Hold Your Breath

July wasn’t the disaster that it looked like a couple of weeks ago. Week 3 was the second-best of the year, erasing Week 2’s dramatic loss. The numbers below show how close I came to beating LY before sales dried up again this week. There’s no doubt why I failed: Tea Party Republicans held the economy hostage all week. Americans are all holding our breath until we find out whether Congress will allow a quick collapse through inaction or actively speed up our long-term decline. 

When the rosiest outcome removes trillions of dollars from the economy, the situation is inescapably dire. The Democrats bought into the conservatives’ deficit-reduction butchery months ago, so the conversation is entirely about how to alleviate the inevitable pain. Nobody (except economists) advocates postponing it until the patient is stronger.


It’s fascinating, and a little frightening, to watch the Republican Party splinter.

About 70% of American voters know that Republican radicals are behind today’s political paralysis. What’s wrong with the other 30%? If you subtract the 20% of Americans who are hopelessly ignorant about everything, that leaves only 10% of mentally competent voters who have been either blinded by ideology or hoodwinked by the vaunted Republican propaganda machine.

Surviving another 15 months until we get another chance to throw the bums out will be hard for all of us. So let’s just focus on next week and hope that Washington will get past its self-inflicted crisis and consumers will get back to consuming.

July: 

Total income: -3.4%
Total COGS: 1.7%
Payroll: -43.4%
Net Income (Profit): -471.5%


Year to Date:

Total income: -11.6%
Total COGS: -15.6%
Payroll: -11.3%
Net Income (Profit): -1,319.4%

And in the hope of surviving…an 80,000-circulation New Jersey magazine called EDGE plans to feature the Science Quiz wall clock in a gift guide due out in late August or early September. That’s right: it’s another random act of media! I could potentially sell hundreds of these, subject to their availability, my ability to physically move that much bulky stock, and my web host’s tolerance for a big traffic surge. This should solve my cash-flow crisis in time to buy new Christmas products. Better: It might lead to an ongoing relationship with the publication. If they will feature just one or two products a year, it could change my fortunes considerably.

I think I can survive another month. I used half of my emergency reserve to cover operating costs this month. Today’s bank balance is $19.74 against $2,154 in August charge bills. I can just barely stay above water if August sales match LY. Last August is when 2010 started to lose steam, so I have a realistic shot unless the government blows up the economy.

One small help: Host Gator closed my account and refunded $153 of my original $167 charge. And the company that owes me $235 says my check is in the mail. Celebrate the small victories!

And finally, a new reason to hate Blogger: A few weeks ago adding images through their new post editor stopped working. I got around that by going into "edit HTML" and inserting my links that way. Well, as of this week they have screwed up standard HTML tags, too. After way too much effort I figured out that I can upload images in the "edit HTML" view using the old post editor interface, and it does finally insert the picture with a whole paragraph of weird, non-standard HTML formatting. The way things are going, though, they will probably remove that soon, too, and you won't get these amusing little pictures anymore.

Where Were You When the Empire Fell?

That’s not a question you’re going to hear every day. The Great Decline is gradual and uneven. Many of us still can’t see it. Will our ultimate Fall be a singular event like the fall of the Berlin Wall? Was the destruction of the World Trade Center our equivalent to the Visigoth sack of Rome? Or will it go down slowly like a tire with a rim leak? This story won’t be written for decades yet.

I can’t date the beginning of the end that hasn’t arrived yet. Some would name Sept. 11, 2001. Some would blame the election of George W Bush for turning a peaceful nation with a budget surplus into a bankrupt country losing two wars. Some might start it as late as the Great Recession in 2007, while others reach back to Clinton’s bubble economy and the rise of globalization. Some will go back even further, to the revival of conservatism and the empowerment of religious fundamentalists under Reagan. Still others will blame outside influences, such as the rise of China or space aliens.

The end of manned spaceflight was my “aha!” moment. I had hoped that Obama would be a renaissance president after Bush’s dark age, so I was surprised when this milestone came during his watch. After one last shuttle flight in just a few weeks, American astronauts will depend upon our old rival Russia to maintain a presence on a space station that has no purpose and no future. While cut off from low earth orbit indefinitely, NASA is supposed to develop deep-space capability for an undefined mission with no timetable; it might bear fruit in the 2030s if Obama’s successor doesn’t overturn this non-program and restart the development clock yet again. Abandoning this key American capability made it clear to me how far we have fallen, and how unlikely it is to turn around. A comeback is difficult after the talent disperses and the infrastructure decays.

