The Speculative Game.

It's so interesting to me that even though I'm not interested in "speculation" anymore, I still know how to do it. And nobody else in town does. Nobody else who sells this stuff has been through this before.

Pokemon is hot again. Okay, that's fine. I love seeing the kids get into it, to play the game; at least, I hope that is at the base of what is happening. 

But seeing twenty-something old guys coming in and pretending to be interested when what they really want to do is buy me out and sell everything on ebaby--that's a big warning. 

Here's the thing about speculation. It's gambling, which is bad enough. But worse, at it's core, a winning speculator is taking advantage of someone. It's almost the definition of a winning speculative strategy.

So obviously, I don't want to be the fool that gets taken advantage of...but neither do I want to be the guy who takes advantage of other people.

How do I sell the product and not get taken advantage of and still sell at a reasonable price to those who deserve it? That's the trick.

When a fad comes along, it's not hard to sell the product. Any moron can do that. No, the real trick is to somehow have the product to sell when everyone is scrambling to get there before you. Over the years I learned how to do it. I still have those chops.

Basically, the trick is to have the product and sell it too. To discourage or thwart the speculators but have the product for sale to those who deserve it.

1.) The minute you see the fad setting in, you buy whatever available product you can. Then, every time it is offered, you buy as much as you can.

2.) You don't put it all out on sale at the same time. You put enough out to keep people interested. You don't let customers buy everything you have. It's tricky, because if you set a limit, they'll buy the limit which just means you sell out even quicker. So you don't tell people the "limit" but wait until they ask for more than the limit.  

3.) When the speculators come in, play dumb. "Oh, is this hot? I didn't know that. No, I don't know when I'm getting more. Gosh, I only have a little bit." and so on. Speculators aren't return customers. They are just trying to take advantage. Not to contradict myself, if playing dumb doesn't work, you look the speculator in the face and say, "I'm not going to do that. I want to sell this to the young kids who are actually playing." I tell you, every time you do that, the speculator will look down and say, "Oh, I want that too." Right.

4.) In every speculative bubble, there is the moment when you can still buy the product but you have to pay more than wholesale. If it turns out that I can still sell the product at (maybe with a smaller margin) SRP, or close to SRP, then I buy all I can. This is not something that a corporate store is going to do, nor is it something that most small businesses will haven't experienced this before do. Paying more than wholesale in order to have the product is just not normal. But in a fad, it's the only way to have it.

I currently have Pokemon at $5.00 a pack. That is slightly higher than the original SRP, though not by much since we were already selling the packs at cheaper than the chain stores, (3.99 versus 4.59) so it really only puts us closer to what most people were selling it for. 

The small bit of extra also is a disincentive for speculators to buy from me, but doesn't dissuade the kids and parents who have searched all over town for it and can't find it anywhere. (I can't tell you the number of times parents have told me, "You're the only place in town who has it.")

What I learned back in the old days was that "It is better to have the product at a slightly higher price, than to not have the product at all."

What's fair and makes sense is instinctive. I'm not interested in gouging. The extra .50 or a 1.00 is not about the extra money (indeed, my margins are probably even smaller than normal) but keeping the demand down enough to have the product and yet continue to sell it. Meanwhile, I was constantly told that the stuff I was selling was four times that price online.

Every single customer who came in to buy Pokemon yesterday also bought something else.  

We'll still sell out--mostly because I'm not going to follow the prices up the ladder like I used to do 20 years ago (I didn't know any better.) When it starts getting crazy expensive, I'll let it go.

But in the meantime, I'm trying to try to be the "go to" place and still keep the prices reasonable.

 

Those who get ahead, get ahead. Just lurk and pounce.

One nice thing about running a current surplus is that I feel free to take advantage of every "sale" that comes along. Some of my suppliers offer weekly sales, sometimes more than one. Any time I can get legit product at a major discount I figure it's a bonus, even if it's not material that will sell right away.

My theory is--have a constant supply of new material running through the store. I liken it to a thin layer of new snow on top of a thick layer of dirty snow. Makes the store look shiny.

Besides, I've learned that just about anything can sell...even, eventually, that most things will sell. I may have to offer a big discount to someone down the road, but I'll know that doing that isn't really putting us backwards. 

It's also a way to test things. I mean, me and Sabrina have already ordered the stuff we think will sell. Most of this liquidated stuff are things we didn't order. So how do we know if we're right? How do we find out if things we aren't currently ordering isn't stuff we really should order?

Well, buying a discount makes sense to test the water. I'm often surprised. 

