October Numbers, November Politics

The slowdown in growth that began in July and intensified in August and September has turned negative. This October wasn’t the first month ever to finish behind last year, but it is the biggest decline ever. This week started out strong. Then yesterday came in at $10.66 and a return drove today (so far) $13.68 into the red. Net sales for the past two days: (-$3.02). Total for the corresponding two days last year: $363.66. Every time I think I’m cruising toward a decent paycheck, a lull like this one takes the wind out of my sails. These blips smooth out over time, but they’re downright frightening as they occur.

October:

Total income: -18.2%
Total COGS: -10%
Payroll: +52.9%
Net Income (Profit): -19.8%


Year to Date:

Total income: +14.8%
Total COGS: +27%
Payroll: +31.9%
Net Income (Profit): -66.6%

Year-to-date sales are now running a smidgeon below plan as we go into the most critical months. November’s targets are intimidating. Increased costs have cut my YTD profit by more than half. At least I’m in the black -- many stores don’t see that until November. In light of current trends I’ll be content if 2010 can just finish even with last year (which was lackluster).

My Google AdWords spend, which historically has hovered around $10/day, is routinely exceeding $20 as the page-one placement price of many keywords skyrockets. Words that for years have cost me 20 or 25 cents now start at 65 cents and range well over a dollar a click. I raise my bids by a nickel one day and find the threshold a dime higher the next. Someone’s using the 900-pound gorilla tactic that Wal-mart uses to destroy local businesses: Use your deep pockets to run at a loss while you overwhelm a market, then establish profitability only after all of your competitors are dead. That’s the only way I can fathom someone paying $1.25 a click for a $20 product.



Despite losing page-one placement to these bid bombers, my $20 still buys 80-100 clicks a day. Traffic hovers a bit over 150 daily visitors. Conversions are steady at around 2.3% and the occasional large sale keeps the average purchase in the $40 range. I’m starting to get a little traffic from Microsoft’s AdCenter now. Tuesday’s newsletter to 372 subscribers got 96 opens (26%) and 24 clicks (25%)…yielding zero sales despite a free shipping coupon. In other words, all of my metrics look pretty good…so what gives?

I turned off Firefox’s AdBlock in order to see Facebook ads after they sent me another $50 coupon. Most retailers run product-specific ads linked to a dedicated product tab on their FB page. That’s predictable; targeted traffic always converts best. But I can’t figure out how to create that product tab. Maybe it’s because my Curio City page is a subpage of a personal account that I don’t use, rather than a top-level page itself. Or maybe the big players have developers customizing their FB interface for them.

Well, I do have my ShopBuddy tab and I can edit that product feed. Should I list (a) just a handful of top products; or (b) most of my catalog with the worst junk stripped out; or (c) my entire inventory? Is my goal selling products through ShopBuddy, or using it to drive traffic to my site? Should I focus people on a few likely sellers or draw them in with variety? I have to decide and write my ad this afternoon if I’m going to use that $50 credit.

OK then, decision time: People use FB primarily to kill time. Therefore, they’d rather browse a large inventory than be shown just a few things. I’m going to go with option (b) above – show them everything except the crap that I’d write off if I could afford to.

This is one of those times that I wish I had coworkers to blame when I make the wrong decision. Well, at least that $50 credit makes it a cheap education.

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I’m indulging in a last political ramble before the midterm elections. Next week I’ll probably permit myself a little hand-wringing, and then I’ll banish politics from my business again.

When politicians say “small business” they mean firms with fewer than 500 employees. That’s a big business in my book. None of the federal initiatives offered to date affects a one-man, owner-operated concern; in fact, as we sank into our health insurance crisis I discovered that owner-employees are explicitly excluded from those subsidies. Tax policy is irrelevant to an operation as small as mine, hence a political platform centered upon tax cuts is spurious at my scale of existence.

