The Changing of the Blog

The “Blogger 2” software just went operational after a long Beta period. The template now has drag-and-drop functionality that makes it easier to manage. I like the tags and the index flyouts. But some of my customizations got stripped out, and the Google AdSense box returns an error message when I try to resize it.

Oh well, those ads weren’t going to make me rich anyway. I’ve racked up a whopping $22 worth of click credits in the past six months, and Google won’t even pay out until you hit $100. At this rate I’ll get my first check sometime in 2009.

The interface for changing my Profile photo got obscured. Now I have to upload my picture in a post first, and then link to it from the Profile interface. Here, then, is my new profile photo. I guess I look more mayoral, huh?

One reader sometimes has problems loading this page. It’s happened across three browsers, two IP addresses, and two PCs, so that’s certainly worrisome. Has anybody else ever noticed this? I’m hoping the Blogger 2 upgrade cures that.

Sound off, readers. Do you like this color scheme, or want to see something lighter and cheerier? Bright backgrounds hurt my eyes, but I see a few lighter templates that don’t look too girly. Is the currency converter useful or interesting? What kind of gadgets would you find appealing? Google has tons of little plug-ins to choose from, including some simple games. Or are they just a distraction?

Finally, what about the new title? I want something a little snappier than “The Curio City Online Blog”, but I’m not sure this one does anything for me. Any inspired suggestions?

Wrapping Up Christmas

The 2006 holiday season – Curio City’s first – is over. Oh sure, I’m bracing for a wave of complaints and returns over the next few days…but hopefully those will be few, and I’ll make enough sales to keep from having a negative week.

Christmas was hard to quantify because the huge infusions from our American Way and WaPo mentions skewed the results. I’ll have to secure comparable placements in coming years if I’m to rival this year’s results. The press kits that cost me $400+ brought no known results. A small cluster of sales to Colorado tipped us off to a little mention in the Rocky Mountain News, but the return from that was negligible. Next year, those kits must go out at least a month earlier, and we need to do one round of follow-ups.

November came in a robust 36% over plan, and December is an incredible 72% over projections -- with virtually all of that coming in just two weeks! The two months together delivered 36% of the year’s sales. The year ended only 10% below plan, with a loss of only 7% of gross sales. Given that I was not aiming for profitability in 2006, that is very encouraging for my 2007 goals. I had a little trouble keeping up with the pace of 10-15 sales per day, every day, for about three weeks. I was pretty exhausted by the time it ended. Next year, I must keep my calendar clear of doctor appointments and similar distractions during December.

We set a quantity record on Monday 12/4 (18 sales in one day) and a dollar record on Wednesday the 6^th. The following week was the overall high water mark, although it didn’t break those earlier single-day records. Not until Wednesday the 20^th did I wake up to find my in-tray devoid of new orders. I haven’t had a zero-sales day since Nov. 16. I do expect one any day now, though.

I only made one real gaffe, mixing up two customers’ shipments. Fortunately, both were cooperative and I was able to put things straight quickly. A couple of customers refused delivery of their shipments. One just wrote “refused” and “please refund” on the box, with no explanation or correspondence of any kind. WTF? I’d never seen anyone do that before and was rather surprised when it happened twice. Naturally, I refunded their money with good grace.

I was aggressive about customer service. I don’t think anyone ended up with a bad impression of my company, which is quite remarkable – I know from many years in retail that some customers live to complain. Several people sent compliments and praise -- in fact, I'm going to add a "testimonials" secton to my About page. After I coughed up $8 to replace one shipment that was lost through no fault of mine, the customer effused that not only will she be a good future customer, she’s now an evangelist for CC. Now that is eight bucks well spent! Making hundreds of new customers is probably the most important single outcome of this Christmas season…some percentage of them will certainly be back for more. A few have already made repeat purchases.

I was a little bit off on ordering, spending more money than I should have later than I should have. Next year I need to go deeper earlier on those items that I know will do well, and take a gamble on some others, because there simply isn’t enough time to place and receive reorders in a season that only lasts four weeks. Overall, though, I did a very good job of remaining in stock on most items most of the time. I stuck myself with a couple of turkeys, but nothing major.

Our credit card processor took advantage of the season’s volume to slip a $95 annual fee into their already-extortionate charges. An email to the merchant service sales company got the fee removed. I’ll save my credit card rant for another column, because that racket really gets me steamed.

All in all, Christmas 2006 was a tremendous success. I earned two substantial paychecks for myself in December – the first real paychecks I’ve had in literally years. Most important: For the first time since I started this business, I’m confident that Curio City will succeed. If I can make as much progress in 2007 as I made in 2006, I’ll be looking at serious expansion in 2008.

Other Forthcoming Topics:

• Credit Card Processing
• Possible Futures
• Planned features

What Does Success Look Like?

That is a harder question to answer than you might think, because there are several possible long-term futures. Those will be the subject of future posts. For today’s essay, let’s make these assumptions:

1. That Curio City Online continues indefinitely as a one-man, home-based, online-only operation;
2. That I solve enough structural financial problems to achieve profitability in 2007;
3. That I can do #2 while still devoting 16.5% of gross sales to payroll, and that I can handle the business while remaining the only employee;
4. That I can achieve the above and also take on some additional expenses (like insurance), and can eventually pay temporary part-time help so that I can take a vacation now and then.