There are comic stores out there that still don't do graphic novels, which is a huge mystery to me. All they have to do is wait and Marvel or DC or Dark Horse or Image or IDW or Titan will have some big liquidation sale. How can they lose? Toys, posters, graphic novels. Just lurk and pounce.

Stuff that stacks.

Pegasus Books has re-upped our lease. It's a great location--probably the only location in Bend that would work for us. Indeed, the store is designed specifically for this location. That doesn't mean I don't wish it wasn't bigger. (Is that sentence a triple negative?) 

We could fill a space two or three times our size.

About 20 years ago, it became obvious that, rather than the cheap rent, out-of-the-way location we'd been when we started, downtown Bend was coming back. Foot traffic was increasing noticeably. New retail spots and hotels were being built to the east of our location making us closer to the center of downtown.

Along with this came higher rents.

Up to this point we'd been mostly a fanboy store--people who were "into" what we were selling would find us. Most of the product was bought in advance and sold as quickly as possible before it became out-of-date. People walking by probably weren't interested in most of what we carried. I'll always remember the looks of dismay and alarm that would overcome middle-aged people when they accidentally wandered into our store. 

Of course, over the last 20 years, much of what we're selling has moved into the mainstream. What was once nerdy--still is nerdy--is now more commonly accepted by a wider number of people. 

At the same time, though, I started mainstreaming the store. I started to design the store for walk-in traffic. As a consequence, more and more of our sales now no longer have an "out-of-date" feature. In fact, really only monthly comics fit that definition and they only represent 15% of our overall sales. 

It wasn't until the changes were made that I realized that I'd been on a hamster wheel for the first half of my business life, chasing product, trying to guess in advance what would sell, and then trying to sell enough of it to move onto the next thing,

By mainstreaming the store, I made budgeting much more predictable, which makes the store much more consistent and steady.

Graphic novels, board games, card games, toys, and novels all have much longer shelf lives than sports cards and monthly comics. I can buy product when needed, instead of having to put in constant preorders.

When you're constantly buying product two to three months in advance, you are always in danger. Anything can happen in three months--war, economic collapse, plagues. And we'd be stuck with the product we'd ordered and the debts accumulated.

Now? The book "The Princess Bride" will always sell. The game "Settlers of Catan" will continue to sell. I don't have to worry about my inventory becoming obsolete overnight.  I quit chasing the dragon. Right now, some comics, non-sports cards, sports cards, and card games (especially Pokemon) are hot again, but I'm not chasing them. That's a trap.

The store has gotten packed. About ten years ago I decided that the only way I could make the store work was by buying stuff that stacks. 

Books, games, and jigsaw puzzles all stack neatly. That means I can buy more of it.

The store has high ceilings, so I used the space above about six feet for toys--and more stacks.

It all seems to be working. 

We are re-upping our lease again.

I suppose it makes sense that Pegasus Books would do so well near the end of my career. I've had all this time to get it right.

But that's not what I see around me. Most stores seem to limp to the finish line, so I think this is fairly rare. Indeed, most stores--99% of them--don't last this long at all. There's basically no one left downtown that was there when I started 40 years ago that are owned by the same people. Assume there is someone I'm not counting--that's the 1%. 

It's also an example of the cycles in business that just seem to be built in, if you last long enough. We go from being popular to being unpopular and everywhere in-between. We just to seem to be on a roll right now. 

The cycle will turn again, this I know. But my efforts over the last 25 years has been to diversify so that we always have options. I think this is the right answer in a town like Bend, which while it has grown, is still somewhat isolated, and which is subject to business cycles perhaps more than most towns.

I'm having fun right now. As I came to realize with the first crash 30 years ago, you need to either have fun or make money. Right now, we're getting both. 

I'm very grateful for a supportive landlord and customers and my manager, Sabrina, and especially to Linda for hanging in there with me. It's often been a struggle but when it works, it makes up for it. Thank you. 

We intend to keep the store going, with or without me.

We've been here all along.

 Just finished "American Ulysses," by Ronald C. White. 

If I'd read this 10 years ago, I'm sure I would have had a different impression. I tend to read books about late bloomers, like Truman and Grant, because I think of myself as a late bloomer.

But what was really striking about this read was the part that dealt with Reconstruction.

Guess what, folks. As a country, while we've progressed in many ways, but we're also very much like we have always been. There are eerie echoes of the racism that pervaded the south and the north in the years after the Civil War and what is happening today.

The top layer of out-and-out racist language and--Thank God--most of the extreme violence (though the book doesn't deal with it, the violence still exists, but nowadays come from those authorized to use violence.)

Grant tried hard to bring the south around, but he was not helped by many of those in his own party. It appears that a large number of abolistionists were opposed to slavery, but holding down Native Americans and Black people, not so much. 

