Below is a transcript of an interview with Nouriel Rourbini, (one of the few economists who got the housing bubble right), on Bloomberg T.V.
My response to the interview is: So....other than that, Mrs. Lincoln, how did you like the play?
Here's where you might be thinking I would be agreeing with the old Bear. But, in fact, I think people spend money. They are addicted to spending money. I think they'll keep spending money. They're willing to spend money. They want to spend money. Spending money is what they do!
It's beginning to look like I'll have three months at least even with last year in the first half of the year, and three months waaayyyy under. So which is the true indicator? Complicated by the fact that the last six weeks have been great.
I'm going to guess about 10% lower than last year this July and August. Nationally 10% would be considered a disaster, but in my store it's not a significant figure, as long as I budget correctly. My spending is way down, so my profits are up.
THE ARTICLE:
The retail sales figures for May - better than expected - were driven by a temporary factor, the tax rebates, whose influence will fade out by early fall.
Instead, more persistent factors will bear negatively on consumption over the summer and especially the fall: the fall in home prices and the collapse of home equity withdrawal (with their wealth effect on spending); the stressed balance sheets and high debt ratios of the household sector (such debt is up to almost 140% of disposable income); the credit crunch in mortgage markets that is now spreading to unsecured consumer credit (credit cards, student loans, auto loans); the rise in debt servicing ratios (following the reset of mortgage rates, and higher interest rates on mortgages and consumer credit); the sharp rise in gasoline and energy prices that is a serious shock to real incomes; the further erosion of real wages through the rise in the inflation rate; the sharp fall in consumer confidence; the drop in employment (now five months in a row) and thus in income generation; the negative wealth effect of the correction in equity markets and the fall in the net worth of the household sector. All these factors will have – over time – a much more significant negative effect on consumption than the temporary boost given by the tax rebates.
Friday, June 13, 2008
Yeah, summer budget!!
Now that my spring 'budgeting' is nearly over, (one week to go!), I can confirm that, yes, over ordering is my problem. Bills are getting paid, money in the bank, debt reduced.
Not ordering two weeks out of every month has had the unexpected side effect of making it very clear to me what I REALLY miss if I don't order, and what I just sorta kinda miss, and what I don't miss at all.
Sales weren't impacted by this experiment, as far as I can tell. If I were to keep doing it for more than 3 or 4 months, I suspect it would've. But I am so well stocked, that I doubt very many people noticed.
But my cash flow noticed.
Technically, if my Summer sales come in at the usual 20% higher, I should now be able to keep to a budget that is 20% higher than what I've been spending in the spring, and still get the same cash flow benefit.
The problem for me is in the execution. I've always had a difficult time moderating. Easier for me to deny myself 100% for two weeks, than cut all my orders by 50% for 4 weeks. Not sure why, but it's happened so many times I'm not fighting it anymore.
So....I found out what I really shouldn't skip:
1.) Evergreen graphic novels. No excuse to run out of Watchmen, or Preacher, or any other proven sellers. Since I maintain a very wide selection that is just one or two copies deep, it almost requires that I make an order every week.
2.) Magic. The magic players are fairly demanding. They don't know from reorder difficulties, they just know they want what they want when they want it. Some requests I can't fulfill, such as rare singles, or specific theme decks, but running out of decks or packs of any major brand is really not an option. Especially since I'm now the only game store in town -- don't want to inspire anyone to say, "Damn, Pegasus is always out. I can do better than that!"
3.) Sports cards. When I have a couple or three active buyers, they want what's new. I can skip a week or two, here and there, but making them wait longer to itch their need, is dangerous.
Of the three categories above, magic and sports cards take giant chunks out of the budget. Graphic novels can be managed in smaller numbers.
Things that I found two weeks have very little effect.
1.) Board games and RPG's. I tend to order the better sellers in ones or twos, and they usually sell at a pace that can stand skipping a couple of weeks here and there.
2.) Books. I very purposely didn't align myself with the 'best-seller' model of bookstore. So if I sell 2 out of the 5 Vonnegut novels I carry, I probably still have more Vonnegut's than most stores.
