Heartbreaker

Business died off immediately after I made last week’s celebratory post. Sales fell from nine on Thursday to two on Friday and one on Saturday. Switchables kicked off a surprisingly nice rally on Monday and the month ended up just a little below LY – which sucks, obviously, but is better than January’s stumbling start had led me to expect. A few good sales in the next day and a half could still push it over the hump, relative to LY. Plan is just a pipe dream.

January (and YTD):

Total income: -3.6%
Total COGS: -16.4%
Payroll: -18.2%
Net Income (Profit): +134.4%

We like to see the Cost of Goods Sold fall farther than sales do (or, better, rise by less), but that’s only because I didn’t write off $250 worth of dead merchandise this January as I did last year. The same thing accounts for the big jump in profit. December’s lame sales depressed January’s first paycheck and dragged payroll down (payroll should track total income for the rest of the year). The jump in net income would be wonderful if it represented more than $195.

February is going to bomb. Last February’s first Monday was my second-best day of all time at $2,100; that week is the tallest non-Christmas spike on my sales graph. For perspective, the entire month of February ’09 brought in just $2,800. Unless someone miraculously delivers a month’s worth of business in a single day again this year, I am sure to take a huge hit.

On the bright side, that’s my last major hurdle for 2011. Although my overall targets remain very challenging through August, there are no more huge spikes ahead. Come March, the healing can begin.

Two things prevent me from doing much to flog sales right now. First: I can’t buy any new products until I scrape together another $1,100 for tax preparation and payments. Second: Panther Vision is going to upend the lighted cap market again. I don’t have details yet, but a substantial fraction of my total inventory will soon become outdated, and the price of admission to their new lineup is high enough to freeze everything else out.

Ideally, this will play out like November-December 2010 did: Excitement over the new product will revive full-price sales while bargain hunters snap up the slightly discounted old product. It will be costly, and without Christmas to drive traffic it might not happen. But if it works March could be good.

So in the meantime I just putter around and wait. I’m stacking up new product orders against the day that money becomes available. I temporarily killed golf ball sales by moving them to a top-level category (if you’re going to yank the search engine rankings out from under a warm-weather product, February’s the time to do it). I created my Rock n Roll theme category, for what that’s worth. I filed my 940 and created my W-2. After losing money on shipping four out of six orders last weekend, I finally made good my threat to withdraw the Parcel Post option. Turnkey released new USPS modules and I restored international shipping (grumble). I uploaded my company file to my CPA and made some little accounting tweaks that he required. I might take some markdowns next week, since the month is doomed anyway…might as well consolidate the pain.

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My Valentines Day jewelry gambit flopped. I expanded some existing lines, added the royal ruby glass, cut a few prices, and then sent a newsletter with a 10% off coupon to 400 people. Only 82 of them even opened the email, and they only clicked 28 times. One friend bought a necklace at a generous discount. Nobody else used the coupon code at all. Three Facebook ads delivered 220 clicks last week costing $75. I doubled my Adwords bids and wrote two holiday-specific ads with no results (barely one click a day). The same treatment at Microsoft Adcenter (Bing & Yahoo) brought even less. Altogether, I spent about $80 for 230 clicks and no sales. I expected eight sales worth $400-450 at my normal 3.5% conversion rate. Even with Facebook’s low-quality traffic dragging conversions down to 1% I should have had two or three sales and recouped the cost of the ads. I wasn’t expecting to take a loss on the effort.

As idiotic as this sounds, I’m going to keep it going until the Valentines sales crest next week. Maybe I just started too early. I hate burning money, but I don’t have anything else going on.

I don’t know if Bottled Up jewelry is a bad fit for Curio City, if it’s just overpriced, or if my marketing sucks. Romantic love is not something that I understand. Valentines Day is supposed to make young men buy young women commercial aphrodisiacs like chocolates, flowers, and naughty underwear. I think that jewelry should fall into that seductive class, but my jewelry customers are always women buying for themselves. I will probably try this same strategy once more for Mothers Day (another “holiday” for which I have little to offer) before I draw conclusions. But jewelry has been weak for me ever since I lost typewriter key jewelry years ago. I persist because it costs me nothing beyond advertising and because I sell just enough to whet my appetite for more.

Switch On, Switch Off

This week started inauspiciously. On Sunday morning both my store and my admin site were replaced by a blank white page with the message “There seems to have been a slight problem with the database. Please contact the server admin to report this problem.”

Fabulous. The same thing happened last Sunday, too. Mocha didn’t restore my site until mid-afternoon. Losing half a day presaged yet another failed week.
So I’m especially delighted that this week’s sales – propelled by Switchables, two hefty lighted cap orders, and an unexpected large bird kite order (to someone in Minnesota…in January) – broke my losing streak. I not only trounced an anemic weekly plan, but recouped January’s entire shortfall versus LY. A slightly better-than-average final week would save this month versus LY. Making plan isn’t even out of the question. That would be nice, because February is doomed to be an epic fail. But let's leave that for next week.