In other words, I’m assuming for the sake of discussion that things go on pretty much as they are now, except with dramatic growth continuing for 2-3 more years.

I said in an early post that riches are not my goal in life. I only need to pull out a salary of $50,000 per year to live quite comfortably. That means Curio City has to gross roughly $300,000 per year. Quite simply, that's my success level.

In Year One (November to November, so not including this all-important Christmas season), I made 515 sales, averaging 1.4 per day. Gross sales were $22,510 with an average ticket of $43.71. To reach $300,000, I’d need 6,865 sales, or 18.8 sales per day.

It sounds like a lot. It is a lot. But it’s attainable. I already make four or five sales on my good days. My busiest day ever hit 18 transactions, and I’ve averaged 10-15 per day for the past few weeks. I've had to run at full speed. It’s hard to imagine processing 20 sales a day on average, but it's not impossible...and I've shown that I can (just barely!) handle the logistics of finding, ordering, receiving, storing, packaging, and shipping that much stock. It would become overwhelming to do it routinely, but that is a problem I’d love to have.

My goal for 2007 is to double my 2006 sales, and end the year with a profit (even just $1). Curio City will pay me in salary about the same amount as I plan to infuse, making the year revenue-neutral from a personal point-of-view.

If I can achieve this realistic goal in 2007, I will feel comfortable taking out a loan for a major expansion in 2008. That’s where my “possible futures” columns come in, so I’ll leave it at that for today.

Other Forthcoming Topics:

• Christmas Wrap-Up
• Credit Card Processing
• Possible Futures
• Planned features

Flipping the Finger

Ever wonder how a company president spends his day? Playing golf? Jetting around the country in his private plane? Dictating memos in his high-rise office, maybe? Not this president. On my good days, I spend a lot of time boxing up orders, buying postage, and schlepping boxes to and from the post office. Today was one of my bad days. Stay awhile, and listen….

A couple of customers recently received nonworking Ultra Bright Finger Lights. It’s no big deal; they’re cheap, so I apologize, send out free replacements, and absorb a small loss. After the second complaint, I started testing them before sending them out. A bit more than 10% are defective. That’s annoying, but the markup on these things is good enough to make up for that.

Last week somebody ordered several finger lights in specific colors, one being purple. I was out of purple ones in my main stock, so I opened up the reorder that I had placed nearly a year ago. I tried a purple. It didn’t work. Tried another with the same result. Another, and another.

Uh oh.

One by one, I tested my remaining 66 finger lights. Almost all of my backup stock is defective. Now, the finger light is my #3 bestseller and one of my flagship products. I like these silly things. I can’t just mark them all down and throw them away. So this company president spent his afternoon opening up battery compartments, removing defective batteries, and salvaging as many working finger lights as possible. I wound up trashing 25 of them, and probably resurrected 15 or 20. Altogether, I’ve lost 34 out of my initial 119 units. That’s awful. And those batteries are still deteriorating in the 28 I have left.

It is way too late to seek recourse from the vendor. They’re selling them in a different package now, at fire sale prices. Their defect rate is running as high as 50% and their stock is priced dirt cheap. I’m tempted to order a huge quantity; even after throwing away half of them, they’d be lucrative. But the thought of testing hundreds of them and swapping all those little batteries in and out just makes me shudder. Reluctantly, I’m probably going to have to let them go. But maybe I'll bring in a small reorder, just to look at the repackaging and ponder. If I can maintain my existing retail price, the markup would be something like 3,000%. That is hard to ignore.

* * * * *

On a completely different subject…have you ever noticed that most of the ads Google assigns to my blog are about debt and bankruptcy? It’s depressing. I’m half tempted to remove the danged things, except that every now and again somebody clicks on one and earns me a few cents. (Hint, hint).

Other Forthcoming Topics:

• Christmas Wrap-Up
• What Does Success Look Like?
• Credit Card Processing
• Possible Futures
• Planned features

Cyber Monday: Fact or Crap?

Fact, I guess. We did set a new record for number of sales in one day. We would’ve surpassed our dollars-per-day record, too, if one of our intrepid customers hadn’t been foiled by an AVS check. Damn you, Internet security! Of course, it’s the kickoff of the Christmas season. We would’ve been busy regardless. Who can say whether Cyber Monday made any difference? Maybe it did for the big retailers who can afford to offer free freight and deep discounts. I wouldn’t know.

As it turned out, Thursday, Nov. 30, was our busiest day to date, and I expect to surpass it next week. Business is booming and the Christmas season is just getting cooking. Our little spot in the Washington Post is this Sunday. The next two weeks should be pure madness here.

Another fact: I am way too busy to put much effort into this blog for the next few weeks. Message ends.

Other Forthcoming Topics:

• What Does Success Look Like?
• Credit Card Processing
• Possible Futures
• Planned features

(Marketing) Score, Once More!

Today’s post is short, this being a holiday weekend. Blogging will take a back seat to sales from now through New Years Day.

That crazy USB Computer Fan is up to 137 units sold. I learned yesterday that the Washington Post’s Travel section will feature it in their Dec. 3 gift guide. Amazing! I have added a USB Mini Vacuum and a USB Light to appeal to the same customers. The vacuum is actually the coolest of the bunch.

