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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, January 14, 2011

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.

1 comment:

  1. This is just my personal view. If something doesnt work well enough, drastically change it. Right now your business model seems to be just getting you by, unless something drastic changes it will likely be the same next year around this time. Question is, are you going to be bring the change or you going to wait for it?

    I have changed my business plan and how i operate it on many many occasions. Sometimes make large changes, sometimes minor one, but always looking to make sure that it is significant change that move me in the right direction. Every year something changes in my business and up to this point it has been up.
    If i barely would be paying bills in my business i would sell it, leave it, or implement something drastic that would have to change how business is done. right now you say you barely making it, and if you remove your wife's effect, would you able to make a living? If the answer is no, then consider one of the 3 options. There are always alternatives.


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