On the large scale, tax cuts are stimulative if taxes are too high to begin with. Federal income tax rates are now at historic lows thanks to Bush’s huge unfunded cuts (which gave us a bubble, not a boom). Raising or lowering taxes on the working poor makes little difference because we don’t pay very much to begin with. The rich, who benefit greatly from tax cuts, squander their marginal income on exotic vacations, luxury cars, yachts, political contributions, and other extravagances like the rest of us can scarcely imagine – when they spend it at all, that is. Mostly they invest it in esoteric ways to make even more money.

What my company needs is not lower taxes, but more demand. You don’t get that by taking a few bucks less each week from a struggling person’s paycheck. You get it by instilling confidence in consumers. In the short term, that means creating jobs, and you do that with government spending. Corporations are already sitting on $1.5 trillion in cash reserves; they’re obviously not inclined to buy employees with it. Meanwhile this country’s transportation, water, and power systems are crumbling. Not only is the era of epic public works behind us…we can’t even maintain those that our forebears built.

Today’s obsession with jobs drowns out the long-term conversation we should be having about the emerging post-employment economy. Traditional jobs, where you work for somebody else at a place of employment and collect a regular paycheck, are dying out. More and more workers find ourselves permanently sidelined. A few of us manage to start businesses or invent self-employment…a few more of us can retrain for the specialized job openings that still exist…still more of us turn to the black market economy…but most of us just sink into chronic poverty. The poverty rate in America is at an all-time high. We should be asking what happens to those who will never have jobs again, as well as the undereducated youngsters who will never hold one. Jobs that have been automated or exported do not come back, and the industries that will create new jobs require higher literacy and numeracy skills than high schools impart. Even the armed forces, our historical employer of last resort, no longer accept uneducated cannon fodder.

Neither party will ever start that conversation, but the Democrats are tacitly addressing it with a more robust role for government. We need a bigger public sector, dramatically higher taxes on the rich, and a livable guaranteed minimum income for the dispossessed. Social Security and Medicare must be fully funded and expanded. Nobody should face a Dickensian doom after losing their job and their health insurance, yet that is exactly the past that Tea Partiers pine for.

To restore demand and revive the economy, let's redistribute the obscene wealth concentrated at the top to the working classes, who will spend it of necessity. The superrich hold more wealth than at any time since 1928 while the middle class's purchasing power steadily erodes. Let's emulate the social democracies of Scandinavia and Europe that consistently rate the best quality of life. (Yes, I know that France took the #1 ranking this year; and no, nobody admires France!)

How we'll pay for that is beyond the scope of this post, but it's not as hard as you'd think when you put our $700 billion military budget on the block.

Kraken Enterprises will never create a single job other than my own. Employees are parasites – I know: I was one for 35 years. I do create jobs indirectly when I buy from wholesalers and manufacturers. Someday I will outsource my shipping to a fulfillment company and contribute to someone’s job that way. I’ll probably hire marketing and SEO expertise at some point. I’ll contract for developer support more often. I might even leave Sunshop behind and build a custom website someday. All of this creates income for others without burdening me with employees. I’d only need to rent an office and hire helpers if Curio City grows much larger than I expect, and even in that worst-case (best-case?) scenario I can’t imagine employing more than one or two people – certainly never enough to trigger the health insurance mandate, which is 10 employees in Massachusetts and will be 25 (or is it 50?) under federal law. Health insurance should be delivered by the government, not by employers.

Ah, well. All indicators say that Americans are going to go in exactly the wrong direction on Tuesday. Unfettered capitalism and under-taxation got us into this mess; surely they will get us back out, right? So here comes my futile exhortation to vote against the Tea Party know-nothings “where truth and science and facts don’t weigh in”. Despite knowing full well that I won’t change any minds I at least feel better for getting it out of my system.

Progressives can only grin and bear it. The Senate minority leader says “The single most important thing we want to achieve is for President Obama to be a one-term president.... Our single biggest political goal is to give our nominee for president the maximum opportunity to be successful." Yep, that’s their agenda: destroy Obama at all costs, even if that means hobbling the economy for two more years. If there’s any justice, the blind obstructionism that's bringing them to power now should set up a backlash in 2012.

Should You Sit Out This Election?

