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.

******************

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.