3.) Toys. Absolutely can be ordered when convenient. I'm searching out the single toy offers whenever possible. I preorder the McFarlane toys; so that is accounted for already. And I rarely want to do reorders. There is so much stuff that simply freshening up the product on a regular basis keeps the sales up.
Refreshing the product is the key to all the above three categories. I like to reorder proven sellers, but it isn't crucial like graphic novels, magic and cards.
And then there is all the ancillary product:
1.) Standups. I finally ordered the stand-ups, a bunch of Star Wars, new Indiana Jones, and so on.
2.) Gag gifts. I want to order the funky stuff from Accouterments (Albert Einstein toys, Death Mints, candy rubber chickens -- important stuff like that) as summer starts.
3.) Cartoon books. I usually stock up on Asterix and Calvin and Hobbes and Far Side and so on before summer and before Christmas.
4.) Dice. There are really cool looking dice that I can get from a company called Crystal Cast. Fancy gem dice, metal dice, and all that stuff that gets my crow brain to go; "Oh, shiny!!"
And finally, the sale product. This stuff isn't 'necessary' at all. But boy does it help the cash flow when it sells. I have to treat this as a completely separate project, in a way. If I get an item that is one third the price, I can take three times longer to sell it. Plus its a great multiplier of freshness; especially since most of it wasn't ordered by me the first time. To tell the truth, I can't see much difference in sales velocity between middle of the road pre-ordered product and re-ordered sale product.
So, now that I identified what is necessary, and what is just wanted, I can make some better decisions hopefully.
Not ordering two weeks out of every month has had the unexpected side effect of making it very clear to me what I REALLY miss if I don't order, and what I just sorta kinda miss, and what I don't miss at all.
Sales weren't impacted by this experiment, as far as I can tell. If I were to keep doing it for more than 3 or 4 months, I suspect it would've. But I am so well stocked, that I doubt very many people noticed.
But my cash flow noticed.
Technically, if my Summer sales come in at the usual 20% higher, I should now be able to keep to a budget that is 20% higher than what I've been spending in the spring, and still get the same cash flow benefit.
The problem for me is in the execution. I've always had a difficult time moderating. Easier for me to deny myself 100% for two weeks, than cut all my orders by 50% for 4 weeks. Not sure why, but it's happened so many times I'm not fighting it anymore.
So....I found out what I really shouldn't skip:
1.) Evergreen graphic novels. No excuse to run out of Watchmen, or Preacher, or any other proven sellers. Since I maintain a very wide selection that is just one or two copies deep, it almost requires that I make an order every week.
2.) Magic. The magic players are fairly demanding. They don't know from reorder difficulties, they just know they want what they want when they want it. Some requests I can't fulfill, such as rare singles, or specific theme decks, but running out of decks or packs of any major brand is really not an option. Especially since I'm now the only game store in town -- don't want to inspire anyone to say, "Damn, Pegasus is always out. I can do better than that!"
3.) Sports cards. When I have a couple or three active buyers, they want what's new. I can skip a week or two, here and there, but making them wait longer to itch their need, is dangerous.
Of the three categories above, magic and sports cards take giant chunks out of the budget. Graphic novels can be managed in smaller numbers.
Things that I found two weeks have very little effect.
1.) Board games and RPG's. I tend to order the better sellers in ones or twos, and they usually sell at a pace that can stand skipping a couple of weeks here and there.
2.) Books. I very purposely didn't align myself with the 'best-seller' model of bookstore. So if I sell 2 out of the 5 Vonnegut novels I carry, I probably still have more Vonnegut's than most stores.
3.) Toys. Absolutely can be ordered when convenient. I'm searching out the single toy offers whenever possible. I preorder the McFarlane toys; so that is accounted for already. And I rarely want to do reorders. There is so much stuff that simply freshening up the product on a regular basis keeps the sales up.
Refreshing the product is the key to all the above three categories. I like to reorder proven sellers, but it isn't crucial like graphic novels, magic and cards.
