Sunday, September 26, 2010

Retailers are illogical.

I've always tried to be logical in my business dealings. Or at least be aware of when I'm being illogical.

For instance, I try to ascertain the "True" cost of a product. Not just the price, but how much time, effort, and space is required to carry that product. How much service is required. And whether it's a service I can actually perform at a cost effective rate.

Time is money. More concretely, minimum wage is 8.50 an hour. If something takes you half an hour extra to do, that item cost 4.25 more. Energy is money. Driving 25 miles to purchase an item is 4.00 worth of gas and wear and tear on your car, so you better save at least that amount by driving that distance. Space is money. If you could use that space for something that will sell twice as fast, or at a higher margin, you're giving up that much money. And so on.

I think storekeepers get too hung up on simple cost of goods and margins, when they should be taking into account their precious time, energy, and space.

Most small business owners undervalue those items, and the world at large encourages them to do so.

Every time someone asks my WHY I don't do something, the answer comes down to time, space, energy as well as money. We small business owners are supposed to be willing to work all those extra hours for the privilege of working for ourselves -- 50 hours, 60 hours, 80 hours a week. Hey, you're paying yourself!

No -- you're not. You're costing yourself.

Admittedly, you have to probably work harder, but you have to be aware of the cost in energy.
I've decided over the last decade of watching other stores come and go, that burnout is at least as big a factor in people quitting business, as money. (Of course, it's much easier to get burned out if you aren't making money, and vice versa.)

Ironically, all the solutions that the experts propose for small business require that we give up more of our time and energy to make it work. The emphasis on service, for instance.

In my business, I've been told over and over again that I could make more money at games if I provided time and space. And yet, I've seen store after store go out of business, doing exactly those things. And often, with the departing lament of "I just couldn't do it any longer."

Well, yeah. Staying late, or paying someone to stay late, in order to support a game is going to cost you -- and even if the payoff is commiserate, there is only so much energy that can be given on an ongoing basis. You may make the money, and burn yourself out pursuing it.

So I very purposefully include the cost of using extra space, the cost of my time, the insidious energy drains, whenever I decide to do something or not do something.

Online selling, for instance, looks much better on the surface than it does when you start taking into account all the elements. Do I take time away from what I'm already doing and what would be the cost of that? Do I add more time to my day, and what is the cost of that? Do I try to hire someone to do it, and what's the cost?

Same with space, same with energy, same with all the other factors.



O.K. here's where I completely contradict myself. Business is as much an art as a science. The caveat to the above Logical Choice scenario, is that sometimes you do things because you want to. Because it gives you pleasure, even if it isn't the most efficient choice.

Sometimes there is a 'feel' to a product, or a product placement, that adds to the overall effect of the store. The example I've always used is that I once took out t-shirts and posters because -- logically -- they weren't performing. And yet I got a strong sense that not having them cost me overall sales and I brought them back.

And, like I said, sometimes you do something because you want to -- and the customer picks up on that. And that's why even though it may end up being a minimum wage job, it's the Best Minimum Wage Job a Middle Aged Guy could ever have.

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