Media kits went out last Monday. It cost me about $400 to send out 48. My fingers are crossed.

Today is “Black Friday” – so named because it’s the day that tips most retailers’ balance sheets into black ink. It is supposedly the busiest shopping day of the year (in my bookselling experience, that was never true, but it was undeniably a busy day). I don’t know what to expect for online sales. I hope that plenty of my customers will take to the internet in an effort to avoid the crowds, and it will be a big day for Curio City, too. We shall see. I have had two sales by noon -- an encouraging start, when you consider that many people are sleeping in and starting their day late.

Other Forthcoming Topics:

• What Does Success Look Like?
• Credit Card Processing
• Possible Futures
• Planned features

Happy Birthday to Me, Part 2

Curio City recorded its first sale one year ago this weekend, on November 19, 2005. I held a stress-test party that night. Those who could come in person had a drink or two and some snacks, and shopped from the several computers we set up around the house. Those who couldn’t be here logged in from their own home. My friends and family bought about $850 worth of stuff that night.

Then, nothing happened for weeks as I sat back and waited for the search engines to index my pages and send the masses my way. Finally I bumbled into pay-per-click advertising the second week in December, and managed to pull off one decent week just before Christmas. That makes last year’s sales laughably easy to beat; in fact, Curio City really didn’t ramp up until Valentines Day.

In the past year, I learned (which is to say, "taught myself") how to set up a new business, how to run a website, how the gift business differs from the book business, and how online retailing differs from running a store. That's a lot of progress in one year. I feel like I have the foundations in place now.

My goals for Year Two are more modest: I will double Year One’s sales, I will record a profit for 2007 as a whole, and I will take out as much in salary as I invest as startup money. In other words, Curio City has to break even in 2007 after taking a substantial loss in 2006.

My next post will use Year One’s actual sales numbers to extrapolate what success looks like.

Other Forthcoming Topics:

• What Does Success Look Like?
• Possible Futures
• Credit Card Processing
• Planned features

(Marketing) Score! Revisited

When I last wrote about our mention in American Way magazine, we had moved all of 37 USB Computer Fans. Since then, we’ve sold them out, reordered, and sold out the reorder. Now we’ve shipped an astonishing 101 of these little buggers and cleaned out our supplier. It will probably be a couple of weeks before I can get more. I am gambling that demand will hold up through Christmas. Several customers bought as many as 6 or 10 fans at once. Many more bought additional items besides the fans.

Thanks to this one hit item, November is coming on strong – even though the magazine went out of distribution a week ago. We had 23 consecutive days with at least one sale, easily our longest stretch without a shutout. We haven’t broken any daily or weekly ydollar records yet, but have set all kinds of quantity benchmarks -- such as eight sales in one day.

On the downside, we haven’t had a single sale since I posted the out-of-stock notice 36 hours ago. I was hoping that general Christmas shopping would keep it going. My pay-per-click ad costs have started creeping upward into the $10 per day range as general traffic picks up; I need to make $150 per day just to cover those PPC costs. Last night I ordered a USB Computer Vacuum and a USB Computer Light, hoping to capitalize on the same audience that’s coming in looking for fans. I have thrown my open-to-buy budget out the window for the next several weeks. Christmas comes but once a year.

The media kit that I mentioned last time is finished. This weekend, I need to assemble and get the first batch into the mail. I also need to figure out how to post the materials on my website -- that damned php template problem again; everything is harder than it should be. It will cost me a few hundred dollars altogether for materials, labor (I hired my sister to prepare the mailing list), and postage. If the 50 or so packages that go out in this mailing result in even one mention comparable to the USB fan, it will be worth the cost.

Other Forthcoming Topics:

• Happy Birthday to Me, Part 2
• What Does Success Look Like?
• Credit Card Processing
• Possible Futures
• Planned features

O, Canada!

I ship internationally. Not because I'm a cosmopolitan globalist, but because it gives me a competitive edge. International shipping is complicated, time-consuming, expensive, and a little bit risky, so few retailers offer it. Being still hungry for every sale I can get, I welcome overseas orders.

I’ve sent packages to Australia, New Zealand, Japan, Great Britain, Brazil, and (most frequently) to Canada. Of those destinations, Canada is the worst. I think the North American Free Trade Agreement is the reason.

NAFTA requires an extra customs form that declares the product’s country of origin – which is almost invariably China, of course. However, listing any origin other than the US subjects the parcel to additional scrutiny. One customer complained that he had to pay an import duty that was almost equal to the value of the product. The guy who runs my local UPS store said that because it’s just a formality, he never, ever, lists any country other than the USA. Being honest on the NAFTA form is just asking for trouble.

I thought that NAFTA was supposed to simplify and streamline North American commerce. Instead it creates an additional form. I cringe every time I take a Canadian order.

You’d think it was a foreign country or something.

Other Forthcoming Topics:

• Happy Birthday to Me (Part 2)
• What Does Success Look Like?
• Credit Card processing fees
• Possible Futures
• Planned features

(Marketing) Score!

How about a marketing success story, for a change? A few months ago, American Way, the in-flight magazine of American Airlines, hired my wife to write a story about cool USB devices. Since I’m familiar with the subject, I did the research for her. We included Curio City’s USB Computer Fan among the other offerings I found, and disclosed our relationship to Curio City. American Way used the item in spite of that.