And then there is all the ancillary product:
1.) Standups. I finally ordered the stand-ups, a bunch of Star Wars, new Indiana Jones, and so on.
2.) Gag gifts. I want to order the funky stuff from Accouterments (Albert Einstein toys, Death Mints, candy rubber chickens -- important stuff like that) as summer starts.
3.) Cartoon books. I usually stock up on Asterix and Calvin and Hobbes and Far Side and so on before summer and before Christmas.
4.) Dice. There are really cool looking dice that I can get from a company called Crystal Cast. Fancy gem dice, metal dice, and all that stuff that gets my crow brain to go; "Oh, shiny!!"
And finally, the sale product. This stuff isn't 'necessary' at all. But boy does it help the cash flow when it sells. I have to treat this as a completely separate project, in a way. If I get an item that is one third the price, I can take three times longer to sell it. Plus its a great multiplier of freshness; especially since most of it wasn't ordered by me the first time. To tell the truth, I can't see much difference in sales velocity between middle of the road pre-ordered product and re-ordered sale product.
So, now that I identified what is necessary, and what is just wanted, I can make some better decisions hopefully.
Thursday, June 12, 2008
"Maybe my business plan is too amusing."
I wonder if we aren't going to see a bunch of articles like the one from the Oregonian today (printed below.)
It's meant to solicit sympathy, but reeks of entitlement.
"Is she coming home to tuck in the kids before returning to clean the store? She let go of her cleaning crew.
No, she told him. An employee's coming to help her scrub the floors."
Oh, the horror. The horror!
Admittedly, she calls it a 'cleaning party,' but through obviously clenched teeth. See how plucky I am!
O.K. 20k income after a couple of years for a start-up small business; husband having a second job; bringing kids to work; doing your own cleaning.
I would consider all those things normal, frankly.
What I consider strange is this:
"The shop -- opening at the height of Portland's housing market -- thrived. On Saturdays, the store pulled in about $2,000, helping pay the mortgage on their $550,000 Irvington home."
A 550k home?
"Now the Saturday take is under $1,000, and midweek days are around $300. Last year, the family took home just $20,000. Scott Korn left the store to take a baking job late last year. Seven employees shrank to three."
I think there is a fundamental misunderstanding of what a Mom and Pop business is.
If I'm doing the math right, there might be enough income for a modest living if Mom and Pop ran the store: but not Mom and Pop and three employees, much less seven employees!
Come on, even if they are open half time on Sundays, you're talking 52 hours total. Even with the 2000.00 dollar Saturdays, a couple of on duty people should be enough.
In other words, the store can be run by a couple working most of the week, trading days, and a part-time employee for Sunday and one other day, to give them two days off. (Which, I would consider a huge luxury for a start-up.) If the couple work together on the busy Saturdays, that leaves each spouse with a 28 hours week, so conceivably there is office work and outside work to push those hours up to 40 hours each.
Oh, the Horror!
Linda and I run separate stores, with (usually) one part time employee per store. We do this because our two Mom and Pop's can support one Mom or Pop per store. That's just what we've come to expect.
The business plan is too amusing, but not in the way she meant. She wants to keep her big house and her big success story and her big money, and not have to really work for it, or wait for it.
A lot of stores have opened during the boom that have exactly the same attitudes, and I suspect we're going to see exactly the same response.
Downturn tough for Portland mom-and-pops
Slumping sales are forcing a Northwest 23rd Avenue merchant to close her doors
Thursday, June 12, 2008
ERIN HOOVER BARNETT
The Oregonian Staff
Stacey Korn arrives just before 10 a.m. to unlock her shop on Northwest 23rd Avenue. She hoists orange molded plastic benches from the back and places them outside under the windows. Then she sets up her sidewalk sign:
"Shop 'Hello' -- nifty gifts for the whole family," it says. "Patronizing us is like flirting with a wealthy widow. You can't overdo it."