Switchables damage claims are surging faster than sales. The company recently weakened their paperboard packaging to make a prettier retail display. Now their boxes are easily crushed. So far Switchables has been very good about replacing damaged items without requiring their return, meaning that I don’t have to ask (and reimburse) my customers to mail me broken glass. But the breakage rate is so high that I need to replace the bubble envelopes I’ve used for the past five years with something sturdier (and heavier and more expensive). The flimsy packaging shouldn’t affect bricks-and-mortar stores very much, so I doubt that they’ll revert to better packaging anytime soon.

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The USPS rate lookup bug that I complained of last week has effectively killed international sales. When someone in Spain paid $12.55 for shipping that actually costs $28 I learned that the lookup routine is only finding flat-rate charges. Although people can theoretically still pay UPS’s bloated international rates – and one Canadian has already done so – I had to pull the plug on USPS service, probably until USPS releases developer support in May. Of course, I’ve been cool toward foreign business for years anyway, so although I don’t like having the decision taken away from me, I’m not entirely unhappy with the outcome. I should probably deactivate the UPS module and kill it once and for all. Still, I hesitate to take that step.

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I had another Random Act of Media: Some blog somewhere picked up the Polluted drinking glasses last Friday and somebody else must have twitted it or something. This product had previously sold only one full-priced unit in two years, plus a single 48-piece special order at a deep discount. On that one day 3,115 people came looking for the seven units I had in stock. The aborted Spanish sale that I mentioned above locked down two of those units. By the time I cleared that up the wave had passed, and I still have one piece left.

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Is taking on a new monthly bill ever good news? Curio City is now paying $45 a month for Internet access -- one-third of our monthly BELD bill (BELD = Braintree Electric Light Department, the nonprofit, taxpayer-owned municipal utility that provides our cable TV and Internet service.) I felt sleazy shifting a personal bill to my company until I found out that BELD’s rate for business internet alone is $65. So our household budget gets some welcome relief and Curio City gets below-market Internet – everybody wins. Except me, of course, since that new $540 annual expense comes off my bottom line.

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In the Miracles do Happen department: UPS paid my claim for a lost 2nd Day Air package. This is miraculous because I had no proof of ever putting the package into the stream, other than printing a label. Should I start a "Reasons not to hate UPS" tag with this post? Nah. Where's the fun in that?

It's the Products, Stupid

Five years of trial and error have finally defined the characteristics of a successful Curio City product:

• unusual, useful and/or fun and/or creative
• of reliable quality
• dollar-dense but not overpriced
• easy and cheap to ship; not too fragile
• not prone to mechanical breakdown or electrical failure.

Rare indeed is the product that fits all of those criteria. Whisky Stones and lighted caps – both of them suggested to me by customers – are my best examples. Buckyballs didn’t take off because they were too widely available. I must resist buying tangential things that dilute my brand even though they'll sell a few units, and I need to shun things that are too ubiquitous even if their sales potential seems good.

Too much cheap stuff: “Dollar dense” means that my typical small box should be worth at least $20, and ideally closer to $50. Too many of my packages are scarcely worth $10. Cheap little things like Crime Scene Bandages and pirate flags are supposed to be impulse buys that people will add to larger orders. Shipping charges approaching 50% of their price should discourage people from buying those items alone. But it’s surprising how many people will pay $2.50 to ship a $5 product. It takes just as much time and effort to fulfill a $5 order as it does a $20 order. Such sales are better than nothing when business is slow, but they’re a maddening distraction in good times. Now that the Bush Recession is finally moving off and taking Americans’ newfound frugality with it, I have little reason to carry anything worth less than $10.

Not enough cheap stuff: Do I contradict myself? Very well then I contradict myself. Some of my most reliable bestsellers are cheap imports that I buy from wholesalers. Products like the Mini Briefcase (600 sold) and the 5-LED Cap Light (1,400 sold) are pure gold. Similar products are definitely hit-or-miss, but the hits tend to be really big, and they carry generous markups that further my profitability goal. I should spend more time shopping my second-tier vendors to find such novelties…never forgetting the cautionary tale of the USB Ionizer (exactly one sold at a miserable 20% markup).