The magazine hit the planes on October 15, and goes off distribution on the 29^th. To date, the article has moved 37 of the 60 fans that I had in stock. That’s zero-cost advertising – in fact, they paid Anne to write the story! Even better, the USB fan is one of the few things I carry with a markup comfortably exceeding 50%, which makes up for “loss leaders” like the Neverlate clock. And perhaps best of all, the article directs people to my front page, rather than landing them on a specific product page as my pay-per-click ads do. That means shoppers have to hunt a bit to find what they’re looking for. Five of those customers did indeed make additional purchases.

This is easily my single most successful promotion to date. I exceeded my sales goal for the last week of October, and came within striking distance of making the month (which would be a first). It’s my second-best week ever, and there's still a day and a half left in fiscal October; if I use calendar accounting instead, I’ll almost surely show my first-ever monthly profit. If it weren’t for October’s “web development” expense (which comes from startup cash, and should have been paid in September), I would already be in the black. Even my open-to-buy has a positive balance…although I won’t sit on that for long!

I wish I could repeat this. With ample help from my wife (I mean, my "vice president for marketing"), I’m creating a media kit for distribution to about 100 newspapers in major cities and college towns. The objective is to get my products included in their holiday gift guides. If I can get even half a dozen mentions comparable to the American Way insertion, success will be assured.

In another marketing development…one shopper, who found my pay-per-click ad for novelty golf balls, is organizing a Spring 2007 golf tournament for 200 ladies. The event will have an “wild and crazy time” theme, and she wants 200 sleeves of animal print golf balls as gifts to the participants. Cha-ching! But she can’t afford to pay $10 apiece for them, and asked what kind of quantity discount I could offer her. She mentioned ad space in her magazine as an incentive.

The magazine is called Gentry. It circulates to 77,000 wealthy older readers in the greater San Francisco area. I’ll sell her the golf balls for my cost and pay the shipping charges out of my pocket, actually taking a loss on the sale. In exchange, she’s giving me a one-time ¼ page four-color display ad valued at $1300. I still need to actually make the ad. I should be able to get it into their February issue, for Valentines Day.

This is how I will grow Curio City – one media placement, one ad insertion, at a time. Nothing that I’ve done up to now has paid off in any substantial way, but I feel like I’m on the verge of figuring out cost-effective marketing – and that is going to be the key to success.

Other Forthcoming Topics:

• What Does Success Look Like?
• Credit Card processing fees
• Possible Futures
• Planned features
• O, Canada

The Royal We

Curio City Online’s text speaks in the plural voice (“we”). My readers know that I am the entire staff. So why not drop the pretense and just write as myself?

Conventional wisdom says that customers want to deal with big companies, and would be suspicious of the home-based, small-budget, one-man startup behind the curtain. So I speak of “our warehouse” and “our photographer” and “our buyers”, and people actually do see a big company. I only break that pretense in my newsletter and on this blog, both of which are specifically the voice of the Mayor.

Suppose I dropped the “big company” act? Some customers might like the idea of supporting a real person or helping an underdog. Then again, many might not trust “us” with their financial and contact information (even though it is certainly more secure with me than it would be in a large organization).

What’s your take? Are you more or less likely to buy from a “mom and pop” store with personality? Does a David-and-Goliath struggle against the odds do anything for you? Or is there a trust issue? Are you more comfortable with the known reputation of the colossus, or would you prefer the honest and personal touch of a little company with a real individual behind it?

Leave a comment. Our marketing department wants to know. :)


Forthcoming Topic Ideas:

• Credit Card processing fees
• What Does Success Look Like?
• Planned features
• O, Canada
• More About Marketing

Money Doesn't Grow on Trees

If you’ve plowed through my past posts, you’ve heard about startup phases and my attitude toward debt. Most readers must wonder where I got the money to finance this approach – unless you’re my in-laws, who just assume that I stole it.

I am not a rich man, nor do I want to be. I scraped along for many years in subsistence-level jobs. I’m content with just enough money to comfortably pay my bills with a little bit left for modest luxuries. A couple of computer games per year, a nice vacation every couple of years, decent gifts for my wife and friends, the occasional computer replacement…that’s plenty for me.

In 1996, I left retail (which pays squat) for a tech job during the boom. My starting salary as a game tester was a small pay cut from being a book buyer, but by 1999, thanks to royalties and promotions, I had nearly tripled my income. Meanwhile, my needs and wants remained unchanged.

The PC game business is brutal. Burnout is common and employers are notoriously mercenary, trimming staff every time a product ships. I always expected that I – with no technical skills or education -- would eventually quit or be laid off.

So I saved a lot of money. I am a lousy consumer. I much prefer having money in the bank to buying things. I called it my Unemployment Fund.

In 2000, with my employer obviously failing, I angled for the generous severance package that came with the first round of layoffs. Combined with my savings, and large enough unemployment checks to cover my bills, I’d never been so rich in my life.

Fast forward: Further career crises unfolded as my money gradually dwindled. Then my mother died, and I inherited another year’s salary. This, I knew, would be the last time in my life that I would ever have a lump of money at my disposal. Now my slow-motion career crisis intersected with the resources and motivation to change it. With the generous support of my wife, I finally gave up on game development entirely, and Kraken Enterprises was born.