Korn needs her sense of humor now more than ever. As the economy slumps, sales at her Hello Portland store at 525 N.W. 23rd Ave. are half what they were soon after opening in late 2005. Her family of four went from living almost entirely off the shop's income to barely getting by and deciding to close in September.
"My friends at Irvington School don't know my kids qualify for free or reduced-price lunch," said Korn, 41.
Her boom-to-bust story is about the kind of shop that falters in a downturn. Hello Portland sells lots of stuff people want -- from $45 hip handbags to $25 "I might barf" baby onesies -- but nothing anyone truly needs. More than that, it's a story of a small merchant's struggles, of the people left behind when a local store fails.
"You hear people say, 'I love this. I can't live without this,' " Korn said. "And then they walk out the door."
Korn gets by with her trademark pluck.
She left a dysfunctional family at 16 to attend acting school in New York and then in Los Angeles. She turned to graphic design school and did secretarial work at advertising giant Ogilvy & Mather, learning computer skills thanks to client Microsoft.
She found a creative niche designing saucy greeting cards for Paper Moon. "Desperate Career Girl," said one. "Sexual harassment: She could dish it out, but could she take it?"
Her big break came when Reuters, the media and financial company, contracted with her in 2002 at $250 an hour to design Web sites. She was still nursing her second child, so her husband took a hotel room next door and paged Korn when Piper was hungry, handing the infant to Korn at a lower-floor restroom in Reuters' Manhattan building. Her bosses never knew she had a baby.
After two years, Korn opened the Hello store on Martha's Vineyard. Richard Singer, the primary developer and landlord on Northwest 23rd, lured Korn and her shop to Portland in 2005, beating out Bridgeport Village.
The shop -- opening at the height of Portland's housing market -- thrived. On Saturdays, the store pulled in about $2,000, helping pay the mortgage on their $550,000 Irvington home. Now the Saturday take is under $1,000, and midweek days are around $300. Last year, the family took home just $20,000. Scott Korn left the store to take a baking job late last year. Seven employees shrank to three.
Korn thinks concerns about finding parking around 23rd are worsening the impact of the downturn. And many of those who do come in just play -- picking up Japanese vinyl toys despite signs saying not to.
"It's like amusement," Korn said with a sigh. "So maybe it's my fault. Maybe my business plan is too amusing."
Extra effort
Sometimes she's direct. When a customer asked if she could buy the shop's melamine plates on the Internet, Korn told her, "Yeah, you could. But I'm here selling these so that I can feed my kids."
Reinforcing that connection is crucial for mom-and-pop businesses, especially now.
"Everyone is just kind of holding their breath to see what's going to happen," said Robyn Shanti, coordinator of the Sustainable Business Network, whose membership includes 360 locally owned Portland businesses. "People also realize if they don't patronize those businesses, they're not going to be around. And if they're not around, we'll lose the whole quality of life in our neighborhoods."
Korn is doing what she can. She tries making customers comfortable, fading out alternative rock music and fading in her "Old people just walked in" mix of Billie Holiday and Glenn Miller when seniors step in.
She puts a sale table outside on warm days. She uses cash to buy merchandise, avoiding additional debt. She rarely gives out even basic handle bags -- "Can you put this in the bag you have?" she asks -- saving 35 cents a pop. And she's gotten her kids involved, saving on child care.
On a sunny spring weekend, Piper, 6, and a friend sat outside selling $1 buttons they made, quickly pulling in $58.
Looking for work
Sometimes stress gets the better of Korn. A week ago, she parked her car just over the line into the valet zone for the restaurant next door. The restaurant had it towed. The cost: $210. "What am I going to sell on Craigslist to pay that ticket?" she said, sobbing. (She sold her car-top storage container.)
Kind comments help. Leslie Hildula comes for offbeat party favors and invitations. "It has this kind of inner-child enthusiasm for life," Hildula said of the shop.
But as the Korn family prepares to take on a foster child in need of emergency placement, Korn must be pragmatic. She hopes to find a stable job in graphic design or another creative field.