“If voting changed anything, they’d make it illegal.” –Emma Goldman

This election cycle finds me wearing the halo of the small businessman. As the improbable economic hero of the hour I claim the right to preach politics. These few short paragraphs won't change your party affiliation or your core political beliefs, so don't be afraid.

Pundits say that voters are about to sweep away the people who failed to restore prosperity in the past two years and replace them with the ones who ruined it in the first place. I see little evidence of anti-incumbent fever here; Massachusetts is better off than most states. But Americans have short memories, shorter attention spans, and even less patience. They just might be foolish enough to throw the bums out and reinstall thieves and cutthroats.

Over the decades my economic philosophy has spanned the spectrum from socialist to libertarian; morally, I’ve been consistently licentious and anti-religious. I voted for third parties and independents in every election except for Gerald Ford and Barack Obama. I voted for Ford because he was a friend of my dad’s, and how often do you get to elect someone with whom you’ve had coffee? I voted for Obama because I trusted him to sweep away the last eight years of Republican misrule that destroyed our economy.

The Great Recession pushed me back to the left. Our epic struggles with health insurance, as documented in this blog (see “health insurance” in the Labels list at right), made us staunch supporters of reform. Unemployment benefit extensions, the federal COBRA subsidy (and COBRA itself), and our state Medical Security Program kept us clinging to the bottom rung of the middle class; without them we’d have joined the ever-growing ranks of the poor. Thank the gods we live in the most liberal state with the most generous unemployment benefits in the US! Republicans tried time after time to eviscerate these lifelines; time after time, Democrats fought to preserve them. It’s obvious which party was on our side.

Today I am more sympathetic to the Democratic Party – or, more accurately, more hostile to the Republicans -- than I’ve ever been. This is not to say I’m a Democrat, though. I’m still independent and plan to vote for at least one liberal Republican in our state contests.

With my biases laid out for all to see, let’s get down to it. We have four choices on Election Day:

1. The old-line forces of evil that got us into this mess (a.k.a. Republicans);
2. The incompetent sellouts that failed to get us out of it (a.k.a. Democrats);
3. The anti-government extremists who are financed by the old-line forces of evil (a.k.a. Tea Partiers); and
4. None of the above (i.e., stay home).

Conservatives face an interesting dilemma. Your long-entrenched powers are losing control over the party to well-bankrolled ignorant and misinformed media darlings. A party agenda shaped by Tea Partiers would consign the Republicans to the fringe for many years to come, and I find that tempting. But the American political system works best when two evenly-matched parties fight over the middle and temper one another’s worst impulses. Conservatives should shun the Bush-era veterans who destroyed our economy, because they’re unashamedly promising more of the same. You should also shun the fundamentalists who will destroy your party if they gain power. That leaves you with supporting moderate Republicans where you have that option or staying home where you do not.

I mostly want to talk to progressives. We’re disappointed with the Obama administration and its Congress. They have so ceded the political narrative to the right-wing hate-and-fear machine that even their successes are twisted into political liabilities – a strange failing for such a mediagenic figure. The stimulus package is reviled even though economists agree that it averted economic collapse and should have been larger. George Bush’s TARP has been painted as a Democratic giveaway to greedy bankers, even though most of the money has been paid back – with $25 billion in interest. While the voters expected bold, New Deal-scale jobs programs we instead got a Republican-designed healthcare giveaway to the entrenched interests. Rather than fight for the single-payer “Medicare for All” system that we really need Congress enshrined private insurance coverage in law and condemned employers to forever deliver it. Extending coverage to 30 million Americans while reining in the insurers’ worst abuses is a laudable achievement, but we all know that it doesn’t address the crisis of rising prices.

So we have little enthusiasm for the Democrats (if indeed the pundits are right about that; early balloting suggests otherwise). They compromised repeatedly to evoke bipartisanship that never materialized while the Republicans somehow made a virtue of blind obstructionism. Who wants to vote for sellouts and cowards? We have no left-wing insurgency comparable to the Tea Party, but if we don’t support beleaguered Democrats the progressive agenda will be overrun by flag-waving fundamentalists. From global warming to energy policy to rebuilding infrastructure and creating jobs, there is still much to be done. You should only skip this election if your choices are limited to conservatives or turncoat Democrats. Obama isn't on the ballot; don't throw away your vote to express displeasure with him.

