was probably better off creating everyday business.

But in the back of my mind, I've always wanted to see if my instincts are right. That if I stocked up before I fad took off, I'd be prepared to leverage it for all its worth. I have a little bit of capital I can try this with.

The NBT I'm talking about is coming out soon. I ain't telling you what it is, but I'll be upfront with you as soon as I don't think I might be giving away a competitive advantage. And if it flops, I'll tell you that too, because this will be an interesting experience.

Now its possible that it will come out and the reaction will be; so what?

But I don't think so. So far, I've ordered probably 3 times what I would a normal new product. I intend to gamble (because a gamble is what it is) a certain amount of money on it in advance, (probably twice what I've already ordered) and I'm going to try to stockpile it as it come out for when it takes off.

Or not.

You can see along with me.
So income has gone up double, but housing prices have increased by 5 times? Not to worry, rich people will buy all the houses.

I'm still amazed and astounded by the reactions I get in my store from visitors. The comment, "It's happening were I come from, too." The comment, "We're thinking about moving here."

And then, when I question their knowledge of the local conditions, the realization that they don't have a friggen clue!

Perhaps when it comes to the crunch, they come to their senses. But I have a sinking feeling that they are moving here willy nilly, thinking they are going to get a comparable job to the one they left, and sitting pretty on a nest egg of equity.

So the question becomes. How long does it take for them to lose their nest egg?

Bend just keeps sucking up all that cash. And the longer the newcomers are oblivious, the longer high-end retail keeps opening. (Not one, but two bookstores opening in Redmond?)

I think we are only on the very beginnings of the downturn, certainly not the end. I think it's going to be another year before it becomes common knowledge. How that can be when it's on every news program and in every news publication I can't explain. Like I said, talk to the tourists....

Tuesday, September 11, 2007

Another example of cost-effectiveness, or lack thereof.

Just had a customer in who was asking for several odd sizes of sport card supplies. Since American Sports went out of business, I'm the only specialty store still carrying supplies. For a couple of months, I sold out of the Beckett Price Guides, because I had a sudden surge of interest, and I was ordering a minimum of one. I was under the impression that to get them direct I would have to order a minimum of five.

Turns out, I can get 3, and still get shipping. So, I've been doing that for a month. So far, I've eaten most of the new ones. If they don't start selling by Christmas, it's back to ordering one or two through my comic distributer.

At any rate, I was explaining to this customer (who buys all his cards online, by the way) that I had cut my supplies down to basics; regular top loads, 9-pocket pages, 400, 660, 800 ct boxes, shoe-boxes, 3200 ct boxes, and soft sleeves. But lately, I'd brought back albums (all sports) and larger top-loads, along with the increased Becketts.

His comment: "Yeah, it must be hard to keep track."

"No, I can keep track," I said. "But the stuff has to sell once in a while, if I'm going to carry it."

In other words, in true sport card customer fashion, he was just assuming I was too lazy or incompetent to carry odd sizes. From my perspective, he was too flaky and demanding for me to carry odd sizes. I went ahead an worked with him for almost an hour trying to track down the odd sizes he wanted, and my total profit is going to be, oh, maybe 10.00. Because he demanded a discount.

I'm really starting to rethink whether I want to deal with either the product (or the customers who want that product). I might be better off just saying, "Sorry, I don't carry that..."

Because it ain't worth it, not because I'm lazy or incompetent. Give me a profit motive, you know? Or should I just go out of business like the rest of the card shops?

Sometimes, in other words, the sale is not worth the sale.
Part of me just wants to hunker down. Yesterday's posts seem like daring bad luck to me. (knock on wood, knock on wood). And yet, I can't help but comment.

My store is in a different place than it's ever been. First it was an under-capitalized startup, then it was on the sports card roller coaster, then it was up and down survival mode, (booms and busts of a succession of bubble product), followed by free fall, and then, over the last three years, in build-up again.

Now, it's more a' keep it going' maintanence phase, which I've never been in before. I need to organize, clean, reorganize, spruce up, and buff. I need to make certain that I keep the merchandise quality high, and the sales as near the peak as I can keep them. (Without the constant increase in merchandise, sales may actually drop a bit, while profits should increase.)

At any rate, I'm still adjusting to this new world. Things haven't really changed from the outside much, so far, except that the foot traffic outside my store is noticeably strong. So the housing crunch, and the possible recession, is all theory at this point.

That said, I still have a few observations about Boomtown. 12 employees and 7000 square feet would be difficult for a destination store. (You wonder if they wouldn't have been better off staying in their Wall Street location.) Also interesting to me is that their diversification efforts evidently weren't enough. Because that's been my strategy as well. But I've been aware for awhile now, that its working because of the downtown foot traffic.

Finally, just a small mention of partners, but it made me wonder if the real reason Boomtown is closing is because the building is worth so much more than the business could ever bring in....

Greg Oden. I KNEW it! Damn. The Sam Bowie curse.....

