Cushioning the Great Decline

The best thing about May is that it’s over. I got the bloodbath that I expected, but I’m sanguine. Last May was my best non-Christmas week ever. May 2013 came in a little over the more realistic benchmark of May 2011…and that’s very good, in light of the death of my mainstay Panther Vision caps. I’d be in serious guano if it weren’t for bird kites.

May:

Total income: -33.8%
Total COGS: -34.5%
Payroll: -8.3%

Marketing: -22.9%
Net Income (Profit): -92.9% (-$666)

Year to Date: 

Total income: -21.4%
Total COGS: -28.9%
Payroll: -13.8%

Marketing: -25.8%
Net Income (Profit): -9.1% (-$121)

Wow, not a single black number in the lot. Does all that red ink hide any good news? YTD marketing and COGS both fell by more than income did, and my profit is only down by $121 on a 21% sales decline. So I’m successfully managing the decline, which is the best that ordinary Americans can expect these days. The worst year-over-year results of 2013 should now be behind me. Sales crashed in July 2012 and the ensuing slump didn’t ease up until December, so I might be able to whittle down the deficit a little over the second half of the year. 

June never amounts to anything, though. Last June was thoroughly average, so I’ll be happy with mediocrity this year, too.

Half-Baked Ideas

No post last week, and only a quick one today, because I’m focused on gardening. I’ve been struggling against off-and-on rain to get my vegetables into the ground by Memorial Day. Customers are cooperating by delivering what could end up being the worst week since July 2011 (my gross pay for this week so far comes to $72). However, I’m too compulsive to skip two blog entries in a row, so you get a few half-baked thoughts today. 
 
Thanks to Dove kites, Pentecost is a much bigger holiday than Mothers Day. “What is Pentecost?” you ask. Well, it’s got something to do with Easter and doves and it moves around the calendar from year to year. I should try to remember to pay attention to it next year. 

I should use the Facebook more often, because that’s the only marketing that ever goes anywhere anymore. Posting a decent new product (in this case, the Red Cup Wine Glasses) plus a discount coupon draws some interest and sometimes even a sale or two. ‘Course, those are discounted sales, but hey, they beat storing the stuff in my cellar at full price until Christmas. 

How many Facebook posts would constitute overdoing it and turning people off? Most people don’t hate shopping as much as I do, so maybe I could post as often as twice a week. The Facebook says that I “reached” 140 people a couple of weeks ago – how meaningful is that? Are those unique users or repeat views?

I also sent out my first email newsletter in three months: 367 sent, 3 bounces, 4 opt-outs, 1 spam report; 103 opens, 16 clicks, 0 sales. Opt-outs always puzzle me; you opted in to the mailing list and got a coupon plus new product announcements…what did you think you were signing up for? 

Anyway, I paid Constant Contact $48 at $16 per month to send out this newsletter. A 28% open rate is considered excellent and a 15% click rate isn’t too bad. But I effectively paid $3 per click and got nothing in return. Is it worth spending that $16 every month just to remind people that I exist by appearing in their inbox? (I know that young people shun email, but my customers are mostly aged 40-65 and many of them shun the Facebook.) If making periodic contact is worthwhile despite the lack of response, should I do it more often?  Or should I forget about email entirely and save a little money?

This is not the first time I’ve asked that question, nor is it likely to be the first time I’ll answer it. Someday I should. Indecision costs me $16 per month.

Taxing the Internet

The Senate recently brought the prospect of taxing Internet sales a step closer to reality. You probably know that you’re supposed to remit sales tax for your online purchases when you file your state return. Some tiny number of people really does that. But most of us consider our Internet purchases to be tax-free as long as the seller isn’t located in our state. I dutifully collect $10 or $20 a month from Massachusetts residents, but everybody else gets off scot-free.   