Product lines vs. one-offs: A good product line is a cash cow even when none of its components sell dramatically. The best of my novelty golf balls has sold only 132 units, yet the product line has moved nearly 1,000 sets altogether (at $10 each). The best bird kite has only sold 47 pieces, yet I’ve shipped 360 kites altogether at $25 and $40 price points. The #1 Switchables, with 450 sales, is the basic $5 light fixture, but those support a line that’s moved 1,100 pieces worth $10-24 each. An unsuccessful line, OTOH, can tie up a lot of inventory dollars. Pursehooks were extremely hot for about a year until cheap imitations ruined that market, stranding me with $800 worth. 3D Puzzles haven't reached their potential, although I have some ideas why and haven’t given up on them yet). I really wish the Fluxx games would do better, but because their publisher favors bricks-and-mortar game stores over online retailers their marketing actually works against me. (I keep them because I want a Games department and because I like Fluxx; they humor me because my money is green). Keyboard stickers are an interesting case: they carry a good markup and sell pretty well, but I’ve had several complaints about their quality, and they are not nearly dollar-dense enough. (Of course, at times like the present when nothing is selling, I’m glad to have them).

All of this analysis is useless unless cash starts flowing again. So far 2011 is running at less than 50% of LY’s unusually strong January. Depositing my payroll taxes drained Curio City’s coffers this week. I have to scrape up another $1,000 to pay my corporate excise tax and hire my CPA to prepare the tax returns and I have $2,700 in revolving credit card charges, against a total of $4,100 on hand from all sources (including reserves). Subtract my next paycheck and I’m down to less than $100 in liquidity. More businesses die from miscalculating cash flow than from any other cause, and so I cannot buy the new products that tease me from my growing pile of catalogs. I absolutely will not invest any more of my own money in this business.



Advertising costs are still running at Christmas-season levels. Yesterday I spent $45 at Google alone; $24 of that bought 100 clicks on keyboard sticker keywords. Total sales yesterday? $35. Keyboard stickers contributed $16 of that. For perspective, advertising is budgeted at 9.5% of net sales. I reduced my daily AdWords spending limit and cut some bids today, but reining in advertising is ultimately self-defeating.

The coup de grace, though, is coming from Panther Vision (which is fitting, I suppose). Today I received $1,500 worth of caps that should have carried me into summer. Instead they will become obsolete in just a few weeks, and I have no money to invest in their successors. I’m grateful to the person who tipped me off that this is coming – Panther sure didn’t; they want to clear out their old product. But the tip came too late to preserve that big pool of cash, and now the pipeline is dry.

Pulling the plug now to save $1,000 on taxes has crossed my mind, but that’s just my old reliable seasonal depression talking. I can only keep on slogging. I have no alternatives.

Ideas Great and Small

I felt hopeful on the first day of my new accounting year. Really, I did. An unexpected Switchables spurt had put some momentum into the weekend and Sunday’s sales plan was a modest $122. It sure would be nice to start 2011 in the plus column.

Sunday was also the first day of the USPS’s new rate structure. I discovered halfway through the afternoon that Sunshop’s postal rate lookup function wasn’t functioning. Shoppers could only access UPS’s always-overpriced rates. I spent the rest of the day slapping together a rate table to replace real-time shipping, but by the time I finished the momentum had fizzled. Sunday finished with one $5 sale.

Happy New Year indeed.

Monday brought more of the same. It turned out that shopping carts all over the Internet were blindsided because the USPS never released new API specs or development docs. Turnkey dodged a “Reasons to hate” tag this week by emailing me fixed files on Monday night. Everything was hunky-dory again by Tuesday morning…and then a refund for a missing shipment dragged my total sales for the year down to $40 out of a planned $427. Total salary earned in three days: $8.

The week was doomed by the time normality returned on Wednesday. Repeat after me: This is a blip. This is not an omen. Let’s move along.

I wonder if I’ve passed the zenith of my current glide path. The ideas that follow should boost me a little higher on this trajectory, but I might need a new course entirely. Of course if I knew of a better route, I’d already be on it. That subject will occasion a whole lot of future hand-wringing. If I can hammer out a reasonable, carefully calculated new direction in the coming months, I will try to overcome my natural risk aversion and my fear of change and my pathological abhorrence of debt. After all, I did beat the first two handicaps to get as far as I have now.


Big Ideas

Facelift: Choose a new Sunshop template, play with the layout and graphics, and pay my developer to customize it for me. Brad is willing and able. I’d like a fresh, clean new look without departing so far from the standard template that future version upgrades get overcomplicated. This is likely to be 2011’s biggest investment.

More video: I need to buy one of those little Flip cameras so that I can post simple product demos on Youtube. The videos that I embedded in my bird kite pages made a huge difference in sales, and I can think of a few products that would benefit from demonstrations. This is one investment that's sure to pay for itself.