Monday, September 10, 2007

I must admit, I find it puzzling and intriguing that so many long-term established downtown businesses are quitting, just as I'm having my best year ever. I've been mulling it over, and I think the answer is surprising, and somewhat counter-intuitive.

My expectations are really, really low.

That is, I spent so many years in debt, just hanging on, that I made the decision to stay in business long ago, that I would willpower my way through to the end no matter how hard, no matter how little money I made.

It may be a great, but stupid, argument to make your mistakes early and make them often.

I can't say for sure, but I'd be willing to bet that some of these other businesses actually extracted a profit out of the businesses for a number of years, that they have a bit of equity to fall back on, that kind of thing. Whereas, I was in debt for so long, and trying to run a business with one hand and one leg tied behind my back, that for me it seems smooth and clear after the debt is gone, and I can actually order the way I want and need.

Still not making a whole bunch of money, but mostly keeping out of debt and paying the bills on time.

Keeping out of debt and paying the bills on time. Nirvana.

So the extra foot traffic downtown is beneficial to my business. Because I was in debt for so long, I've kept my overhead to a minimum. I've learned to maximize my product, to diversify, to -- in essence, butcher that buffalo, and use the meat, the bone, and the gristle. I've become very very savvy because it was the only way to survive.

So this seems like smooth sailing to me.

Maybe not for long. Competition always lurks. See the post below about sea changes in industries, the constant changing of the technology and retail landscape. But I just find if fascinating that things are going well at a time when everyone else seems to be feeling a drag.

But I need to keep from being cocky: just because my head is above water for the moment, doesn't mean there isn't a big wave headed my way.....

I just heard that Boom Town is closing.

I 'd heard their CD sales were way down, but really didn't want to say anything on rumor. But, especially following the news of Music Millennium closing another store in Portland, it doesn't come as a surprise.

It may be CD's, but I also think it's small business in general. Was there really room for two indy record stores in Bend anymore?

I 'm really not kidding about how much small retail is going to turn over in the next few years in Bend-- and what people ought to think about is that many of these businesses that are currently closing are LONG TERM businesses, with savvy and experienced owners.

Most of these new 'high-end' stores should be so lucky as to last 15, 20, or 25 years. It is nearly impossible, if you aren't experienced, to actually know if you are making a profit. Because losses sneak up on you. And the amazing thing is how the investment is part of that, and I doubt many owners realize how much that initial investment is costing them.

It's a tough road, that I think newcomers mistake as easy when they first start because they are new and excited and have the best inventory they'll ever have.

How could a business that looks to be doing so well go out? Because looks are deceiving. You can sell 60% of your product easy, and since that pays for your product you think you're cruising. The next 20% isn't so easy, but it pays for most of your overhead, so you still think you're O.K. The next 10% takes forever, and you never really notice that the last 10% never sells, or sells for a loss. So instead of the 40% gross profit you thought you were making, you really were making 30%.

Now you have a bit of old, tired product mixed in with the new, and you can't guite get all the new shiny stuff your store seems to need and pay the rent on time, so you cut a couple of items.

And so on, and so on, until half your product isn't turning over anymore, and that bright glorious first couple of years starts to fade from memory.

You throw some money at advertising, and you start having sales, but it seems like the ad bills are just extra, and the sales have less and less effect, especially since the customer wants the new, shiny on sale not the old tired, and now they're waiting for you to put it on sale and won't buy otherwise.

Meanwhile, four years into the venture, those bright shiny fixtures are getting scratched and dented, and the carpet has a few holes, and you still are paying on the original loan.

And a bright, shiny new store opens two doors down. And about five years in, your spouse starts to mutter that he or she never sees you anymore, and you're not much fun, and the kids seem to think their babysitter is their real parent.

And some customer says something like, "Is this all you got?"

And you realize your landlord is moving out your neighbors and you might be next, and it's going to cost another loan to move, and you still have 2 years left on your original loan.

See what I mean? All kinds of stuff going on behind the scenes.

So you make it ten or fifteen years, and finally you're making a bit of money, you've figured out how to do it....and the industry has a sea change on you. The mass market discovers how to sell your best selling line at what you paid, and the internet seems to be selling it at a loss, and someone has figured out a computer program that eliminates the need for your store at all.

Not trying to say that small business isn't something people should do, but that they should be aware it's much tougher than it looks, and having lots of money may only mean you lose lots of money sooner.

Again, I'll let others more knowledgeable and into it, decipher the Bulletin's graphs on housing yesterday. Except to wonder if, when estimating the 'days on market', the number of new building permits is subtracted from the total number available. If they sold 266 units, but built 149, that only draws down the inventory by 117, right?

The number that really interests me, is the number of new business filings. Look at that graph, folks. While the number of building permits has gone from 126 in the year 1997 to 149 in the year 2007, a 14% increase, the number of new business filings has gone from 41.9 to 418, or by 10 times!

I'm not sure what businesses are being counted here; real estate, retail, hair salons? But any way you figure it, it makes even the housing bubble look small. And while the housing bubble is correcting, it looks to me as though the business filings continue to spiral out of control.

It says to me that newcomers are trying to create new jobs to go along with their new houses.