I have nothing to say to Tea Partiers. As a mercy to my readers I deleted six futile paragraphs of facts and logic because ideologues are impervious to those. They embrace that which supports their beliefs and reject everything else. It’s up to the rest of us to ensure that the Christine O’Donnells and Sharron Angles and Sarah Palins and their ilk remain amusing entertainers on the fringe.



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By the way, my new Facebook blogcaster displays a thumbnail of my blog itself when it doesn’t find any graphics in the post. Since that’s boring, I’ll be embedding pictures more often than not. Sometimes they’ll be more relevant and interesting than others.

I rather like this one.

Flow My Cash, the Merchant Said

Eighteen months of unemployment honed my skill at redlining budgets. I used to preserve generous margins for error, even though I rarely err financially. Now those comfy cushions are gone. I often drain my accounts down to their last $5.

That’s safe with my meager personal finances. It’s more chancy with our household finances. It’s downright dangerous when applied to Curio City. For the first time in five years, I may have frakked up.


If September sales were worrisome, October is downright frightening. Only five days have beaten last year and I haven’t hit my plan even once. The income that I was pre-spending isn’t coming in, but the bills are. I’m averaging a decent five sales a day but too many of them are in the $10-15 range. Five sales a day at $40 is about where October should be. Five sales at $10…well.

And yet, spend I must. This compulsion could be a sign of the apocalypse, so alien it is to my nature. Skyrocketing keyword prices have doubled my advertising spend even as sales decrease…but cutting back on advertising would be suicide. After waiting literally for months for the supplier of my bestselling 5-LED Cap Light to restock, I finally gave up on them and found an alternate source – one who also sells a color version. Woo! This will be a surefire hit. But, of course, I had to spend money to bring them in. (Those links won’t work until the products arrive next week).

So I’ve deflated my cushion (I keep reminding myself that investing it in Christmas merchandise could pay off better than the $2 it’s earning in monthly interest). As of this morning, bills are outpacing cash by $1,600. Receipts between now and the end of the month might or might not cover that gap. I might carry a small credit card balance for the first time ever. That wouldn't be the end of the world, but it would feel like a frakup.

Well. October’s only halfway over and I have one good-sized sale in the pipeline (I’m waiting for a paper check to arrive for a deal struck a month ago). Lighted cap sales revived after I bid up my keywords and hopped up the page text to seduce Google. The next two weeks probably won’t reverse the damage from the first two, but they could at least stop the slide.

Curio City isn’t the only one who needs cash. Anne’s birthday is two weeks away, my packie’s huge fall beer tasting is almost upon us, the Boston Globe bill is due again, and I’ve got all of $17.74 in my checking account.

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Weird footnote: More than half of this week’s orders came from Texas, California, and Florida. I don’t know why. Under the “How did you find us?” dropdown one customer chose “You were linked in a blog or online article”. Really? Another said “Heard about you on radio or TV.” Wow. She probably saw Panther Vision caps on TV – one of the shopping channels used to sell them…if that’s begun again it would explain the cap revival better than my feeble efforts does. Believe it or not, most consumers don’t understand that retailers and manufacturers are different entities; many of my customers think I’m Panther Vision. I don't care if they think I'm Satan Claus as long as they place those orders.

The Good and the Bad

As much as I fret and complain, you might wonder why I do this for a living. I’m not a risk-taker or a capitalist or even a consumer. I don’t care about buying and selling. I don’t follow popular culture or keep up with technology.

I do it because it’s the only thing I know how to do without any education or training. It uses skills I picked up haphazardly over the decades. I need to pass the years productively until I retire or (more likely) die in harness. So what consolations does Curio City offer me?

