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Every Friday, I post a small insight into running Curio City and/or Blue Hills Editorial Services. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
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Friday, June 08, 2007

This Still Isn't the Post I Promised

The arrival yesterday of a badly-needed new computer desk prevented me from finishing up the store-opening financial analysis that I promised you two weeks ago. My wife bought me this one for my 50th birthday, to help alleviate chronic problems with my neck, spine, and hips. My badly-configured workspace threatened to undo the progress that I made earlier this year in an expensive round of physical therapy. I really like the desk’s flexible design and all-hardwood construction, but assembly was a major challenge. It took me a good four hours to achieve the basic configuration, and then another couple of hours to customize it to my liking. And I’m still pondering more adjustments.

Kraken Enterprises’ headquarters is a glorified closet, really, so space is at a premium. My previous desk was a printer stand. Back pain often prevented me from working more than a few hours a day.

To be honest, I thought I’d completed the spreadsheet in question. After many hours of number-crunching, I arrived at a bottom-line sales requirement of $375,000 annually. That’s a lot of money, but it’s at least in line with revenues of the bookstores that I’ve managed in the past. It’s sure a lot less intimidating than the $800,000 I figured I’d need to make Curio Metropolis Online succeed.

(Footnote: My average sale has climbed back to its historical level of about $40, so the ridiculous number of sales-per-day in my earlier post is slightly less ridiculous now).

Before putting a bow on it and calling it a plan, I did the basic research that I really should have started with. The median sales figure for gift shops under 1800 square feet is $115-$140 per square foot. The magic number to make my plan break even was $375/sq ft. Only jewelry stores, which cram very expensive merchandise into very little space, typically achieve such a number. Gift shops in busy malls might exceed $200/sq ft, but they also pay astronomical rents. When I plugged in the safe assumption of $125/sq ft, everything collapsed. Even if I have no employees, pay below-market rent, and cut my own salary to a token $25,000, the best result I can forecast is a $35,000 annual loss! How the 1,000 sq ft store that I envisioned can pay its expenses and put $50,000 in my pocket from $125,000 revenue is…well, impossible.

By my calculations, it’s impossible for a gift shop to break even. Yet, just as bumblebees manage to fly despite scientists grounding them aerodynamically, they do. So there’s obviously something wrong with my assumptions. I had just realized that I need to start over yet again when my desk arrived.

Getting this right is very important. Maybe next week I’ll finally nail it.

You might have noticed that I didn’t start this week’s post off by whining about sales, as I’ve done for the past several weeks. Things picked up a little for Father’s Day – too little, and too late, but enough to reassure me again that there is no technical problem. Curio City is routinely running 50% behind last year now. The good news is that the stakes remain so low that it really takes only a few outstanding days to turn things around. Today I’m up against an astronomical $300 day from LY. Sales so far today? $9.95. Still, one never knows.

In any case, although it still depresses me, I’ve stopped stressing out over the sales decline. This year is just going to suck. Although I'll keep trying to turn it around, I have to accept that the current incarnation of Curio City Online may simply be a failure. Instead I'll put my energy into defining and implementing a new phase.

1 comment:

  1. Some dude from 10 months in the future thinks that the US economy wasn't strong enough to support a curio/gift shop in the middle of 2007. :( 2006 was proof that the conept had some legs, but 2007 showed that certain aspects of folks' budgets take a whack ahead of other aspects.


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