Sticking It to the Little Guy

Here's the first P&L statement of this brave new pay-cutting year. Giving up half of my salary had better turn the bottom line black. 

January

Total income: -6.8%
Total COGS: -9.3%
Payroll: -81.3%

Marketing: -26.6%
Net Income (Profit) vs LY: +1,179% (+$678)

Actual Profit/Loss: +$621

2016 (calendar year, final)

Total income: -22.7%
Total COGS: -22.8%
Payroll: -27.9%

Marketing: -28%
Net Income (Profit) vs LY: +20.1% (+$494)

Actual Profit/Loss: -$1,971

Oh, look: It's black. Until yesterday, the top line was getting creamed because last January included a statistically outlying $1,900 week -- that's equal to three healthy January weeks. Apart from that fluke, every other week this year beat LY by a comfortable margin...and then yesterday $500 worth of bird kites made up most of the rest. In fact, the next day and a half could conceivably bring in the additional $224 it would take to match LY. That's encouraging; however, a lot of those sales were Switchables, and that's discouraging. COGS and marketing both fell by more than income did, so that's encouraging again. 

This month was the fourth worst/eighth best January ever and could still move up one more notch. The bottom line looks great because I paid myself just $117 for the whole month...before taxes. As in the national economy, Curio City enriches the corporation at the expense of the workers. And if the year ends with a profit (and if there's enough cash on hand) I'll be able to pay myself a bonus to make up for the foregone salary, as if I were a bona fide member of the investing class.

You can't even pin this on Donald Trump. Corporations and their owners have been taking an ever-increasing share of wealth since the Reagan administration. 

My debt didn't budge, but I did squirrel away my CPA's fee. I can't turn my full attention to debt service until I come up with another $465 to renew my corporation and $109 for the secretary of state (just because). Next year I might be able to split those corporate expenses between Curio City and my new endeavor, Blue Hills Editorial Services. First I had to decide whether to make it a sole proprietorship, a partnership with my wife, or a new division of Kraken Enterprises. I finally decided to make it a Kraken enterprise. Then I had trouble figuring out how to create a new DBA. Today I should be able to set up a bank account and start treating Blue Hills as an entity in QuickBooks. Then I can finally set up a website next week and start seeking clients. I had to know who's covering roughly $150 in startup costs (spoiler alert: I am...it's just a question of whether I do it as myself, as Kraken Enterprises, as Curio City, or as Blue Hills. I am all of those things). 

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My biggest vendor, Jackite, just launched a new website, allaying my worries about their future. They also let slip that they expect a shipment of poles in March. That will make a big difference for spring sales. At the moment, their new wholesale site is drastically overcharging for shipping -- so badly that it wiped out the entire markup of my last dropship. I hope that will be a temporary hiccup, because I can't profitably do business with them while they're charging me triple the actual shipping costs. They just told me that they're looking into remedies.

As for 2016...at least that red bottom line will be a nice deduction on our personal tax return.

Down to (Metal) Earth

I've written about Metal Earth before, and I'm going to keep coming back to it until I reach a useful conclusion.

From my point of view, Metal Earth is the perfect product. The models are all one of two standard sizes, and they weigh next to nothing. They take up virtually no storage space and cost very little packaging and postage. They're unbreakable. They don't have batteries to wear out and they don't become outdated. An ample supply of new designs keeps the line fresh while targeting a wide range of interests. I can create new product pages by simply cloning and editing old ones. The vendor supplies good images and doesn't screw up their billing or shipping. Their website is easy to order from. In theory, they should be as collectible as Switchables and hence drive repeat business; in practice, I rarely see a customer come back for a second order. 

Those are all good reasons to pour money into making this line succeed. And yet, it stubbornly doesn't. I have several ideas about why that is so. 

So many new models come out so frequently that it costs a fortune to even try to keep up. Shoppers will naturally gravitate to the site with the biggest selection, and that's never going to be me.

They only ever sell for Christmas. I typically move $1,000 worth in four weeks, and then never sell another one all year. Apparently lots of people think they're great gifts for someone else, but very few people ever buy their own. Advertising trends support that conjecture: During the holiday rush, Metal Earth keywords go for at least 40 cents a click, and even lowball bids draw 25+ clicks a day. Then the competition for keywords crashes immediately after Christmas. This month I spent $22 to buy 136 clicks (just 16 cents a click) that brought exactly zero conversions. Cheap clicks and steady traffic...what's not to like? Well, paying $22 for no return, that's what. I assume that the rest of the retail world sees the same thing, which is why a click is going for just 14 cents this week. If nobody ever buys, those clicks aren't worth anything.    

Competition is probably the real killer. Other retailers can surely see the same appeal that I do, and big-name, deep-pocket sellers like Target can afford to Hoover up all the business. The only advantage I might have is staying power. A mainstream store like Target won't give shelf space indefinitely to something that only sells four weeks out of 52. (I wonder if they sell year-round in bricks & mortar stores.) Curio City is supposed to be about unusual products that one doesn't see everywhere, so maybe Metal Earth is fatally flawed that way. 

  
Shipments can be "dollar-dense," meaning that very small packages can easily bring in $100 or more. Yet my shipping charge for multi-piece orders is too damned high. Models weigh 0.15 lb. on average. But if I set a weight below 0.25 lb the USPS server returns first-class letter rates instead of the higher first-class package schedule, forcing me to overcharge by .1 lb per piece. That discrepancy doesn't matter much for one- or two-piece orders, but it adds up rapidly when you get to four or more pieces (1 lb). I can ship 10 models in a flat rate box for $6.20, but my software sees 2.5 lb going to the West Coast and charges $13. Without going any deeper into these weeds, there's no good solution. I can either optimize shipping for the vast majority of tiny orders, or for the much smaller number of more desirable large orders, but configuring for one end screws up the other. It's probably not as big a factor as the ones I mentioned previously, but shipping overcharges are certainly another competitive handicap.