Have you had your epiphany yet? Don’t feel bad if you haven’t. It’s hard to see until it suddenly snaps into focus one day. It’s like global warming: Theoretical until a moment of clarity makes it frightfully obvious. The Decline is not a one-way slide; short bursts of economic growth and military adventures will periodically divert our attention from the ruling class’s steady consolidation of wealth. (Don’t take the global warming analogy too far, btw: Climate change is a measurable and irreversible physical process, whereas nebulous and potentially reversible factors like politics, the economy, mass psychology, and sociology underlie the decline of empire.)

The decline of Western civilization is a little beyond the usual scope of my blog, so let’s take it down a level to economics.

Massive government intervention ended the recession for the rich. Huge deficits bought our current statistical recovery and keep it sputtering along. As both parties quibble over how to impose austerity befitting our declining circumstances, they condemn us to more economic contraction. It’s 1937 all over again. But Americans are ignorant of history, so what can you expect?

Heh. Do you get the impression that somebody’s not making his sales targets? Guilty. Sales this month are running 25% behind LY. Today’s meager paycheck – which I really couldn’t afford, but why else am I in business? – drove Curio City’s projected end-of-month checking balance down to (-$429). I have $379 in pending deposits against $1,233 in outstanding bills, with another $1,200 worth of orders that have been placed but not yet received. It’s looking grim as I prepare to shut down for a week’s vacation. 

Well, business can’t be an uninterrupted climb, can it? The year’s only half over; the top line’s probably a lost cause, but an unusually good xmas could still pull the bottom line out…and that’s the bottom line, isn’t it? This perpetually struggling economy makes me pessimistic, though. Curio City was founded in the halcyon days of 2005 on the assumption that Americans would always spend money they don’t have on things they don’t need. Who could have guessed that the party would end a scant two years later? Curio City is doomed unless consumers go back to instant material gratification. Would one more rhetorical question help?

It’s a small consolation that everybody else who isn’t upper class is circling the drain together.  

I had hoped that my speedier, more reliable web host might goose sales a little. So far, I don’t see it, but solving Mochahost’s chronic outages would have only a very long-term effect. Did downgrading from an interactive GoDaddy SSL seal to a static Comodo seal hurt my perceived security? Did my new IP address ruin my search engine rankings? Is the economy really sliding back into the crapper for everyone except the rich, as recent statistics indicate? Or are shoppers just on holiday for a few months?

You’d think that slow sales would reduce my cash demands, but I have to keep restocking the same few products. All of my money is going to Panther Vision, Jackite, Switchables, Cool Baseball Necklace, and golf ball reorders; struggling to stay on top of those bills freezes out everything else. It would be a great help if I could liberate some of the dollars locked up in merchandise that isn’t selling…but then it would be selling, wouldn’t it? Yesterday I marked down a couple dozen items by another buck or two; today I sold one and reclaimed $5. Well, at least it’s something.

On the bright side, June’s somniferous start gave me ample time to plant my vegetable garden. I’m going to have a bumper crop of tomatoes this year. Maybe I should sell those. At the $2.50/pound that Stop n Shop gets for inferior tomatoes, I could make thousands. 

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Holy Hell, do I ever hate Blogger's new post editor! It's riddled with bugs and much harder to use than the old one. I don't see any improvement from week to week and their last Help blog post on the subject is months old. I would move my blog if I weren't trailing five years of history and 250+ posts.

Just another symptom of the collapse of civilization. They're everywhere when you open your eyes! ;)

The Purge

Constant Contact’s price doubles when you reach 500 email addresses. My newsletter subscriber list recently passed 400 and was growing by 10-15 per month, while my open rate had dipped to around 20%. It was time to purge.

Email addresses are fragile. People change ISPs, or they lose their jobs, or they sign up for Yahoo and Gmail addresses that they never use. Permanence is rare. When we switched over to BELD.net this year Anne and I opted to pay Earthlink $3 per month to preserve the addresses we’ve had since 1987. But even those will die by the end of this year; we aren’t going to pay that $3 forever.