On Tuesday, Scott Korn arrived at the shop at 5 p.m. to pick up the children.
"Bye, cutie," he said to his wife as he headed out, Piper and Skyler, 10, ahead of him.
"Bye, sweetie," she said.
Then he remembered to ask: Is she coming home to tuck in the kids before returning to clean the store? She let go of her cleaning crew.
No, she told him. An employee's coming to help her scrub the floors.
"It'll be a party," Korn said.
Erin Hoover Barnett: 503-294-5011; ehbarnett@news.oregonian.com
It's meant to solicit sympathy, but reeks of entitlement.
"Is she coming home to tuck in the kids before returning to clean the store? She let go of her cleaning crew.
No, she told him. An employee's coming to help her scrub the floors."
Oh, the horror. The horror!
Admittedly, she calls it a 'cleaning party,' but through obviously clenched teeth. See how plucky I am!
O.K. 20k income after a couple of years for a start-up small business; husband having a second job; bringing kids to work; doing your own cleaning.
I would consider all those things normal, frankly.
What I consider strange is this:
"The shop -- opening at the height of Portland's housing market -- thrived. On Saturdays, the store pulled in about $2,000, helping pay the mortgage on their $550,000 Irvington home."
A 550k home?
"Now the Saturday take is under $1,000, and midweek days are around $300. Last year, the family took home just $20,000. Scott Korn left the store to take a baking job late last year. Seven employees shrank to three."
I think there is a fundamental misunderstanding of what a Mom and Pop business is.
If I'm doing the math right, there might be enough income for a modest living if Mom and Pop ran the store: but not Mom and Pop and three employees, much less seven employees!
Come on, even if they are open half time on Sundays, you're talking 52 hours total. Even with the 2000.00 dollar Saturdays, a couple of on duty people should be enough.
In other words, the store can be run by a couple working most of the week, trading days, and a part-time employee for Sunday and one other day, to give them two days off. (Which, I would consider a huge luxury for a start-up.) If the couple work together on the busy Saturdays, that leaves each spouse with a 28 hours week, so conceivably there is office work and outside work to push those hours up to 40 hours each.
Oh, the Horror!
Linda and I run separate stores, with (usually) one part time employee per store. We do this because our two Mom and Pop's can support one Mom or Pop per store. That's just what we've come to expect.
The business plan is too amusing, but not in the way she meant. She wants to keep her big house and her big success story and her big money, and not have to really work for it, or wait for it.
A lot of stores have opened during the boom that have exactly the same attitudes, and I suspect we're going to see exactly the same response.
Downturn tough for Portland mom-and-pops
Slumping sales are forcing a Northwest 23rd Avenue merchant to close her doors
Thursday, June 12, 2008
ERIN HOOVER BARNETT
The Oregonian Staff
Stacey Korn arrives just before 10 a.m. to unlock her shop on Northwest 23rd Avenue. She hoists orange molded plastic benches from the back and places them outside under the windows. Then she sets up her sidewalk sign:
"Shop 'Hello' -- nifty gifts for the whole family," it says. "Patronizing us is like flirting with a wealthy widow. You can't overdo it."
Korn needs her sense of humor now more than ever. As the economy slumps, sales at her Hello Portland store at 525 N.W. 23rd Ave. are half what they were soon after opening in late 2005. Her family of four went from living almost entirely off the shop's income to barely getting by and deciding to close in September.
"My friends at Irvington School don't know my kids qualify for free or reduced-price lunch," said Korn, 41.
Her boom-to-bust story is about the kind of shop that falters in a downturn. Hello Portland sells lots of stuff people want -- from $45 hip handbags to $25 "I might barf" baby onesies -- but nothing anyone truly needs. More than that, it's a story of a small merchant's struggles, of the people left behind when a local store fails.
"You hear people say, 'I love this. I can't live without this,' " Korn said. "And then they walk out the door."
Korn gets by with her trademark pluck.
She left a dysfunctional family at 16 to attend acting school in New York and then in Los Angeles. She turned to graphic design school and did secretarial work at advertising giant Ogilvy & Mather, learning computer skills thanks to client Microsoft.
