Crunching April

April was a slightly better-than-average month. It finished a very satisfying 27% over April 2009. Unfortunately I’m not up against 2009, and April 2010 was an excellent month. Consequently I “bent the curve” (as the kids say) farther in the wrong direction.

April:

Total income: -29.3%
Total COGS: -32.8%
Payroll: +47.4%
Net Income (Profit): -66.8%


Year to Date:

Total income: -15.4%
Total COGS: -23.2%
Payroll: -6.1%
Net Income (Profit): -211.4%

I don't understand the weird jump in payroll. Excel shows my salary properly lagging LY. Sometimes I think Quickbooks is on drugs.

I tried to exploit Mothers Day by running some temporary alternate ads on Google and Bing. I changed my welcome message to reflect the “holiday,” implemented same-day shipping, and updated my News page daily. I announced a lot of new products in a newsletter with a Mothers Day subject line. The latest newsletter stats: 15 new subscribers brought the total to 422 emails sent. There were 5 bounces, 3 opt-outs, and 1 spam report -- wtf? It’s a 100% opt-in list! It set new lows with just 79 opens, 18 clicks, and 0 purchases. I’m guessing that the Mothers Day subject line suppressed interest. Mothers Day is useless unless you sell flowers or own a restaurant.

This is just more evidence that my newsletter is a waste of digital postage (and my time). Logic says I should kill it. But I have no other way of announcing new products. Yes, I do post them on Facebook, and yes, I do supposedly have 121 fans there. But I have no indication that any of them actually see my posts – no comments, no “likes”, no response to coupon offers. At least Constant Contact tracks opens and clicks. Facebook posts just go into the void.

Easter weekend brought an anemic Saturday and a shut-out Sunday. But we lose one random Sunday to Easter every spring, so that ought not to matter in the big scheme.

Cash flow is still my ball and chain. I covered my April Mastercard payment just yesterday, two days before it was due. The paycheck that I should’ve drawn today is postponed until Monday or Tuesday, which is an appropriate punishment for the brain fart that caused this money shortage. Needless to say, that smart phone that I was thinking about buying is on hold until I can break these shackles, probably in September.


I screwed up cash flow when I obliviously spent my payroll tax money on new products. None of that new stuff is selling. I was convinced that the Cool Baseball Necklace was a slam-dunk (err, I mean home run). Number sold to date: Two. I had planned to give those the Facebook ad treatment, but the vendor (who’s a scant 10 miles away from me) still has not entirely filled my tiny opening order from a month ago. So much for churning a small inventory frequently.

Against my better judgment, I reprised my Valentines Day strategy of running Facebook ads for Bottled Up jewelry; this time, I’ll pull the plug after one week (next Monday). Total expense so far: $45.11; Total clicks: 76; Total sales: 0. Statistically, I expect one sale per 50 clicks, so this is already a disappointment. I’ll never repeat this effort with that product.

For some bizarre reason, the mini-briefcase business card holder is blowing out of here right now. Maybe somebody somewhere linked to it, or maybe Google raised its page rank. This golden oldie (sku 16) has been a bestseller since Curio City opened. It's not my favorite product. Due to a historically high defect rate, I have to open and inspect every single piece before I ship it. Customers constantly inquire about imprinting, which of course I don’t do. Its vendor requires a minimum order of 200 pieces costing nearly $1,000 – half a month’s open-to-buy -- and they're out of stock as often as not. Their outrageous shipping prices require me to game their semi-regular free-shipping offers, meaning I have to order at their convenience, not mine. And every time I do reorder, they start harassing me with followup marketing phone calls and emails. I’ve never advertised it, yet I’ve sold 660 of them (worth $6,600). And now I need another damned reorder.

I shouldn’t bitch about something that sells without any effort from me. Advertising costs are way up across the board. I stumbled across a spreadsheet view in AdWords that lets me set custom landing page URLs per keyword. So instead of just advertising “3D building puzzles” and dumping everyone on the Puzzles category page, I can use specific keywords like “Big ben puzzle” and send them directly to the product page while still using a catchall ad. The resulting profusion of new, low-volume keywords will raise my costs somewhat, but theoretically these cheaper, narrower keywords should have better conversion rates. Generic “ear buds” keywords, for example, are all priced at 40 cents and up (which is way too much for a $12 product), whereas specifics like “gem ear buds” can be had for as little as 12 cents. To help offset the new costs, I zapped a few of my keywords with the worst conversion costs ($15 or more per sale).

I don’t use Twitter, but I did open an account when that was all the rage and set it up to automatically twit my Facebook posts (including blog entries). Somehow I’ve attracted 10 “followers.” I found out through a new Constant Contact message aggregator called Nutshell that a blog called Preppy Picks featured the Dove of Peace kite as a spring product pick for preppy children. Google Analytics says it hasn’t produced a single visit, but links are always valuable in and of themselves, and so I hereby reciprocate.