So here’s how you start a business without going into debt:

1. Reduce your needs and wants to subsistence level.
2. Earn considerably more than that, and save the difference.
3. Marry a woman who will cover your personal living expenses while you pour your assets into the business.
4. (Inheriting more money is optional, but recommended.)

It’s as easy as that!

If Curio City Online turns a profit in 2007, as it must, my current deprivation will have been worth it. If not, it was a terribly costly detour. I’ll have spent my life’s savings and walked around penniless for two years for no good reason. But at least I have a shot at the brass ring, and that’s more than most people ever get.

Other Forthcoming Topics:

• Long-term Prospects
• Planned features
• O, Canada
• Giving 110%
• Credit Card processing fees

Marketing Will Be the Death of Me

Last night’s attempt to enlist some marketing help sputtered to a bad end. Anne and I thought that our friend’s startup was a public relations firm. It isn’t. Muddy Dog Media is actually a video production company – and a damned fine one, I’m sure. Maybe I’d have known that if I’d checked their website instead of glomming onto a PR buzzword that I saw in their press kit. Oh well, it was genuinely nice to see Elaine again, even if she was a little bemused by our misguided appeal for help.

I’ve always known that marketing is my blind spot. See “If You Build It, Will They Come?” for my previous thought on this. Corporate types in suits and haircuts always did the marketing while I ran operations. I thought of them as overpaid parasites. Little did I know.

Nothing has changed since I first posted about marketing back in August. I have made no progress on improving it. My now-defunct eBay store, my almost-monthly newsletter, this blog, my tentative and clumsy efforts at understanding SEO…none of it has made any discernable difference. My small marketing startup budget continues to dribble away, month after month, subsidizing PPC ads. They remain the only thing that works.

The moral of this post is simple: Never try to start a business without working out promotion first. You can't just trust it to work out.

This post would undoubtedly make a professional marketer blanch; expressing doubts must be a huge PR sin. But I said that this blog would not be a happy-talk marketing tool, and I am resolved to keep it honest.

Forthcoming Topics:

• The Royal We
• Where the Money Came From
• Long-term Prospects
• Planned features
• O, Canada

Good Debt, Bad Debt

I mentioned in Kraken Enterprises Begins that I’m trying to become profitable without taking on debt.

So far, it’s been easy enough to avoid borrowing. My startup cash is dribbling away on schedule. Now, though, I’ve hit an unexpected sales slump just as I need cash to buy Christmas merchandise. Revenue was supposed to increase steadily throughout September. Instead, it's coming in as my worst month yet. My open-to-buy is stubbornly stuck in negative numbers again.

No merchandise, no sales.

Most established stores buy their merchandise on “net” terms. That means that they place an order, and then have a defined amount of time from the ship date (usually 30 days) to pay the bill. Net terms let you sell some of the merchandise before the bill comes due. It’s a nice cash-flow trick for high-volume stores.

Curio City Online has net billing terms with a few vendors, but, like most small accounts, I usually prepay orders via credit card. Disregarding the float between the time the order is placed and the time payment is due (determined by the statement period, rather than the order’s ship date), I effectively have to pay for my stock before I can sell it.

Right now, I’d like to bring in some Halloween and autumn-themed things, but I have no open-to-buy. I do have a credit card with a high limit and no balance. It’s dangerous thinking: I can’t remember the last time I failed to pay off a monthly charge bill. If I start using deficit financing now, my open-to-buy might never return to black numbers again, interest charges will erode my markup, and I’ll be in a death spiral.

When is debt a good thing?

Debt makes sense as an investment in something that will pay off in the long run – a mortgage, education, home improvements, or business expansion. Debt is wrong when it’s used for consumption, or to subsidize routine expenses.

Going into debt for merchandise straddles that line. If I’d borrowed ahead in August in anticipation of a September sales recovery, I’d be deeper in the hole and racking up interest charges right now.

I’m fairly sure that I can service any debt incurred in October with increased November and December sales. If those don’t materialize, I’m sunk anyway. Next week I will repurpose some of my remaining Phase 2 startup cash to buy new inventory, and run up some credit card debt to replenish some depleted items (such as my magnetic globes and winestoppers). You have to spend money to make money, right?

Long-term, I will take out a bank loan to either (a) expand and revamp Curio City Online after Phase 3; or (b) open a physical Curio City store – depending on which way I ultimately go. I need to show a profit before I’m comfortable with doing that, though. I am not going to borrow money for a losing business.

Other Forthcoming Topics:

• The Royal We
• Where Money Comes From
• Long-term Prospects
• Planned features
• O, Canada

(SEO) The 900-Pound Marketing Gorilla

First, please welcome a new Friend of Curio City. FluidPC uses the same Sunshop software as I do, and its owner has encountered many of the same problems that I’m facing. We’ve been talking about the subject of this week’s post: Search Engine Optimization. Check out their high-quality, reasonably priced, customizable gaming computers.

As I mentioned in If You Build It, Will They Come?, I have known from Day One that search engine results have to drive most of my traffic. PPC advertising is too expensive by itself. Making one’s site appear prominently is a dark art that has spawned a whole industry of SEO companies.

Very few of my product pages ever appear the top 1,000 results for keyword searches, if at all.

I know that the problem is Sunshop. I don’t understand the nitty-gritty well enough to do anything about it.