Traditional bricks-and-mortar (b&m) stores bitch about this situation more loudly as more and more retail sales move online with each passing year – not because we’re a nation of tea party tax evaders, but because shopping online is always more convenient, usually cheaper, and more secure than traipsing around from store to store carrying money or handing out credit cards. Traditional retailers think that they can delay their inevitable decline if online sellers have to give up their most obvious price advantage.

Seeing the tens of billions of potential tax dollars left in consumers’ wallets each year, many states sided with the retailers whining about a “level playing field.” Those retailers, after all, are their constituents, whereas Internet shoppers are anonymous people “out there”. Plus hey, free money!

The Senate bill enables states to collect sales tax on all purchases made by their residents. Each state has to provide retailers with software that automates collection, and the state is liable for any lawsuits or challenges relating to sales tax collection errors (every state has different rules about exemptions, for example). Retailers will remit just one payment per participating state, leaving it up to the state to divide it among its internal jurisdictions. Most importantly, companies with less than $1 million in annual sales are exempt.  

Will the House go along? On one hand, government-hating zealots who have sworn to oppose all tax increases of any kind for all time still have enough power to gum up the works. OTOH, the law would merely enforce the collection of existing taxes, not impose new ones; red states face the same budget and b&m lobbying pressures as everybody else; and the reddest states could opt out to preserve their ideological purity. So some version of an Internet sales tax might squeak through the Chamber of No.

Consumers, from what I’ve seen, seem resigned. They’ve enjoyed the tax-free loophole for decades, but the party is over.

So how does your favorite online retailer – other than Amazon, I mean – feel about all this?

As a company that would be thrilled to ever reach even 10% of that $1 million threshold, Curio City will remain tax-free. Big online retailers currently enjoy bulk shipping rates that are far, far lower than what you and I pay. These sweetheart rates enable them to offer free shipping. Outbound shipping eats more than 15% of my gross sales; if I didn’t charge for it I’d die quickly. Forcing the big players to tack sales tax onto your purchases gives Curio City a small advantage – or at least helps to offset my biggest disadvantage. Professionally, the Internet tax won’t harm me and might even help me a little bit. 

My own meager disposable income goes mostly to beer, which is already tax-exempt (as are life’s other necessities – food, clothing, and medicine). Restaurant meals, my biggest indulgence, obviously aren’t affected by the Internet tax. I don’t spend more than a couple hundred bucks a year on luxuries. Even though I do all of that shopping online, the tax hit to my wallet would be negligible. So I have no personal objection.  

Anything that helps to hold down other state taxes or improve services is a good thing when it comes out of other people’s pockets. As a low-income almost-senior citizen with no kids, I’m going to expect more government services in my old age than most people do. Philosophically, I support higher revenue to strengthen government programs if it doesn’t stifle the real driver of tax revenues: economic growth. And because online sales are still a small percentage of overall retail activity, this tax probably won’t put a dent in consumer spending.

I'm going to gloss over the questions of whether sales taxes are progressive or regressive and how the law affects states without a sales tax. I'm also unsure if this law would supersede my existing requirement to collect tax from Massholes. Those arguments seem tangential to me. 

Taxing Internet sales could be good for Curio City and for state services with negligible impact on my personal finances or on the economy. Therefore, Curio City endorses the Internet sales tax proposal as long as that small business exemption is in place. It would put me out of business overnight otherwise.  

Revising History

The last two days of fiscal April were almost strong enough to turn the month black. Being anal about numbers, and having nothing else to post today, I therefore offer this revision to last week's numbers. 

April:

Total income: -2.4%
Total COGS: +3.6%
Payroll: +32.8%

Marketing: -11.5%
Net Income (Profit): -72.7% (-$276)

Year to Date: 

Total income: -16.9%
Total COGS: -24.1%
Payroll: -15%

Marketing: -26.9%
Net Income (Profit): +25.9% (+$529)

The expected May bloodbath is underway, though. May 2012 was my strongest non-Christmas month ever, whereas the first week of this May is on track to be the worst of the year. That’s been the pattern all year – one average-to-good week alternates with one poor week, keeping all of my paychecks anemic.