This is where you hear the echoes, in the talk about state and local control, in the voter suppression, in the willingness of the whites to throw minorities under the stagecoach and not look back. It was startling to read what people were saying 160 years ago and what they're saying now. Take out the blatant racist language and the message is still the same.

We've been kidding ourselves about the southern states. They have been fighting against true equality for this entire time and as long as they maintain power they'll continue to do so.

Edda this, Edda that.

Back in high school, (when I actually had to go to a library to research) I did a paper on the two Eddas influence on Tolkien. I don't remember much about that paper, except that a list of dwarf names included Gandalf as well as others that were familiar. 

Having just recently finished a tome about the Vikings ("Children of Ash and Elm") I decided to get the two Eddas for the store. Basically, almost everything we know about Viking mythology comes from these two works, which--even then--were written by Christians shortly after the Viking age. 

What I remember them being called was the "Elder Edda" and the 'Younger Edda." Nowadays, the preferred titles seem to be the "Prose Edda" and the "Poetic Edda."

I don't expect these will sell quickly. I got them because I wanted them.

But it's also a good example of what I think a good bookstore should do. 

1.) Buy something interesting.

2.) Buy something most other stores won't have.

My theory is that everyone is carrying the bestsellers. How many store are carrying the Eddas?

My store is reflection of me, in some ways. I like having books that are significant only to those "in-the-know." That one person, who over the course of year, will pick up the Prose Edda and go, "I can't believe you have this." My theory is that that person will be a customer for life.

Whereas the person who picks up "Where the Crawdad Sings" may not even remember where they bought it. Certainly, the store itself won't be unique or memorable by having it.

When Linda and I owned the Bookmark, we started off with an idiosyncratic selection. Books that came from my parent's eclectic library as well as books I'd gathered over the years. I had enough time to come in and sort through the books, selecting out the books that I thought were interesting.

The latest Tom Clancy or John Grisham or James Patterson weren't interesting to me at all.

I remember once one of our employees lifting up a book and laughing, "Oh, a book about goat herding!" and tossing it in the storage bin.

"No," I said. "That's the kind of book we want."

Anyway, I took my eye off the ball. Linda wanted more time off and so we had a couple of full time employees. A few years passed.

So one day, I walk in the store and I realize that we were just like every other "paperback exchange" type store. Full of Tom Clancy and John Grisham and James Patterson, but nary a goat herding or chicken raising or Edda to be found. No matter how often I told them to look for the unusual, they insisted on filling the shelves with dreck. (Not that the authors are dreck, but that EVERYONE has them.)

So when I buy books for Pegasus, I very purposely give way my whims. Things that aren't necessarily commercial. I pursue interesting sections that don't really pay off. 

Because I just don't want to have a store that has nothing but the lowest common denominator. I don't want my store to be indistinguishable from every other bookstore. 

Hell, Walmart does a better job of that.

PTSD

Post-traumatic stress disorder. Recently, it's occurred to me that I have a mild case of it. I don't want to trivialize the trauma that solders and emergency workers and survivors of abuse feel. But I have this thing about feeling angry and anxious whenever I think about a certain subject. I mean, it doesn't compare, but the anger I feel is just below the surface.

Sports cards. Fucking sports cards.

The reason it's occurred to me recently is that--of all things--sports cards appear to be making a comeback. So, of course, even though I haven't really sold cards for over 20 years, everyone calls me and asks:

"How much are my cards worth? Are you buying? Who is buying? Do you have (random supplies). Where do I go?"

Over the last 20 years I've learned to play dumb, to say, "Gosh. I don't know. Sorry."

I wished that worked.

Of course, sport card collectors being sport card collectors, they don't accept that. They''ll double down and then double down again, getting angry that I'm not buying, I don't know what they're worth and I don't know where they can go to sell them.

I want to say,"Where have you been the last 20 years? What right do you have to demand anything from me!"

I get seriously angry and upset. Just ask Linda anytime the subject comes up. Hell, just ask my customers. My anger immediately surfaces.

"Why," you ask? "What the fuck, man. It's just sports cards." 

A little history. 

Sports cards were great at first. I was probably one of the first 3 or 4 shops in Oregon. It immediately took over the store. At the peak, cards were 85% of our sales! (Which was a trap. More on that later.) I've come to understand bubbles since then, but that was my first bubble, and so I took it personally. There was a Golden Age when everyone was happy and appreciative. I wasted the Golden Age by doubling down on purchases every year--never really making much of a profit. 

And then it turned. Cards were everywhere, at half the price, and scamsters came out of the woodwork--as they always do where money is concerned.

