Welcome to Curious Business
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.
Friday, April 10, 2015
Bobbing the Long Tail
An old retail chestnut says that 80% of your sales come from 20% of your merchandise. That's the "short head." The underperforming 80% is called the "long tail." Most of Curio City's sales come from bird kites, Switchables, and lighted caps, with honorable mention going to golf balls in the summer and Metal Earth during the Christmas season. Pretty much everything else makes up the long tail.
That usually consists of products that either failed to achieve stardom or unexpectedly fell from grace after a rock-star start (like purse hooks and microwave bags). But sometimes I intentionally fill the tail. For example, nothing in my kitchen or office categories has bestseller potential, but those departments pull their weight if I fill them with enough products. I typically bring in six pieces of something and break even if I sell three of them at full retail. Things that succeed might come back next Christmas, or they might be one-shot wonders. Things that disappoint gradually get marked down to cost or lower. This is where the tail starts to drag.
Problems arise when the tail gets too long. After nearly 10 years in business, my cellar is full of miscalculations that won't sell at any price. Thousands of dollars are locked up in dead merchandise. I write off a few hundred bucks worth of the worst dogs each year to free up space and streamline my store, but that doesn't liberate those dollars; in fact, it's like setting them afire. The only dubious financial benefit is to reduce my profit, and hence the income tax that I personally owe on my K-1 income.
It makes me happy, then, when people buy dead products. Even if they only pay a fraction of the original cost, they're freeing up a few bucks that I would have otherwise had to burn someday.
That happened multiple times last week. I unexpectedly sold maybe $50 worth of stuff that I'd given up on completely. For example, I had sold only one set of Salt + Power in five years; this week I finally sold a second one (at cost). Same deal with Lit! candles, although those are below cost. Granted, lopping a couple of inches off a 40-foot tail doesn't change very much, but selling anything that I have no intention of reordering is like free money.
Speaking of cash flow, Bird Kite Lady came back again on Monday with "So sorry can you extend one more time! Ordering tomorrow! Thanks!" All those exclamation points must mean that she's sincere, so I immediately extended her free shipping coupon code again. Well, friends, it's Friday again. Bird Kite Lady has now promised imminent orders three times since she first contacted me more than a month ago. I don't know what her game is -- maybe her cash flow is as iffy as mine, or maybe she needs cooperation from a recalcitrant boss, or maybe she's a sadist.
I sent one last message telling her that her coupon is good through April 20 and heard the expected crickets in response. I'm not going to contact her again. Either she'll give me $1,000 or she won't.