She found a creative niche designing saucy greeting cards for Paper Moon. "Desperate Career Girl," said one. "Sexual harassment: She could dish it out, but could she take it?"
Her big break came when Reuters, the media and financial company, contracted with her in 2002 at $250 an hour to design Web sites. She was still nursing her second child, so her husband took a hotel room next door and paged Korn when Piper was hungry, handing the infant to Korn at a lower-floor restroom in Reuters' Manhattan building. Her bosses never knew she had a baby.
After two years, Korn opened the Hello store on Martha's Vineyard. Richard Singer, the primary developer and landlord on Northwest 23rd, lured Korn and her shop to Portland in 2005, beating out Bridgeport Village.
The shop -- opening at the height of Portland's housing market -- thrived. On Saturdays, the store pulled in about $2,000, helping pay the mortgage on their $550,000 Irvington home. Now the Saturday take is under $1,000, and midweek days are around $300. Last year, the family took home just $20,000. Scott Korn left the store to take a baking job late last year. Seven employees shrank to three.
Korn thinks concerns about finding parking around 23rd are worsening the impact of the downturn. And many of those who do come in just play -- picking up Japanese vinyl toys despite signs saying not to.
"It's like amusement," Korn said with a sigh. "So maybe it's my fault. Maybe my business plan is too amusing."
Extra effort
Sometimes she's direct. When a customer asked if she could buy the shop's melamine plates on the Internet, Korn told her, "Yeah, you could. But I'm here selling these so that I can feed my kids."
Reinforcing that connection is crucial for mom-and-pop businesses, especially now.
"Everyone is just kind of holding their breath to see what's going to happen," said Robyn Shanti, coordinator of the Sustainable Business Network, whose membership includes 360 locally owned Portland businesses. "People also realize if they don't patronize those businesses, they're not going to be around. And if they're not around, we'll lose the whole quality of life in our neighborhoods."
Korn is doing what she can. She tries making customers comfortable, fading out alternative rock music and fading in her "Old people just walked in" mix of Billie Holiday and Glenn Miller when seniors step in.
She puts a sale table outside on warm days. She uses cash to buy merchandise, avoiding additional debt. She rarely gives out even basic handle bags -- "Can you put this in the bag you have?" she asks -- saving 35 cents a pop. And she's gotten her kids involved, saving on child care.
On a sunny spring weekend, Piper, 6, and a friend sat outside selling $1 buttons they made, quickly pulling in $58.
Looking for work
Sometimes stress gets the better of Korn. A week ago, she parked her car just over the line into the valet zone for the restaurant next door. The restaurant had it towed. The cost: $210. "What am I going to sell on Craigslist to pay that ticket?" she said, sobbing. (She sold her car-top storage container.)
Kind comments help. Leslie Hildula comes for offbeat party favors and invitations. "It has this kind of inner-child enthusiasm for life," Hildula said of the shop.
But as the Korn family prepares to take on a foster child in need of emergency placement, Korn must be pragmatic. She hopes to find a stable job in graphic design or another creative field.
On Tuesday, Scott Korn arrived at the shop at 5 p.m. to pick up the children.
"Bye, cutie," he said to his wife as he headed out, Piper and Skyler, 10, ahead of him.
"Bye, sweetie," she said.
Then he remembered to ask: Is she coming home to tuck in the kids before returning to clean the store? She let go of her cleaning crew.
No, she told him. An employee's coming to help her scrub the floors.
"It'll be a party," Korn said.
Erin Hoover Barnett: 503-294-5011; ehbarnett@news.oregonian.com
Wednesday, June 11, 2008
They got the memo
The proliferation of (Insert Name: Real Estate Blog)s is a little suspicious. As if it is a concerted effort by the real estaters to counter the negative bubble blogs.
But they are so bland and inane, you have to wonder how effective they are. Sort of like form protest letters.
Nothing works better then thinking and writing those words for yourself, instead of parroting talking points.