On the bright side, May’s targets look attainable. On the dark side, May is the first month of the long summer sleep. There just aren’t enough dollars on the table between now and September to matter very much.

I’ve got no more blog topics “on the hook” and I’m sick of wringing my hands over shitty sales, so I won’t be posting again until I have good news or something interesting to say.

Taxing the Golden Goose

With state budgets still wracked by the Great Decline, Massachusetts lawmakers are now entertaining bricks & mortar (b&m) retailers’ demands to capture sales tax from Internet purchases.

Curio City already collects sales tax from Massholes; last year we fattened the state’s coffers by $106. The current proposal targets out-of-state behemoths like Amazon and Overstock by defining affiliates as being an in-state presence. (If you have an Amazon link on your website and you collect a commission when a buyer clicks through, you’re an affiliate.)

Theoretically, that means that the big online retailers would have to collect sales tax from Massholes. In reality, Amazon simply curtails its affiliate programs when states enact this boneheaded legislation. The orphaned affiliates have to cope with the lost revenue. If it was core to their business strategy, some affiliates move to a friendlier state. Either way, the state loses revenue from the businesses that shrink or leave, and does not collect one dime of additional sales tax. Everybody loses except the politicians who score points with the local b&m retail industry.

It would actually benefit Curio City to a tiny degree if the megasites really did start collecting sales tax in order to preserve their affiliate programs. But the odds of that happening are approximately zero.

Far more worrisome is a national effort to kill the goose that lays the golden egg. The Supreme Court’s ruling that states can’t tax sellers outside their borders was fine in 1992, when it only affected mail-order catalogs and home shopping channels. It remained fine when online retail was a curiosity. It’s less fine now that big money is at stake ($23 billion in uncaptured taxes by one estimate, but only $4 billion by another) while state budgets are in shambles. Internet sales won’t eclipse b&m for some years yet, but they’re growing much faster. The states want a piece of the action and b&m retailers (understandably) want to stave off their creeping obsolescence for as long as possible.

Some years ago a coalition of states banded together to work out a uniform sales tax collection policy administered by a central collection agent. Rather than face thousands of jurisdictions with varying rates and exemptions, retailers would simply track sales by state and send a lump sum to this agency. Presumably the simplified collection mechanism circumvents the Supremes’ chief objection and paves the way for an internet sales tax to be ruled constitutional. Once this structure is ironed out, the states will ask Congress to open the spigots of billions of new tax dollars. About half of the states are playing along with this, so it’s got to be taken seriously.

OK, so what? I’d just be collecting and remitting tax from consumers, not paying it myself. Americans’ overall tax bills are at a historic low and all levels of government are hemorrhaging money. All serious economists agree that taxes need to go up. Isn’t it better to enforce existing consumption taxes than to raise income taxes? Why should I help shoppers dodge taxes that they already owe?

First, business don’t exist to be tax collectors (or insurance providers either, for that matter, but that’s a whole different rant). As a Massachusetts-based business, I don’t have a problem with collecting tax from my fellow Massholes and turning it over to my own state’s government. Curio City indirectly benefits from state services. I do have a problem with being a tax collector for 49 other states. But that’s just a philosophical objection.

Second – and more practically – being tax exempt partially offsets the competitive disadvantage of shipping fees. I’m not Amazon. Businesses that ship fewer than 100,000 packages a year – nearly 100 times my size -- have to pay retail for postage. Shipping is my second-largest expense item (behind payroll), running 16% of gross sales. I obviously can’t just abolish shipping fees. Customers accept them because they’re saving time and money for gasoline, parking, and sales tax. But how many people are willing to pay both tax and shipping? Very few, if my small number of Masshole customers is an indicator. If all online retailers start charging sales tax, a lot of shoppers will only buy from the free freight megasites.

Third, I expect that the mechanics of compliance would be expensive and time-consuming. I’d need new versions of Sunshop and Quickbooks just for starters. One can only hope that very small companies like mine would remain exempt.

Kabuki

When no other topic suggests itself, I dip into politics. Brace yourself; I'll keep it short.

The recent budget showdown was a loss in that right-wing extremists defined the debate, but a victory in that they got less than they demanded. The cuts that passed yesterday are unlikely to measurably affect the economy or my business, so there’s nothing more to say about that here. It sucks to be poor and powerless.

Bigger battles loom.

I just passed my 54th birthday. I’ll be eligible for Medicare in 4,015 days unless the Republicans realize their dream of ending the Great Society for everyone born in 1957 or later. I don’t think that they really have the power to sell my shot at retirement for more millionaire tax cuts, but since they drew a line that runs right through me I’m acutely interested in how it turns out. But the 2012 budget is still months away and both parties are just making opening gambits, so enough on that.