Metal Earth is never going to be the next Switchables, despite their many similarities. Over the past three years I've put a lot of money into building a 125-model lineup. I can't afford to throw good money after bad, obviously, but neither can I abandon something I've cultivated so carefully for so long. Instead, I need to acknowledge that these things are only ever going to sell during the Christmas season and I'm only ever going to sell about $1,000 worth. Ideally, I'd scale back my advertising and inventory buys so that I can eke out a profit as a niche player without falling so far behind in selection that I can't compete at all. 

There must be a just-right balance there. I haven't found it yet.    

Yeah...Not Going to Happen

I won't miss the complaints about fixtures not being included with Switchables covers, or the ensuing orders for a single fixture (costing me a 50-cent box, a 5-cent label, and my time to process a $7.50 sale). Every single nightlight cover's product page includes this text:

This is not a self-contained night light. Switchables stained glass night light covers are designed to be used with the Switchables Nightlight Fixture (sold separately). Switchables are "switchable" because you can easily swap any one of our covers onto the same simple fixture. You can also use your Switchables cover as a suncatcher, a Christmas ornament, or with any other kind of light source. To display your Switchables cover in a window, add the optional suction cup. Switchables make gift-giving easy: Start your recipient out with a fixture and one or two covers, then buy him or her new covers on future gift-giving occasions.

The category page repeats this message in slightly different wording. Additionally, I added "Light fixture sold separately" text to most (but not all) of the product photos. Plus, all of the product names end with the word "cover." And yet, around 10% of customers still think they're buying a complete nightlight. People just plain don't read. 

Because I had found Switchables at the Boston Gift Show (a.k.a. The Cavalcade of Crap) 10 years ago, I faintly hoped that I might find a replacement for them there this spring. I should have registered for that by now, so I Googled the date. Turns out that the 2017 Boston Gift Show has been indefinitely postponed (why not just say canceled?), with suggestions to attend trade shows in Philadelphia, Atlantic City, Gatlinburg (the capital of tacky...didn't Gatlinburg burn to the ground?), or Myrtle Beach. Hah! Nope. The Boston show was of dubious value when it was free, and it died for good reasons. I'm sure not going to travel far away to browse tacky souvenirs, mass market junk, and handicrafts.  

As glad as I am for the excuse not to roam that sad and deserted convention floor this year, it does leave me with no plan for finding a Switchables replacement. I might overcome my hatred of travel to consider a road trip -- at my own expense, obviously; Curio City sure doesn't have a travel budget! -- if I thought that any of those other shows might be worthwhile. New York's Toy Fair (Feb. 18-21) is the only one that could be worth it. "Toys" are not a great fit for my store since I don't cater to children at all. But Toy Fair is enormous, and it defines "toy" very broadly. Admission is free to retailers, but of course staying in NYC is not. Even with free Amtrak tickets, meals and a couple nights' lodging would approach $500.

But behold their online component called shoptoys365.com. I found a lot of my opening products on the Toy Fair website back in 2005, so I have requested access. That it is a gated community encourages me. 

Now I just need to grit my teeth and shop it. It's hard to get motivated when one has no money.

When Battle Plans Go Awry

"No battle plan survives contact with the enemy," said the German strategist, and the recovery plan that I outlined last week collided with reality this week. The 10-hour editing job that I had expected to start right after the first of the year is not even an actual open position yet, and I'm not a shoe-in if it does open up. What's worse, I might have shot myself in the foot when I balked at being on-call 24/7 in addition to the 10 scheduled hours. I don't mind doing some ad hoc night-and-weekend editing within some reasonable parameters, but I can't be available all the time just in case, and I find it hard to believe that anybody else would go along with that, either. It's copy editing. Lives are not at stake here. I would still very much like this gig, but I think my chances died with that exchange.

Well, Eisenhower said that "Plans are nothing; planning is everything," and I'm still doing that. Since I can't go entirely without income I'll have to start bleeding Curio City again until I can figure out something else. I took one last mini-paycheck ($62.55 gross, baby!) for the last week in December. I'm going to skip the other half of the check that would be due on Monday. Then I'm going to start taking 10% of net sales rather than the 15% that I took in December, or the 20% that is my historical due. This will hurt Curio City's debt repayment plan without helping me very much. 

If I can't find at least one copy-editing client within the next month, I'm going to have to find a part-time minimum wage job. Eleven bucks an hour is still a lot more than Curio City can pay me, and I don't mind doing menial mindless work, but I really want to avoid being servile to the public. Most of the menial jobs that haven't been automated yet are customer-facing, and I have already spent too much of my life doing that.  

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I was going to say "At least LY set some easy sales targets for this year," and then I noticed that the second week of 2016 brought in a $750 bird kite sale. Sigh. $750 would be a pretty good total week in January. That one lucky strike will almost surely make this January yet another double-digit loser. Not a cheery start to the new year.

This week, at least, was halfway decent, thanks entirely to Switchables. I still can't believe those are going away. I'm announcing their demise in a newsletter tomorrow morning. It only goes to 185 people, and only some of them will open it, and only some of them are Switchables customers...but some collectors are going to be as shocked and disappointed as I was.