Consider my bestselling DayClocks. If you search the literal string “DayClock Classic” on GoogleRankings.com, my product page ranks #1 on Google and Yahoo (but is invisible to MSN; go figure). Trying just “DayClock” ranks me at #24 on Google, #18 on MSN, and a respectable #4 on Yahoo. The bots are clearly indexing my product title. However – and this is a huge however – searching the keywords embedded in my META tags (“dayclock”, “day clock”, “week clock”, “day of the week clock” and others) returns no results at all. If you look at page source, you’ll see that the keywords appear properly in the header. Why, then, are the bots ignoring them?

I tried to help the bots by creating an XML site map (as well as an HTML version for customers). The free online sitemap generators, and the one commercial program that I tried, all choke on Sunshop’s sloppy URL generation. I screened out some of the garbage results with filters, but even my best effort still produces lots of duplication and missing category information. I’m unsure whether a decent site map will really help my page results or not, but it's all I've got to go on. So I am going to take another shot at hand-editing an XML sitemap.

A post in the Turnkey Support forum indicated that adding a couple of lines to my header file might make the bots see my product META tags. I just edited that file a few days ago, so it’s too early to say whether that made any difference. I hope it is mere coincidence that a bad sales slump began at about the same time.

Sunshop 4 reportedly contains major SEO improvements. I am hoping that the upgrade will alleviate my problem. Unfortunately, it keeps being delayed. Even the Beta won’t be ready for another month. The release version will almost surely come after Christmas.

If the upgrade doesn’t help automagically, I could change the way Sunshop builds my site. Instead of letting the PHP engine build pages on-the-fly, I can make it generate standard HTML pages, which should be bot-friendly. The drawback is that I’d need to regenerate my whole site every time I make any changes. It is probably a huge amount of extra work to maintain the site if I go that route. Another alternative, which some Sunshop users are trying, is to make a main page outside of Sunshop. This kludge would enable me to directly edit the header information that goes to all of the assembled pages. Unfortunately, it wouldn’t allow me to have custom keywords for every product page.

I suppose I could try to work variations on product titles into my product descriptions, and see if the bots index those. I could rewrite my DayClock descriptions to refer to “day clocks” and “dayclocks”. It would look like a style error to readers, but I might have to try it. I don’t know if the bots are reading product descriptions or not.

The last resort is hiring a professional SEO company. The one’s I’ve talked to are all ruinously expensive – $6,000 and up, which is considerably more than half of my entire Phase 3 budget. SEO is also a shady industry that I would rather not engage unless absolutely necessary. A mistake here would probably be fatal.

Solving this problem is absolutely critical. Sales will improve dramatically when my pages start coming up properly in keyword searches. They will never amount to anything if my pages remain invisible. All the listing and submitting and linking that I’ve been doing is ineffective.

I need help. The Sunshop upgrade is the first step. A decent site map is the second. Professional SEO is my last resort. If you have experience with SEO, please leave a comment or shoot me an email.

Other Forthcoming Topics:

The Royal We

Where the Money Came From

Good Debt, Bad Debt

Long-term Prospects

Planned features

O, Canada

The Neverlate Dilemma

Consider the Neverlate clock.

It’s a great item during back-to-school season. But the economics are difficult. Each clock costs $18 plus about $2 freight, if I can afford $960 to reach their 12-case discount (48 clocks). Because my open-to-buy is chronically struggling back up to zero, I have to go for their 3-case minimum instead, and pay $22 apiece.

The Manufacturer’s Suggested Retail Price (MSRP) is $34.99. To me, “.99” price points mean sale items, so I use $34.95. That four-cent difference happens to make me the cheapest vendor on the internet, and lately I have sold a goodly number. Each sale brings in $12.95 ($34.95 retail minus $22 cost). Profit! Right?

I wish it were that simple.

My cost structure requires a 50% average markup. 50 cents of every dollar goes toward replacing merchandise; the other 50 cents covers all of my other costs (or will, when I'm profitable). When I sell a Neverlate, only $17.48 goes back into my OTB. Because the clocks cost me $22, my OTB actually declines by $4.52 (the $22 cost minus the $17.48 infusion) every time I sell one. That’s another way of saying that I take a $4.52 loss.

When sales are broad-based, some of my merchandise that costs less than 50% of retail makes up the difference. But when an item like the Neverlate surges, as it did last month, I have a real problem.

This is a pickle, George. This is a pickle.

I know of five other web retailers selling this thing. Their price points are $34.98, $34.99, $39.95, $39.99, and $44.99. It’s tempting to simply raise my retail. But with two other online stores underselling me, I’d never sell another one. Only bricks-and-mortar stores can get away with price gouging (because in-store consumers can’t easily comparison shop). You can bet that the $44.99 retailer is not selling any clocks online.

When I went to reorder recently, I learned that the supply is limited; soon everyone will run out. I immediately raised my price to $39.95. And as expected, sales immediately stopped. Hooray! I'm no longer losing money on Neverlates.

That's obviously self-defeating.

What to do?

First, I’m going to have to cough up the $960 to get my cost down to $20 apiece. That cuts the loss from $4.52 to $2.52. I’ll have to risk getting stuck with 48 of these things if sales drop off when the back-to-school season ends. Second, I can inflate the weight by a few ounces to nick people a little bit extra on shipping. It goes against my own policy, and I hate doing it; but I’m desperate here. Let’s say that I can recoup another $0.52 that way and reduce the loss to $2 apiece.