Constant Contact’s process for cleaning up one’s list is hidden – after all, bloated email lists are lucrative for them. I actually had to email their support department to find the online instructions. The process is pretty convoluted and the results don’t quite match the instructions. Without numbing you with too much detail: You duplicate your main mailing list, then remove everyone who has opened an email in the past 90 days (the past two issues, for me). The remaining “unconfirmed” addresses -- 286 in my case – get an opt-in newsletter. If they click the link therein, they go back on the list; if they don’t, they’re out. Forty-one of those 286 people opened the email and 22 of them clicked the link. In other words, 41 of the 286 addresses that I culled turned out to be valid and 22 were interested subscribers.

In the end I got rid of 245 garbage addresses. I won’t have to worry about hitting that 500-address price increase again for years now.

With the remaining 158 names known to be good, my newsletter open rate ought to approach 100%, right? You’d think so. But only 60 people looked at the Fathers Day free shipping coupon that I sent out this week. Two emails (both sent to friends…Joy, what happened to your hotmail address?) bounced as non-existent. Fathers Day is a poor benchmark because my average customer is too old to care, and my newsletter’s subject line (“3 Days Only: Free Shipping for Fathers Day”) wasn’t cute or clever. But a 38% open rate is disappointing after such a thorough cleanup. The issue did bring in one nice big sale, though, so there’s that.

Incidentally, a Constant Contact telephone support guy told me that what I did was very advanced stuff for their user base. Fewer than 1% of their customers ever try to purge their mailing lists. It’s no wonder I couldn’t find the instructions in their FAQ; the question isn’t asked frequently.
Anyway: If you didn’t get a newsletter this week, please use the Newsletter Signup box on the upper right side of this page to re-join my list.

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I just figured out how to add a Facebook “Like” button to the bottom of my website. I’ve been stuck at 120-123 fans for months now. Maybe this will get that growing again. Just this week I had my first customer answer “How did you find us?” with “Saw your Facebook page.”

I also figured out how to work around Blogger's broken image upload function by simply editing the HTML code. I posted a question on their Help blog last week and never got an answer. So I should be able to amuse you with pictures again.

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Mochahost finally closed my old account on Sunday, six days after I put in the order. No mention of a refund. But that’s OK: the $40 that they’re keeping will buy them a lot of bad publicity. I won’t hesitate to tell the world (via the Googlebot) that Mocha was the worst company I’ve encountered in almost six years in business.

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Overall Fathers Day sales were poor. The week ending 6/11 was pretty good at 122% of LY. But this week, which should have brought the big rush, is running a paltry 69% of LY. Last year’s numbers were inflated by one big sale of Mini Briefcases – not Fathers Day business at all. With a day and a half left, this week could still deliver the $500 that it’s short. But it ain’t likely.

I'll be back in two weeks with June's numbers, assuming nothing interesting happens before then.

Big Picture and Little Picture

The Little Picture

I didn’t know that Authorize.net bills in arrears until they raided my checking account one last time. Oh well. Now, at last, the savings from changing credit card processors can begin to accrue.

Or can they?

Today I was charged $31.97 for “Visa/MC discount fees.” (At least they have a web page that explains the charge; Pipeline Data did not). They also debit my account daily for discount amounts ranging from a few cents to a several bucks. Turns out that they collect the discount amount daily, but batch and authorization fees are billed with my monthly support fee. Maybe if their online billing report called the charge something snappy like “support and authorization fees” instead of “Visa/MC discount fees”, I wouldn’t have wasted 30 minutes investigating. This little revelation makes their fee structure about as opaque as was the old bank’s.

It is damned hard to see if I’m saving any money. Pay-per-click advertising has crept over budget again -- it's running 12% of net sales, vs. my budgeted 9%. It’s my own fault, of course. I’m a sucker for buying more traffic, even when conversion reports suggest that it’s not paying off. Half the time that I set out to pare back my campaigns, I end up raising as many bids as I reduce or cancel. Conversion tracking isn’t perfect, after all. Some people block tracking cookies. None of my “kite” ads reported any conversions on 15 clicks one day last week…but I did sell one bird kite.

Anyway. The point is that I need to keep the big picture in mind while I focus on small day-to-day things that I can control.


The Big Picture

Today’s economic climate does not encourage thinking about long-term strategy or addressing major challenges. As I said above, I am concentrating on controlling costs and making incremental sales…beating LY one week at a time.

Two things that happened in 2008 need counterparts in 2009.

The first is a website upgrade. Last summer I added some new features when I went from 4.1.0 to 4.1.4 -- nothing major, but enough to improve overall sales incrementally. I need to do that again this year, and the sooner the better.