Mobile computing: “Smart phones” are supposedly where it’s at. I’ve never used one and I don’t really want one, but my flip phone is more than five years old and its second battery is shot. It’s overdue for replacement and I need to learn how the new gadgets work. Curio City will pay for both the device and the data plan, so I’m eyeing one of those fancy Androids, or possibly the new Windows 7 phone that’s getting such rave reviews. They’re apparently the best phones on the market today, but I’m not sure that Verizon has them yet.

Marketing Ideas

Random Acts of Media: 2006 had the USB Fan’s airline magazine appearance. 2008 had the Recycled Mobo Christmas Tree in the NY Times gift guide. 2009 had Whisky Stones in the Boston Globe (pure coincidence). 2010 had…nothing. I need to make something like that happen this year. If I can’t pull off an al-Qaeda scale spectacular, maybe I can at least manage a CIA-style hit or two. Anne knows of a company that will distribute PR releases to their list for as little as $80…I will probably start there.

SEO: This has probably been on my list every year; every year I back down. It’s expensive and there are a lot of fly-by-night operators. Sunshop’s template construction limits my ability to make technical (non-content) changes without paying a developer and complicating future version upgrades. And the payoff for proper SEO is gradual and long-term, not quick and dramatic. Despite my reservations, I could still be talked into it by somebody with good credentials and a solid offer.

Reevaluate newsletters. They seldom generate enough sales to cover my Constant Contact subscription and they take a lot of time. I need to rethink how I use them, possibly integrating them more closely with Facebook. My blog and FB work together to drive a good deal of traffic, but my newsletter usually lands with a thud.

Further Exploit Facebook: I shut down my FB ads after Christmas. They were effective but expensive. I’m sure I can get more bang for the buck based on what I learned – starting with Valentines Day. FB surpassed Google as the Internet's most-visited site last month, and its users cheerfully sort themselves into nicely targeted marketing demographics.

Start using LinkedIn. A few people have contacted me that way, so I ought to fill in my bare-bones account there.

Financial Ideas

Focus on Profitability: I need to avoid whittling away the bottom line while I try to pump up the top line. Most of what I’m talking about in this post costs money and reduces net income. I could be a little less cavalier about small expenses, I suppose, but I’m already a tightwad.

Carry More Weight: It’s time for Kraken Enterprises to pay us for Internet access and landline phone service, which we only keep for the Fax capability. If 2/3 of our BELD bill goes for those services, Curio City ought to pay 1/3 of that amount (Anne’s business already deducts a portion of that). Doing this will reduce our household budget’s monthly deficit. Of course, it directly contradicts the profitability goal above. But paying household bills with pre-tax dollars is just a good idea.

Give myself another raise? I would eventually like payroll to reach 25% of net sales (it's currently 20%). If I’m meeting my 10% sales plan in July I’ll bump myself up 0.25%. If I make it for the year, I’ll take another 0.25% next January. This, too, comes off the bottom line…but I'm OK with money going into my pocket.

Insurance? This could be a huge drag on the bottom line, but being without it is risky. One frivolous lawsuit or big casualty loss would destroy me. I have to find a way to investigate the cost without tipping off my agent that I’ve been doing it for five years already. This being a home business, it must mesh with our homeowner’s insurance somehow. If it runs $200 a month it will wipe out my annual profit.

Picayune Ideas

Speaking of shipping: The latest USPS rate hike widened the gap between Priority Mail and Parcel Post rates. Since I can’t implement my preferred solution, I will either have to discontinue Parcel Post or actually start shipping that way – probably the former. Keeping fees collected higher than postage purchased is probably the easiest way to improve the bottom line, but ending the cheapest postage rates will drive some business away.

Categorize: Turn golf balls into a top-level category, get rid of travel. Revisit category names in general and discontinue the smallest ones.

Add “Light source sold separately” text to all Switchables photos. My product descriptions make that crystal clear, but many customers don’t read them, and I’m sick of taking returns from the confused. (See “Concentrate on profitability”)

Try to cash in on Valentines Day by putting some effort into jewelry, my only pertinent category. It will probably flop but it’s worth trying. I also need to milk Mothers Day and Fathers Day somehow.

Write something off. I wanted to do this immediately after New Years, but now I’m waiting to see if business is going to come back. The object is to close out one or more defunct categories, and/or reduce the bulk in my cellar.

Create a Rock n Roll subcategory under Themes.

Purge the Constant Contact list again; it is getting near the 500 threshold that raises my monthly charge. Purge old customer accounts that haven’t seen any activity in 3+ years. Should I purge old orders, too? My database still has every transaction going back to November 2005, and sentimentality is the only reason to keep it. I wonder if shrinking the database would have any benefit on site speed.

Polish the new shipping table so that I’m ready the next time rate lookups go offline. The current table’s numbers were pulled out of thin air.

Next week’s post will be about product focus, which nearly took over this post before I peeled it off.