Good luck with that.
But they are so bland and inane, you have to wonder how effective they are. Sort of like form protest letters.
Nothing works better then thinking and writing those words for yourself, instead of parroting talking points.
Good luck with that.
Mr. Nice Guy?
You all know my love of the KTVZ.com mugshots. There's a really good one today, a tough looking fella in a ski vest.....no...wait...that's the new manager of Mt. Bachelor.
Nevermind.
Nevermind.
Tuesday, June 10, 2008
The Magic Formula
The magic formula.
Of course, there is no magic formula for small business, and if there was, it would completely change six months later. That doesn't keep me from trying.
Since the day I bought Pegasus Books, in April, 1984, comic books have been my mainstay. My identity. But comic books have always only brought about 65% of the revenues needed for viability, and probably 55% of the revenues needed for true profitability.
This has never really changed, through all the vicissitudes of the market, the rise and fall of other product lines, or the rise and fall of comics themselves. As Bend grows, the comic market shrinks; or the comic market grows, but the cost of doing business goes up, and so on.
The other statistic that has never really changed is that, as a specialty store, I need about a 40% gross profit margin to stay in business.
I'll combine these two statistics, later.
Realizing very early that comics weren't going to pay me a living wage, I cast about for some other product lines. My first attempt was games, but I just didn't have the monies to get in enough inventory fast enough, and the arrive of the store Book and Game in the Mt. View Mall blew me out of the water. New and used books also failed to fill the gap. New book distribution was in the dark ages -- I'd see books at Waldenbooks that I wouldn't get for another month, if then.
Finally, I lucked upon sports cards. Good luck...and as it turned out, really bad luck. Card fueled my growth, but I also put every dime I had back into more cards, and eventually I got left holding a burst balloon in my hands.
Early on, though, I heard the idea of three legged stool; it's more stable than a one legged stool, or a two legged stool, or even a four legged stool. This made so much sense to me, that it became my magic formula. But I could never find that third leg of the stool after comics and sports cards, and after sports cards self-destructed, I had a hard time finding even a second leg.
At some point I gave up on the analogy. I decided that the best model would be to have comics be 50% of my business, and the other 50% would be everything else.
I brought in anime and manga, and toys, and roleplaying games, and card games, and used books, and so on. Each brought us a little closer, squeezed me for room, made inventory the most important facet of my business. But not quite there.
Finally, I realize that turnover rate really didn't matter to me. As long as I was paying for the product within my cash flow, it didn't hurt me. I started doing a 'long-tail' business before I ever heard the term.
I also became more sophisticated about COG's; Cost of Goods.
Notice, if you will, that some product has a Suggested Retail Price, and other product does not. Almost without fail, the product that doesn't include a SRP on the packaging has very low margins. Product that does list the price, such as comics, books, graphic novels and games usually have adequate profit margins (i.e. 40% or so.)
The reason that most toys, cards and anime doesn't have SRP on the packaging is that the manufacturer knows the margins suck and is allowing the retailer to chose the price.
Interestingly, the same product tends to be suicidally competitive. So the pressure is on to lower the price on product that you already have lousy margins.
I discovered that if I set my price as close to my own profitability as possible, and stuck to that price, that most of this product was profitable. That is, I might not sell huge amounts, but what I did sell was profitable.
So, realizing that I could carry low margin material, and realizing that I could carry slow moving product, and still make them profitable, freed me to try many different product lines.
Over the past couple of years, I added new games, board games, and new books. My current sales are roughly; 30% comics, 20% graphic novels (50%); and 5% RPG's and Boardgames, 15% CCG's and miniatures (20%); and 10% books (probably more since many of these get lumped into graphic novels); 10% toys and anime; and 10% sports cards.
The magic formula, for now, that seems to be working.
Of course, there is no magic formula for small business, and if there was, it would completely change six months later. That doesn't keep me from trying.
Since the day I bought Pegasus Books, in April, 1984, comic books have been my mainstay. My identity. But comic books have always only brought about 65% of the revenues needed for viability, and probably 55% of the revenues needed for true profitability.
