Hither the American consumer:
Total income: +96.2%
Total COGS: +75.2%
Net Income (Profit): +411.4%
Total income: +11.8%
Total COGS: +11.3%
Net Income (Profit): -76.2%
I beat my sales plan for the first time since April, the cost of goods sold is rising slightly less than revenue, I narrowed the profit gap a wee bit while still increasing my own pay, and the bottom line is showing black ink. Not bad for the worst economy since the 1930s.
So what are my prospects as September ushers in another Christmas season?
The macro economy is rising from the dead. Our regional housing market has bottomed out. Having been settled for nearly 500 years, New England doesn’t have open land to plop down the big tracts of overpriced McMansions that dragged down the sprawl cities. And Yankee thrift prevented the average down payment from dropping much below 20%, compared to near zero in boomtowns like Las Vegas; that means that we didn’t have many new homeowners with negative equity. Housing might not lead us back out of this mess, but at least it’s no longer dragging us down. Even the overbuilt sprawl cities are showing a pulse.
Gloom always sells better than good news so dire warnings are still easy to find. Some economists foresee another plunge as collapsing commercial real estate prices drag down more banks and persistent unemployment keeps the American consumer on the sidelines. Three hundred banks have already failed this year and 111 more joined the “troubled” list this week.
Wise men intone that consumers, bloodied by falling retirement accounts and home values and frightened by persistent unemployment, will remain on the sidelines. As a lifelong tightwad myself, I approve. But if everyone was as thrifty as I am, capitalism would have collapsed a generation ago. I have boundless faith in Americans’ instant-gratification materialism – Curio City depends on whimsy, after all. When they see their 401ks and house values rising reliably again, Americans will shrug off their ill-fitting prudence like a fading nightmare and resume the impulsive and frivolous spending that has powered the economy since the 1980s. When you combine a revived consumer with Obama’s aggressive deficit spending (most of which kicks in in 2010), you have the potential for a real boom – possibly even one whose proportions will mirror the recent collapse.
I’m going to buck the wise men. So remember, you read it here first: Gradual improvement will lead up to a robust December and accelerating growth after that. Year-over-year numbers should look quite good as we go up against last year’s most dire months (October through April).
The other possible scenario is stagflation – we get the slow recovery that economists predict while inflation and interest rates shoot up because of all the money that Washington printed this year. In that scenario we continue struggling for years to come. Let’s not dwell on it.
I braced for a run on free money when I announced the new Customer Rewards Program last week. Didn’t happen. AFAIK, nobody has used the Refer-a-Friend feature to earn an instant $5. Exactly three new customers have created accounts that generated 3 points altogether. One returning customer might have tried to take advantage of the program, but he failed to log into his account and so didn’t earn any points. I’m glad that customer reward points are not going to break the bank, but mostly disappointed that my big innovation for 2009 flopped. Well, it’s a long-term thing that should build momentum over time. We’ll see how it goes.
Following the SCORE exec’s advice, I have been slowly building up cash and selling down merchandise. My open-to-buy is now in four figures and I can begin acquiring new merchandise just as Christmas season gets started. In fact, my rough OTB formula tells me to spend all of my cash on hand; I need to be careful.
I applied again for another new MC to replace the Advanta card that I lost this spring, but I’m not optimistic. The people at Citizens Bank (where I have my business checking as well as a personal account) are notoriously incompetent. The clerk who took my application insisted that I’m a sole proprietor, and not an S Corp, and could not grasp that my store has one name and my company another. Clerical errors will probably sink this application. Still, I'm holding back on placing orders until I get a ruling on this credit card.
Next week: Curious Business tackles healthcare reform.
Welcome to Curious Business
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.