Boom Echo

Every boom has an echo, right?

One of the interesting things I noticed about fads (or booms, if you will), is that the maximum number of purveyors appeared long after the peak in demand. The product would reach its height, and then, slowly, almost imperceptibly start its inevitable decline, but the number of stores that would pop up to sell it would accelerate.

I used to explain this by using a 'froth' analogy. The cup runneth over...and over and over....

But I think the mechanics of it are deeper than that.

First of all, let me state this is just a theory, so take it for what it's worth.

Secondly, when I say the boomlet reached its peak, I mean the 'golden age' is over. It no longer is difficult to get the product, the prices are starting to fall, and thus the profits. But the product may be selling in greater numbers overall than ever before. Just nots so you can make any money off it.

The temptation is to follow the prices down, to deny that the product is failing. Failing to make a profit.

It seems crazy that so many stores could possibly be selling what -- just a short time before -- you had been the only one to see the potential of, the only one to take the risk, to develop the market. How are they doing it? you ask yourself in disbelief.

Usually, I'd get hit from both sides -- the big guys would take notice, and the bigger the fad the more likely they'd use the fad as a 'loss leader' and lower the prices to close to wholesale. They just want people in the door. Then I'd get hit by the little guys, who's best idea of how to generate business is to try to steal the customers you have already created and the only way they know how to do that is to undercut in prices.

I tried the first couple of times this happened to keep my customers -- by both competing in price and keeping the same level of service. But this is pretty much impossible, because the service was costly in time, money, space and effort and my competitors were apparently willing to lose money in order to gain market share. How do you compete will someone who thinks they can name that tune with one note?

Here's the kicker.

The overall market might -- to outward appearances -- even by objective numbers -- still be expanding in sales. Sometimes for years. Each outlet is selling less, each outlet is making much less profit, but there are so many outlets that the overall industry continues to expand.

None of this made much sense to me the first couple of times -- until I realized there was no sense to it. I was competing against people who had little imagination, who only really noticed the fad while it was in full swing and only then decided to jump on the bandwagon -- this goes doubly for the mass market, who usually only jump on when the fad has reached its ultimate mania.

Then it really gets crazy. The stores that opened at the peak start to fail, and two other stores will pop up to take their place. Then they'd fail, and two more stores per store would open up. This goes on for years, sometimes. These stores were generated, propagated, at the height of the mania even though they may not have opened until long afterward. They don't see the failing sales or profits because they have nothing to compare it to.

Nuttiest of all, is the phenomenon of stores opening to replace failed stores who follow the exact same business model of the failures. They don't copy me, or some of the other established stores, who are still in business.

No, they liked the failed stores because the stores were "CHEAPER" and the owners were too stupid to realize why they had failed (or unwilling to admit it) and would usually point their fingers at the landlords, or the wholesalers, or the spouse, or whatever as the reason they failed.

So these nitwits decide that selling the product for next to nothing, and spending all their time and energy in a losing proposition is the way to go. And go and go.

Once it reaches this stage, the best strategy for me is to take a step back. I'll maybe moderate my prices a little bit if I want to keep up some volume but not go whole hog crazy discounter, or I'll raise the prices a little bit and order much less product and hang back.

It's hard to compete with "the new kid in town", who in his or her naivete seems so much more of a booster of the fad, (while I'm trying to warn people to watch out), who's idea of competing is to be cheaper, who provides suicidal services like opening product to get the 'best' from it, selling it cheap, then taking what's left and selling it even cheaper.

I play a little bit of rope-a-dope then, wait for them to become disenchanted, or split in the middle of the night and just hope that some of my old customers will drift back to me.

But usually, it's pretty much over.

When I was visiting Brett's store in Roseburg, he mentioned how interesting it was that so many of the old-line stores that existed 20 years ago are still around: Heroes Haven, Emerald City, Things from Another World, Excaliber, Pegasus Books, and so on. Of course, that is a prediction of a natural phenomenon -- that is, the survivors would be the survivors. But I also think it's a valid observation -- and the only answer I could give him was, "None of us became crazy discounters."

I see Magic as having entered into a phase where 'price' will become paramount, because Hasbro has decided to promote the product in the chain stores, because its readily available at near wholesale online, because the progeny of the magic boom are being born in every town, but where the pressure will be for stores to provide tremendous service to retain their customers is stronger than ever, so the strain will be in both price and in services (space, time, effort.)

I'm not going down that road. I'm sticking to my price.

And the customers are disappearing in droves. Which means, I guess, that my budget for boardgames and books has gotten a sudden bonus -- and I'll pursue product where I can still make a decent profit.

Meanwhile, the conflagration of the fad will burn and burn, cheap being the common denominator, services becoming more and more costly and stress inducing and resulting in less and less customer loyalty instead of more. It's a vicious cycle to get into, I tell ya.


O.K. Some of you may have figured out where I'm going with this.

Way back when I first started writing about the boom in Bend, I mentioned that I thought downtown Bend would continue to fill with stores even after the bust because of the demand created at the peak, that the 'froth' would keep filling the space.

I've been more right about that than I expected. For one thing, there really are only a couple of vital places for 'small' business in Bend, right now. Downtown. The Old Mill is more for what I consider 'medium' sized businesses -- same with the Factory Outlet or Cascade Village, etc.

But if you wanted to open a small business and get immediate foot traffic, downtown Bend is the place.

So the irony is that we are still experiencing the Echo of the Boom. Now it may be that this echo will continue to fill the space until some kind of economic recovery begins. It won't be like most fads, where the product falls and falls....and falls. Eventually, there will be a bottom to the recession, and if we are lucky, downtown Bend will have placeholders all the way until then.

But like the boomlets I talk about above, the profits may actually be less, the service stress even more, and there may be more turnover than most people are aware of. But I do believe downtown Bend is an echo of the boom right now.