This has never really changed, through all the vicissitudes of the market, the rise and fall of other product lines, or the rise and fall of comics themselves. As Bend grows, the comic market shrinks; or the comic market grows, but the cost of doing business goes up, and so on.
The other statistic that has never really changed is that, as a specialty store, I need about a 40% gross profit margin to stay in business.
I'll combine these two statistics, later.
Realizing very early that comics weren't going to pay me a living wage, I cast about for some other product lines. My first attempt was games, but I just didn't have the monies to get in enough inventory fast enough, and the arrive of the store Book and Game in the Mt. View Mall blew me out of the water. New and used books also failed to fill the gap. New book distribution was in the dark ages -- I'd see books at Waldenbooks that I wouldn't get for another month, if then.
Finally, I lucked upon sports cards. Good luck...and as it turned out, really bad luck. Card fueled my growth, but I also put every dime I had back into more cards, and eventually I got left holding a burst balloon in my hands.
Early on, though, I heard the idea of three legged stool; it's more stable than a one legged stool, or a two legged stool, or even a four legged stool. This made so much sense to me, that it became my magic formula. But I could never find that third leg of the stool after comics and sports cards, and after sports cards self-destructed, I had a hard time finding even a second leg.
At some point I gave up on the analogy. I decided that the best model would be to have comics be 50% of my business, and the other 50% would be everything else.
I brought in anime and manga, and toys, and roleplaying games, and card games, and used books, and so on. Each brought us a little closer, squeezed me for room, made inventory the most important facet of my business. But not quite there.
Finally, I realize that turnover rate really didn't matter to me. As long as I was paying for the product within my cash flow, it didn't hurt me. I started doing a 'long-tail' business before I ever heard the term.
I also became more sophisticated about COG's; Cost of Goods.
Notice, if you will, that some product has a Suggested Retail Price, and other product does not. Almost without fail, the product that doesn't include a SRP on the packaging has very low margins. Product that does list the price, such as comics, books, graphic novels and games usually have adequate profit margins (i.e. 40% or so.)
The reason that most toys, cards and anime doesn't have SRP on the packaging is that the manufacturer knows the margins suck and is allowing the retailer to chose the price.
Interestingly, the same product tends to be suicidally competitive. So the pressure is on to lower the price on product that you already have lousy margins.
I discovered that if I set my price as close to my own profitability as possible, and stuck to that price, that most of this product was profitable. That is, I might not sell huge amounts, but what I did sell was profitable.
So, realizing that I could carry low margin material, and realizing that I could carry slow moving product, and still make them profitable, freed me to try many different product lines.
Over the past couple of years, I added new games, board games, and new books. My current sales are roughly; 30% comics, 20% graphic novels (50%); and 5% RPG's and Boardgames, 15% CCG's and miniatures (20%); and 10% books (probably more since many of these get lumped into graphic novels); 10% toys and anime; and 10% sports cards.
The magic formula, for now, that seems to be working.
Monday, June 9, 2008
Nobody Likes Conquistadors!
Conquistadors make good bad guys. I was watching C-Span the other day, a book reading about early settlement in North America. The guy said that in the Dominican Republic, people are claiming Indian names even though the natives were nearly wiped out. In Mexico, they also tend not to much like the Conquistadors.
So, the armor and aspect of the bad guys in Narnia was perfect. Better than the Middle-Eastern appearance in the books.
Do they write children's books with quite so much warfare these days? I guess the last Harry Potter had a big battle at the end.
I'd forgotten Reepicheep and his tail-pride.
As usual, Peter Dinkledge is the best actor in any movie he appears.
So, the armor and aspect of the bad guys in Narnia was perfect. Better than the Middle-Eastern appearance in the books.
Do they write children's books with quite so much warfare these days? I guess the last Harry Potter had a big battle at the end.
I'd forgotten Reepicheep and his tail-pride.
As usual, Peter Dinkledge is the best actor in any movie he appears.
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