I started getting complaints, then animosity, then outright attacks. Every day, every hour. I got more and more defensive. Not only was I bleeding red ink, I was getting attacked for doing so. 

Remember that 85% of sales? How do I escape?

After one egregious attack; a guy attacking me loudly for selling the price guides at RETAIL!!!! (how dare I...) I put everything in the store at retail. (how DARE I!!!!)

For the next five years, I was constantly attacked and belittled and bitched to, until one day in 1997, a customer whined about me not carrying a certain thing and I blurted, "We're not a card shop anymore."

I still remember the relief I felt upon saying that. 

Honestly, my blood pressure rises even thinking about it. Nothing else in my life has that effect. I took the collapse of Beanies Babies and Comics and Magic and Pogs and Pokemon without any ill effects.

But sports cards?

Fuck sports cards.

Late in the game to get here, but it's nice.

 It's astonishing how well stocked Pegasus Books is right now.

When I bought the store 37 years ago, we were depleted. The previous owner had stripped the already bare-bones store twice while opening shops in Portland. As he told me in wonderment, "I made more in the first week in Portland than I ever made in Bend."

Admittedly, I got the store relatively cheap--but not because of the inventory. What made the store possible was that I only had to put half down and the rest was paid monthly. I went home and did the math and realized that I'd have to do about twice as well as we were currently doing to make the purchase feasible. 

But doing twice as well didn't seem like much of reach. We had the customers, I reckoned--we were just missing the inventory to sell them. I got a couple thousand dollars in the bank loan to flesh out the store and, sure enough, sales immediately doubled.

Sounds good. But doubling only made the store viable--it wasn't exactly flourishing. I used up the paltry reserve cash at the very beginning. We were C.O.D. for the next couple of years, and we were trying to pull ourselves up by our bootstraps.

I remember that every time someone said, "Is this all you got?" it was like a stab to my heart.

Still, it seemed to me that the potential was there, and a couple of years after we started, I went up to the C.O.C.C. small business center and they helped me get a loan.

I remember saying, "I think we could do "X" amount of business in about five years."

Adviser: "Why can't you do that now?"

"I have no money for inventory."

"Then let's go get a loan."

The loan was great. It made Pegasus a real store--but it also meant that most of the extra money we were making was servicing the loan. 

That was pretty much the pattern for the first 15 years or so. Striving to reach viable levels while paying off loans. There's a reason this blog is called, "The Best Minimum Wage Job a Middle-Aged Guy Ever Had."  

And then--the disaster of over-expanding into 4 stores; the slamming of consecutive bubble collapses; the huge credit card debt I built up. 

I spent one 7 year period working every day of the year except Thanksgiving and Christmas. I ground my teeth to the nubbin, and it was a race between my hair turning gray or disappearing altogether. Stress city.

Debt payment to the tune of 40% of our gross sales. I repeat, not our net profit, our gross sales. 

Any normal person would have declared bankruptcy and started over. But I was certain the store still had great potential. I also figured that all the hard-won lessons would be wasted. If we could just get out of debt, we'd have a real chance.

And sure enough, when in 2002 we emerged from debt, things immediately became easier. That day marks about the halfway point in our existence. There was debt and after-debt and it was like night and day. 

But we were still a long way from making much money. I turned that 40% of gross into buying inventory--diversifying as best I could. I was still making minimum wage.

Here's the thing. Even then, even without debt, I could never quite fully inventory the main product lines. We could only get about 80% of the way there, especially since I was trying to create a stable platform of product lines, which constantly required new investment. 

Of course, about the time we would have reached full equilibrium, the housing bubble crashed. Bend was a bubble within that bubble. So again, it was back to basics.

It has only been in the last year or so--after more than 35 years, that I felt all the product lines were fleshed out. And once that happened, I wasn't needing to constantly invest in new product lines. I just needed to keep the product lines up and incrementally improve them. 

I fully stocked the poster rack yesterday with new posters. I got a case of jigsaw puzzles that completely filled that section of the store. I ordered some miscellaneous supplies that we don't strictly need but which will probably sell. I ordered some discounted books from my suppliers. I gave Sabrina the go-ahead to make a couple of game orders. And so on.

The store looks and feels prosperous. I mean, you can always tell when you walk into a store whether they are doing well or not. At least I can. It is probably subconscious for most customers. 

What's more, now that the inventory is in, all it requires is maintenance. I don't need to constantly take some of the gross profit and invest in something else. In other words, we don't need to pull ourselves up by our bootstraps any more. Of course, I feel like we need to be on guard for disasters--but as of now, the store is working.

Late in the game to get here, but it's nice.