Things I Like

I love being in control of my schedule. Freedom is the single biggest tradeoff for living in poverty. I don’t need anyone’s permission to spend a day tending to my garden or household chores. Business is slow? This week I cleaned the oven and mopped the floor. Living la vida loca!

I love being responsible only to and for myself. I never do busy work for appearances sake. My labor doesn’t further enrich some rich guy. Although I might fail, I can’t be laid off and if I’m not at the mercy of somebody else’s competence. Nobody else's fate depends on my performance.

I like statistics. I enjoy the accounting aspects when the numbers are good.

I like order. My wife, who was raised by wolves, lives in perpetual chaos and upheaval. Curio City is a tiny oasis of order. Plans are made, budgets are followed, accounts are balanced, bills are paid on time, loose ends are tied up, and trash doesn’t become clutter.

I like the way my paycheck tracks my results. I make more when sales are good and less when they’re poor. I get nice big checks when I’m working flat-out in November and December. I earn next to nothing during the summer drought, but I don’t have to work very much.

It has potential. If everything breaks my way, I could earn enough money to survive on and own a salable business by the time I’m eligible for Medicare. That’s my pipe dream, anyway: By the time I turn 65 (in 12 years), either hire someone else to run Curio City while I just skim off the profits, or sell it and live off the proceeds. Unfortunately it needs to be an order of magnitude larger for that to happen. The Great Recession was a major setback and I'm moving in reverse at the moment.

Things I Don’t Like

Uncertainty. Half of my annual income comes in November and December. Spreading the other 50% over the other 10 months yields laughable little paychecks. I’m thinking about level-funding my payroll next year. That is, I’d figure out my average weekly pay based on this year’s paychecks and then parcel that out evenly through the year, keeping enough of Curio City’s holiday windfall in the bank to subsidize the slow months. Of course, doing this would break the workload/reward mechanism that I listed under “likes”, and it doesn’t affect the next point:

Low pay. If I did level-fund my salary, the bi-weekly check would be uniformly disappointing with nothing to look forward to during my busy season. I do get tired of being chronically broke.

Slavery. I can never go home from work. I can never take a true vacation. I can never call in sick. There is no such thing as a holiday or a day off.

I’m on my own. Nothing ever gets done unless I do it. Nobody else ever has insights or initiates anything. When I suspect that something might be wrong, I have to figure it out myself. For example, the sales decline that began in July is still gathering speed. I blame lighted caps. Last fall they were blowing out at record speed as Panther Vision rolled out the new 3-LED Power Caps while I discounted my old 2-LED caps. This year they aren’t selling at all. Why not? I don’t see any formidable new competitors or discounters. My ads are still generating 30-40 clicks a day, so the interest is there. Is there something wrong with my site? Did Google change their mysterious algorithms and knock my pages out of contention? Are customers just being fickle? I don’t know and nobody’s going to tell me.

Another example: The Simplaris Blogcast application that spews my blog entries onto Facebook stopped working last week. If it weren’t for my Facebook readers I wouldn’t have any readers at all – even my own wife doesn’t read my blog. Eventually I found and installed a similar app. Does it work? I’ll find out in a few minutes, after I post today’s essay. If it doesn’t show up on my Facebook wall, it’s back to the drawing board.

Another example: An astute blog reader (hi Andrew!) encountered my admin password popup when he clicked last week’s link to Buckyballs. Gosh, do you think that might be why Buckyballs weren’t selling? It turned out that a graphic that I’d uploaded through Sunshop’s text editor was calling a path through /admin, and a layer of security that I added last week won’t let you in there without a password. Moved the graphic, changed the link, and all was well. Buckyballs still aren’t selling, though.

Another example: I want to add the transit times to the shipping options dropdown list that appears when you check out. I’ve been trying to make this simple change ever since postal rates went up last February. Adding that text to the UPS options was easy, but changing the corresponding USPS text doesn’t work. It is not being drawn from the appropriate source file. The Sunshop support forum is no help. I finally gave up and asked my developer to solve it for me.

That’s just one typical week’s pitfalls. I confront crap like that constantly.