By squeezing my budget mercilessly, I increased my OTB percentage from 50 to 50.75%. Now each sale replenishes $17.74 instead of $17.48. The gap is down to $1.74. I can’t figure out how to make that last $1.74 go away. I’ll have to absorb it, and make it up on other products.

After considerable deliberation, I decided that building volume is more important to my business than maximizing revenue per sale. So I dropped my price to $34.99. Now I'm tied for second-lowest price, with the difference being only a penny. The manufacturer sold me two more cases (eight clocks) from his limited supply. That gives me a total of 12 more in stock between today and the time the supply returns to normal in November. If I can sell all 12 between now and then, I’ll assume that the demand is sufficient to justify placing the big 48-piece reorder next time. If the item dies on me despite my loss-leader pricing, then I will instead try to trickle them out at the 39.95 retail.

Footnote: More than half of my recent Neverlate customers have paid an extra $2 for giftwrapping. If only I could get everyone to buy giftwrapping, I’d be all set.

(Update, August 2007: I've restored the original version of this post. It replaces a bowdlerized version that removed all price specifics at the vendor’s request. Since I decided to sever communication with that vendor after he removed my page link -- and especially because the post didn’t make sense when purged of numbers -- I have replaced the censored version.

(Ultimately, I ended up marking my stock down a couple of bucks to clear it out. At this writing, I’m down to four left. Thanks to its already inadequate markup, I just about broke even on this product. That’s too bad; it was a nice clock. I actually bought one of the last copies for myself.)

The Boston Gift Show

Expecting the Fall show to blow away the Spring one, I planned to roam the convention center all day Saturday, and then return on Sunday or Monday to place two or three orders that I’d have to cull from several candidates.

Instead, I covered all 13 aisles before lunchtime. I saw ample evidence that 90% of everything in the world is crap. I breezed past booth after booth of kitsch, mass-market junk, nice but undistinguished jewelry, gourmet food items, etc. Even among the 10% that held some quality and interest, very little was appropriate for Curio City. I expected to sift through a lot of coal for a few small diamonds. I was unprepared for how little coal there’d be to sift.

I ordered from only one vendor – Tile Craft, Inc. – whom I had previously seen at the Spring show. They told me that the Boston Gift Show has been shrinking steadily as fewer and fewer vendors find it worth their considerable expense. New England merchants, I was told, are too conservative and cautious to place show orders. (Personally, I’d think that shopping show specials is a Yankee trait; in my previous retail career, convention specials usually recouped the cost of my trip.) Whatever the reason, the show was a big disappointment. It felt tired and perfunctory. As much as I hate to say it, I might have to plan a trip to Toy Fair in New York next year.

So what did I buy from Tile Craft? Since they have no website, I can’t link the product here. If you’re a subscribed customer, you’ll find out in the October issue of The Curio City Chronicle. Otherwise, watch my New Arrivals section, where the items will appear within the next couple of weeks. I picked up a couple of other catalogs, too, but nothing that I’m especially excited about.

On the bright side, the show was not nearly the challenge to my meager budget that I thought it would be. My single order bled my open-to-buy from $202.38 back down to (-$61.62).

NEXT: Search Engine Optimization

Startup Phases Defined

My last post mentioned Phases 1, 2, and 3. The definition of each has changed with experience. The budget for each has not.

Phase 1 (once I lost my delusions of grandeur) was simply creating a working e-commerce site and opening for business before Christmas 2005. It cost me about $21,000 to get there.

I’m in Phase 2 now. The objective is to enhance my site as much as possible given the development constraints previously explained, refine my inventory selection, strengthen my brand, and achieve financial break-even. Phase 2 ends when the Sunshop version upgrade is completed, when my current modest development task list is done (or the money runs out), and when Curio City has its first break-even month. The budget for Phase 2 was $10,500, more than half of which is gone.

Despite August’s lamentable sales numbers, I came within $51 of breaking even; with no physical store, my costs are highly scalable. Year to date, I’m $3,867.42 in the red on gross sales of just over $14,000. While I don’t think that Christmas can possibly save the year, I do expect to have my first profitable month – maybe even this month, although September is off to a disappointing start.

Phase 3 begins when my last bank CD matures next May. It will end when that $10,000 is gone. By then, Curio City must be consistently profitable and providing me with dependable paychecks. My main Phase 3 objective is to release Eric from servitude and find a new developer to implement some of my more advanced features. Secondarily, I need to remedy some necessary omissions (like insurance) and employ a part-time helper during the Christmas season.

By the time Phase 3 ends (probably Q1 2008), I’ll know whether Curio City will fly as an exclusively online business, or whether I need to open a physical store...or whether I should just get a respectable job. By then, I’ll have invested all of my money -- $41,000 -- and a couple of years of my life.

**********

The Boston Gift Show begins tomorrow. If it's at all interesting, that will be my next topic.

**********

Other Forthcoming Topics:

• SEO: The 900-Pound Gorilla
• Where the Money Came From
• “We” versus “I”
• Good Debt, Bad Debt
• Long-term Prospects
• Planned features

If you're especially interested in any of those subjects, or if you want to suggest something else, please feel free to leave a comment.