Raising the debt ceiling is the next crisis. This political kabuki will turn into seppuku if the Republicans let the US default on its debt, as their wingnuts would like. All economists agree that doing so would provoke an epic economic debacle, so that certainly concerns Curio City – and everybody else.

I predict that they will lay down a list of outrageous demands, and that Obama will accede to half of them at the 11th hour. You read it first in Curious Business.

Smart Phones for Dumb People

Anne dragged me kicking and screaming into the 21st century this week -- or at least its showroom. Verizon Wireless stores sell the 21st century in the form of pocket computers that can access the Internet, take photographs and movies, play music, show TV programs, play lame little games, and (incidentally) make telephone calls. For as little as $50 (or $150 with a “protection plan”) plus another $50 in must-have accessories plus another $29 per month for at least two years, I too could live in the 21st century.

I’m pretty sure I won’t like it there. It’s expensive, complicated, conservative, grim, and joyless. Everybody has tattoos.

But the future does at least have dazzling entertainment gadgets and I really do need a new telephone. Getting an ordinary “dumb” phone would shame my supposedly high-tech business. I need to learn about mobile computing whether I care about it or not. So now I’m weighing the advantages and disadvantages of various Android phones. I’m likely to settle on either the HTC Incredible or the Droid X.

Quarterly tax deposits just drained almost $1,000 that I had already spent on inventory because I plumb forgot that my payroll taxes were due. At the moment I’ve got $1,800 on hand to cover $3,800 in obligations. That puts the brakes on 11 reorders that I need immediately and postpones the telephone decision.
If customers obligingly cough up the expected $2,000 in the next two weeks I’ll be time traveling into the future before the month is out.

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Minor milestone: It took nearly five years to make my first 5,000 sales at the end of April 2010. At that time I set a goal of reaching 10,000 before 2012 ends. This week I passed number 6,666. And yes, I filled every one of those boxes myself.

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It’s still unclear at this writing if the Republicans are going to shut down the federal government tonight. If they don’t back down from their extremist demands by midnight (and if the spineless Democrats don’t roll over as usual), 800,000 federal workers will be lose their paychecks for an unknown time. If the teabaggers get all of their fantasy cuts, 125,000 civil servants will lose their jobs permanently. Either outcome is bad for business.

Blowing Off Steam

One night a few weeks ago over dinner and drinks I filled in my wife (who doesn’t read my blog) on just how badly Curio City is doing. My bottled up frustration and self-doubt unexpectedly came uncorked. I don’t ordinarily allow emotions into my life or display weakness, but sometimes I have to release steam to keep from blowing up my containment building. Unfortunately, steam can be radioactive. Anne takes my company’s failures personally due to foregone income and wasted lifespan, and I don’t have anyone else to talk to.

After a heated discussion I decided to give Curio City one more Christmas. If I don’t achieve my modest 10% year-over-year growth plan, I’ll be looking for a way out in 2012. I won’t dwell on that possibility this early in the year, but it does give the monthly numbers more urgency.


March:

Total income: +38.8%
Total COGS: +17.3%
Payroll: +67.7%
Net Income (Profit): +136.1%


Year to Date:

Total income: -12.4%
Total COGS: -22.1%
Payroll: -2.9%
Net Income (Profit): -23.9%

March was a weird month. Eight really good days hid a lot of really poor ones. The annual numbers improved, but there’s still a big gulf between the -12.4% that I’m at now and the +10% that I need by year’s end. I’m $2,800 – a slow month’s entire sales -- below plan; basically, I need an extra July this year.

The percentage drop in YTD Net Income only represents $156 and my new “Internet access” expense item accounts for $90 of that. Curio City’s loss is our gain since that payment goes directly to our household budget.

I lost last Sunday entirely when my server went down and Mocha took all day to fix it.

Last April was so strong that I’m likely to lose ground again this month. Well, goals are supposed to be challenging, right? News flash: Life is a struggle that we all lose in the end.

I could shave expenses a little by killing my email newsletter. Three or four of the 400+ emails that go out each time will bounce because people mistype their email addresses or die or something. A couple more people will unsubscribe (or more than a couple when I refer to a “controversial” product like Pot Holders or any smoking accessory). Only 85-100 of my 400 subscribers will actually open the email, and they’ll only click 15-20 times. Those clicks only ever produce a sale once every three or four issues. (Those percentages are better than the industry average, btw.) For this I’m paying $18 per month, or a buck per click.

Is there any value in simply putting my name in customers’ mailboxes each month? Probably. Is it worth $18? Dubious.

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The Boston Gift Show was not a complete loss: one of my existing vendors gave me permission to return $57 worth of dead stock, which justified the $15 it cost me to attend. I didn’t find any unexpected new products. They ought to rename it the Boston Jewelry & Souvenir Show. The amount of dreck that our economy still generates is truly impressive.