The second was the NY Times gift guide picking up one of my products. That was a lightning strike that I can't reproduce at will. I’ve sent press kits and announcements to major media for each of the past three years, with never a nibble of interest. I’ll probably try again this year, since the only cost is my time. But if December is going to match or beat LY – as it absolutely must if the year is to succeed – then I’m going to need some publicity. I’ll probably need to buy that publicity…which is to say, place an ad. The potential to waste money is high. To be profitable, an ad has to return about 10x its cost in new sales. If I'm going to spend $1,500 or more on a magazine placement, it can't look like something I made in Paint Shop Pro. But because December 2008 set such a high bar, I need to take that chance. That means identifying a specific product to promote by fall, producing an ad, and placing it to run in November or December, preferably in multiple places.


The Passing Picture

Business started strong last week, then fizzled. This will be only the third week this year to come in below LY. LY was unusually strong, and the rest of March looks more attainable. And, of course, one big sale could still rescue the week.



When a shopper asked about the Infinity Tunnel Clock, I started to reply that it’s no longer available. Before clicking Send, I thought to check. Lo and behold, it’s back! So my open-to-buy deficit suffered a little setback. The next morning I sold an Infinity Optics Lightshow. Coincidence? You be the judge.




And O, how I hate Blogger! I finally figured out a workaround for their resizing fonts; now when I copy my draft from MS Word, I paste it into Textpad before copying it here. Then I can set the font and restore my formatting. Unless, that is, I decided to add images. First, they aren't inserted where I specify; I have to drag and drop them after uploading. Worse, they remove all of my formatting and reset my post to the default font.

With a database of 140 hyperlinked posts built up over three years, I'm not inclined to move my blog. Neither is Google inclined to fix their lousy interface. So I guess I'll have to content myself with complaining periodically.

Inaugurations

Apropos of nothing…my wife took this photo on Monday, Dec. 8, just as I was about to load up the Forester with the weekend’s orders. The huge box in the foreground is about 4 feet deep. All three of those boxes are filled to overflowing with orders. She named the file “why isn’t the mayor smiling.jpg”. The mayor is stunned. The mayor thinks his business may have outgrown him. The mayor is rethinking this whole "success" thing.

Anyway, on to today’s post:

It looks like the Obama administration is going to parade into Washington throwing fistfulls of cash to anybody who asks. I’m tempted to grab a piece of whatever action they toss at small businesses, even if it means taking on debt for the first time -- we all know that government debt never has to be repaid.

Here’s what I’d do with a big pile of free government money:

1. Take Curio City beyond Sunshop with a custom e-commerce engine and a graphical makeover. I just met a developer who’s going to take over from Eric very soon -- solving one of my longstanding challenges -- and who would happily step right into a complete redevelopment.
2. Contract with a marketing firm to bring Curio City to America’s attention. Last Christmas proved that people love my store…when they stumble upon it. Long-time readers know that marketing has been my Achilles heel since before I launched this company. Three years later, I am no closer to figuring it out myself.
3. Rent commercial space with warehouse, shipping/receiving, and office capabilities. Nothing lavish…I use maybe 250 square feet of our house now; quadrupling that to 1000 would be luxurious.
4. Hire a part-time or seasonal employee to handle the shipping/receiving duties, freeing me to focus on the intensified admin requirements that points 1 & 2 would impose. The above photo should explain why I need to do this. Do you know how long it takes me to ship that many boxes?

The new regime has promised most working Americans an extra $10 per week from reduced federal withholding. Ten bucks would be a nice windfall. How am I going to spend mine?

Hah!

My paychecks are too small to trigger the federal withholding tables. Since our combined household income is taxed at 25%, I just withhold as much as I can afford without shrinking my paycheck to invisibility. To date, I’ve arbitrarily taken 10% for federal withholding. Starting with my most recent check, I raised that to 12.5%. So unlike the rest of America, I’m getting a 2.5% “tax hike” that will reduce my average weekly paycheck by about $3.50.

My wife, being a grownup, will reap the Obama windfall. That $10 per week will help offset a fraction of this year’s $100 monthly health insurance increase. Our combined net income is going down again for the fourth year in a row. Hopefully a round of deflation as other Americans join us in the shrinking income department will make it a little easier to survive on less.

To battle this, I gave myself another raise, to 18.25% of gross. If Curio City defies gravity again this year, we might be able to hold our ground.