Labor Day? Christmas Is Coming!

Summer is my favorite season. But in retail, summertime is dead. Established retailers with deep pockets can take seasonality in stride. It is a real challenge for a young, hand-to-mouth company like Kraken Enterprises. My paycheck is a percentage of net sales; when business falls off, so does my income.

August was the month of the empty wallet. Some weeks, I couldn’t even pay my own bar tab at Flanagan’s (even on $1 pizza night). Thus do I welcome Labor Day.

As I mentioned in The State of the City post, I could easily spend $5,000 on new products and reorders that are currently wishlisted. The largest single percentage of my sales goes to buying merchandise. This “open-to-buy” (OTB) mostly just replaces the stuff that sells. When business is good and sales are broad-based, there is enough cash flow to expand into new product lines before I need to reorder existing items. When business is slow – as in August – OTB just barely grows enough to replace the few items that are selling.

In fact, the OTB budget sometimes doesn’t even cover the product cost, especially if I use discounts and markdowns to drive sales. Consider Neverlate clocks. A back-to-school run on those forced me to spend $265 on replacements at a time when my OTB held only $54 and sales in general were poor. The introductory pricing that I negotiated on my initial order was not available for the reorder, so my already-marginal 43% markup on that product fell to only 37% (meaning that 63% of the revenue from Neverlate sales just pays for the clocks). My benchmark, based on my across-the-board markup, is 50%. I could stop carrying low-margin items…but I can’t walk away from anything that actually sells. I could raise the price of Neverlates, as a few other retailers have done…but my primary competitors, who get better pricing on their higher volume, would undersell me so much that I’d probably never move another Neverlate. I could increase the portion of sales that go into OTB…except that I’d have to cut something else, and there is definitely no wriggle room when my P&L plan optimistically forecasts profits of $12 in 2007 and $20 in 2008.

Having gradually recovered from that unexpected Neverlate reorder, my OTB today holds exactly $81.27. To bring in new Fall items, I have to borrow against anticipated sales (sending OTB into the red and risking a general cash flow crisis), or take on debt, or infuse cash from somewhere else.

Shall I run a balance on my credit card for the first time? If you’ve read my history, you know that I’m trying very hard to achieve breakeven without going into debt. Debt is a last resort. Bzzzt!

What about nicking operating cash to overspend my OTB? About 90% of all business failures are caused by cash-flow crises. I can’t risk a chronic cash shortage. Bzzzt!

That leaves Phase 2 startup money.

I do have a little money left in my development budget for website improvements. I still have ambitious design plans, and Sunshop 4 is right around the corner. But given my developer’s limited availability, I probably can’t spend my entire Phase 2 budget. So I can free up a few hundred bucks there.

I also have some advertising budget left, which I’m gradually pissing away on PPC advertising. Until I figure out search-engine optimization (which is just not going to happen on its own), PPC ads bring in 90% of my traffic. Not only can I not afford to pull the plug on those...I’ll need to boost my subsidy during the Christmas season. Phase 2 runs through April 2007, so I need to keep bleeding ad money for another 7 months. I can divert at most a few hundred dollars from that budget.

A few hundred here, a few hundred there: It still doesn’t add up to real money. The only real solution is a recovery in sales. But Christmas is coming, oh yes it is: the 900-pound gorilla of retailing. By the time sales recover and cash flows comfortably again, it will be too late. My initial Christmas orders have to go in during September and October.

* * * * *

Incidentally, I have in mind the following topics for future posts. If there’s anything you’d like to read about, leave me a comment:

• Startup Phases
• “We” versus “I”
• Good Debt, Bad Debt
• Long-term Prospects

Absent reader input, I’ll eventually write all of those posts in due time.

Moving Right Along

Last week, I invited you to comment on my blog, or register your presence by clicking the ads above this post. (You won’t see them if your browser runs Adblock or restricts javascript). I got one comment, a few ad clicks, and a few emails. We're not exactly burning up the Internet, but it's a start. I thank you for your time and interest.

I will henceforth post at least once every week, probably on Monday or Tuesday. If you’re interested in the inside story of Curio City Online, bookmark this site and come back periodically. I’ll do my best to keep my posts interesting and informative – and short.

For your part…please continue to signal your existence by leaving a comment or clicking on an ad. I don’t need much encouragement, but I do need some.

Oh, btw: My wife thinks my profile photo should be more mayoral looking. I kind of like the slightly warped self-portrait. What do you think?

NEXT: It’s Almost Christmas!

So What Do You Think?

My previous 10 posts gave you a short autobiography, the genesis of Kraken Enterprises and Curio City Online, a brief history of my first year in business, and a look at my current status and immediate challenges.

Now I’ll lay back until I see some indication that people are reading this. If you find it interesting or useful, please leave a comment. I seek readers who can learn from my mistakes and advise me on solving or avoiding problems – especially regarding marketing and technology. I’d like to establish an honest, free-wheeling dialog with interested small business owners, customers, vendors, and suppliers. I hope it will be useful to me and my readers. But first I need to know that you’re reading.

Sound off. This is my last post until I have some reason to continue. Is there anything you’d like to know more about? Did you enjoy what I've written so far?

(Oh, and if you don't comment, please make your presence known by clicking the ads at the top of my page.)

NEXT: ????