Constant change. Whenever I think I’ve got things figured out, the rules change. Technology moves faster than I can follow, especially with the spread of smart phones (which I neither own nor want). Fashions in silly stuff like website colors and layout evolves; my five-year-old Sunshop template looks archaic. Technologies like Flash go in and out of favor. Search engine algorithms change constantly. Customer whims are unpredictable. Today’s hot product is likely to end up on the discount table next year.

Boredom. You wouldn’t think I could get bored given the constant state of change and endless mysterious problems. But I don’t care about my work on a personal level. It doesn’t make the world a better place. It’s not enriching in any sense of the word. It’s unimportant. All it does is earn me a living, and it’s not very good at that. Yet.

Isolation. When Anne’s out of town I can go for days without speaking to anybody or leaving the house. As a misanthrope that suits me just fine, but I get weird when I withdraw too completely for too long.

On balance, the good outweighs the bad. I don’t want to return to conventional employment (despite its higher pay) even if I thought that I could get a halfway decent job. Which I’m pretty sure I could not do anyway in the current market.

And so I soldier on.

It's Not Me. It's You. or, Buy Stuff, Dammit!

Year-over-year growth slowed in July and turned slightly negative in August. In September, it crashed. Let’s cut straight to the grim numbers:

Total income: -20.3%
Total COGS: -12.7%
Payroll: +34.8%
Net Income (Profit): -112.3%


Year to Date:

Total income: +21.2%
Total COGS: +35.2%
Payroll: +40.3%
Net Income (Profit): -103.8%

How can I sugar-coat that? September 2009 kicked ass. September 2010 was on the weak side of normal. This month was doomed before it even started. Last September brought a $1,100 lighted cap sale from Staples and another $500 cap sale to a business in Texas. Three other days during the month broke $300. This September delivered only one day over $300 with no big institutional sales.

If you remove those two big lucky strikes from last year’s sales, this month was about flat with LY. It’s a very healthy increase from the more typical September of 2008. As reassuring as that is, September still came in $1,500 behind last year. At least (the ultimate in sour grapes) I’ve set a more realistic target to beat next year!

My own pay is still 40% ahead of LY. Sounds great, huh? Yeah, but big percentage swings often mask small dollar amounts...and the "extra" pay comes directly out of my year-end profit-taking bonus. The bottom line is slightly negative right now when it should be solidly in the black. Cost of Goods Sold is running way too high due to bad luck and bad judgment: Two floods, two thefts, and two write-offs of dead merchandise (greeting cards and magnets, gone forever at last).

At this time last year, Panther Vision’s third-generation Power Cap arrived, forcing me to discount my old 2-LED caps. This year, my old mainstay is drifting nowhere. The wind has gone out of kite sales, too. With no hit product driving business this year and no capapalooza, October’s prospects look dim. BuckyBalls are languishing so far; so many competitors are bidding up keywords so high (a buck a click? Come on) that I effectively can’t advertise them. Incidentally, some manufacturers and specialty retailers buy keywords at a loss to freeze competitors out; Looney Labs does that with their Fluxx games because they favor b&m stores over web retailers. You can't possibly make money paying $1 per click for a $15 product.

My comfortable lead over LY is almost gone and I have no confidence going into these critical last three months, but at least I’m still (barely) ahead of my 15% planned increase. There’s little I can do. My buying frenzy is over for now; I’m well-stocked on everything that ought to sell and my OTB is more than spent. Like, WAY more. Cash flow – including the money that I had squirreled away for a rainy day -- is $120 in the red right now with $1,000 in payroll taxes due in two weeks. Today I added about 100 new keywords to Google AdWords, deleted some badly overpriced ones, and raised my daily budget. I’m flogging the new Microsoft adCenter, too, but that won't amount to much until they finish digesting Yahoo next month.

Come on, shoppers, are you even listening to me? Another weak consumer confidence report implies that you’re not. Consumers won’t consume until the job market brightens and businesses won’t hire until demand picks up. I’ve already explained this: Somebody’s got to blink, and it’s not going to be the corporations.