One thing I've noticed in my store: most civilians have absolutely no clue to the appropriateness of a business; that is, they don't understand the proportional aspect whatsoever. I get the comment every single day, "Are you the only comic shop in town?" There is no irony in the question. They really seem to believe that Bend could support another shop, maybe more. And the same holds true of all other businesses they mention.

There is a range of possible numbers of sizes and numbers of businesses in each type of environment, but it is a very NARROW range. Sure, Bend could have 3 comic shops, but I guarantee you one is already doomed, one is struggling, and one is maybe making a small living.

So, at a guess, that is indeed what is happening in Bend retail. The proportionality of scale has been completely lost. And when or if there is weakness in the local economy, there is going to be hell to pay.

Sunday, September 9, 2007

One of my sons and his wife was home for the weekend, along with his wife's sister and her significant other. The sister and 'other' were actually interested in comics, so we took a jaunt downtown.

"Shall we park in the garage?"

"Why?" I say. "It's Sunday, there'll be parking everywhere."

We found parking, but barely.

Downtown was packed, every street. People all over the place.

And yet, the Bookbarn was closed. Pave' Jewelers was closed, Designer's was closed.

At the end of the day, my store did twice the total I had on Saturday, with half the hours.

It doesn't happen like that every Sunday, but I almost always get close to my hourly average. I just can't understand why any business that has employees wouldn't open, because the wages would be paid for in almost the exact same proportion as a normal day. That is, if you can afford to be open Monday through Saturday, you can afford to be open Sunday.

Shrug. It's their funeral.

Saturday, September 8, 2007

I'd rather talk about business, you know. But everything is so routine right now. Contentment writes a blank page.

Up until spring, I was still in expansion mode. Still adding product. Then all spring, I was trying to fine-tune my budget. Then summer, was all about sticking to budget. Almost went off track by opening a second store, and spent almost 6000.00 on product I hadn't intended to spend. But, still made a profit this summer.

If I can turn a small profit in the fall, I'll be O.K. And then another attempt at profit at Christmas.

See what I mean? Boring.

About the only thing I can really talk about is What product I choose to order and When. For instance, I've taken to ordering standups toward the beginning of each season.

Standups are cardboard cutouts of popular figures. People think they're free, sometimes, because they see them at movie theaters and checkout stands, but no, they're made to be sold. Some people are horrified about the price point, others think it more than fair. What's interesting about them is they're unlike anything else I sell.

For instance, almost ANY other product I sell could probably be found cheaper on the internet. But standups are so bulky, and yet relatively low priced, that by the time you pay postage, you can buy it just as cheap at my store.

You might be able to find a single standup at about 5.00 over my cost, but postage would add a minimum of another 35% to the cost.

It's one of the reasons I still carry the damn things. They're bulky, and expensive to ship, take up a huge amount of room for the profit I get. I've noticed that almost no one else does them, or does them for very long. In a way, they are a perfect product for me.

No competition, even from the internet.

Profit margin is average.

They fit the theme of my store.

I'm willing to take the time and expend the space to carry them.

I have to order a minimum of a dozen at a time. If I guess wrong about the popularity of a character, I end up sitting on them for a very long time. For instance, for some reason I ordered Roy Rogers and Dale Evans. Meanwhile, I sold a dozen Johnny Depp Pirates over a couple of orders. So... Do I just order Johnny Depp and John Wayne....but wait, I like Bogart and Monroe, too, even though they sell much slower. It's a perfect long tail product.

So, it's a tricky business. I sell them for 35.00. I could make a decent profit at 25.00, BUT I have to sell 95% of what I get in, and that doesn't happen. Plus, they take a good long while to sell 95%. At 35.00, I only need sell, say 80% of them, which affords me the occasional blunder.

Why am I talking about this? Because it's an interesting case study of price points. It seems like I used to get constant complaints about my 25.00 price. So much so, that I found myself apologizing and explaining. "They're made to be sold, you know. I have to buy them in bulk, and they are expensive to ship and take up alot of space...."

Now, I knew that I was spending about 6.00 per figure buying them in bulk, and that postage would be as much as 12.00 a figure if I dared to buy them in singles. I knew they took up all kinds of room, and that I almost always had a figure that wouldn't sell, and that they were sporadic sellers.

So I decided to quit carrying them. I went about six months, and then thought, I'll try it one more time, but instead of charging 25.00, I'll charge 35.00, and I won't apologize or explain, and if they don't sell, then out they go.

So what happened? They ended up selling at almost exactly the old pace, but because they were 35.00 they were worth carrying, when at 25.00 they weren't.

On the surface 25.00 should have been enough markup, and this is sometimes all people see about price -- but sometimes other factors weigh in that are equally important. It makes sense; if someone is going to object to a 25.00 price, I won't sell at 20.00; yet if someone is willing to buy at 25.00, they probably will buy at 35.00. Even if they buy slightly less, I can afford to carry a wider variety at the higher price point, which brings up the turnover rate.

Selling them for less, doesn't help at all.