Oh, and while we’re on taxes…in the past week Kraken Enterprises deposited:

• $1,236.81 in federal Q4 payroll taxes
• $259.89 in state payroll taxes
• $56 federal unemployment
• $235 state unemployment
• $69.23 in sales taxes
  

Put that together with our personal Q4 1040-ES payment and our quarterly property tax bill, and it’s hard to understand why the government is broke. Maybe we are the only people who actually pay our taxes.

Let's end with a parting shot at Blogger: Every time I Preview a post, Blogger changes the font and removes my formatting. It's probably because I paste in text that I composed in MS Word, but you'd think that after all these years they would have fixed that. It is highly annoying to see everything changed to LARGE and all of my line breaks gone. It's why my posts don't look consistent from one week to the next. This paragraph, for instance, simply refuses to convert to Verdana.

Ding, Dong, The Store Is Dead!

What a relief.

I tried to talk myself into it. The financials probably would have eventually worked – as the wife observed, I was probably too fixated on a sales-per-sq-ft number with a weak basis. A year or more of exhausting hardship and chaos might have eventually settled into a stable, profitable base of operations. Of course, surviving until “eventually” was always the corker. Certain aspects of owning a mature store did (and still do) appeal to me. But I could never convince myself to go through hell to risk that nebulous payoff. I’m almost certain that I couldn’t have done it all by myself, and I would’ve destroyed my web business in trying.

The certainty that a store would completely take over my life was the biggest drawback in my mind, along with the staggering amount of work required to make it happen at all. To Anne, it was the thought of borrowing >$60,000 during an economic recession, and with our personal finances already very wobbly. We aren’t doing very well. I make doodly squat, and she hasn’t had a raise or a bonus in three years even though she does nothing but work, work, work. Savings are bleeding away, debt is mounting, and inflation pinches the household budget more and more every time I buy groceries or try to pay property taxes or need car maintenance. Coddling Curio City looks more and more like a luxury that we can’t afford.

Wife Summit II ended with a mutual commitment to endure a couple more years of hardship, at least for as long as growth remains encouraging. Now that I don’t have to open a store, I’ve decided to divert a couple thousand dollars out of “startup money” and into our house, which is literally rotting away. Hopefully we won’t have to tap the home equity line of credit that we have no way of repaying.

“Curio City Offline” is not dead. It’s merely resting until such time as “Curio Metropolis” needs to move out of the house. By then, Kraken Enterprises should have enough cashflow to reduce the risk of rapid failure. I might even be able to hire someone to help me do it. In theory, anyway.

With the store slain for now, I can focus on moving the website forward. Although the risks are much less than a store’s would be, they’re out there. I need to push forward aggressively if I hope to keep doubling my sales. There are some time bombs coming up.

The first one, paradoxically, is lighted caps. If you’ve been following along, you know that this single product line accounts for 75% of my total sales. It is the sole reason that March is demolishing LY’s sales. In my fine tradition of finding the dark cloud beneath every silver lining, I know that these caps won’t sell this well forever. Sooner or later, a deep-pocket competitor will out-compete me, or consumers’ whims will just wander on to something else. Even if caps do keep cranking along, I’ll soon be up against LY sales figures from months that included cap sales. The year-to-year comparison will look a lot less rosy when I’m comparing apples to apples.

Earlier I identified three major steps to take Curio City to a higher plane:

1. Increase my merchandise selection and improve its presentation;
2. Increase my traffic by improving my search-engine placement; and
3. Improve my conversion rate.

Step 1 is the most straightforward, and the most fun. So let’s talk about that one this week.

I have two immediate problems: Way too many inventory dollars locked up in old and unsalable products, and an open-to-buy budget that is constantly struggling to reach black ink.

Nothing cures a budget shortfall faster than a big wad of cash. But pouring in more of my own money is counterproductive; after all, Curio City exists to put money into my pocket, not take it out. I would much rather let operations lift the budget back to where it belongs than infuse a new loan for it. (And just because I have money in the bank labeled “startup money” doesn’t mean that I want to spend it on Curio City; I would love to divert some of it into personal needs instead). So rather than transfer all my money into Curio City’s treasury and go on a shopping binge, I’m ordering just those half-dozen or so new products that I’ve had wishlisted since January. Maybe they’ll sell enough to cover the bills before the charges hit, or maybe I’ll need to inject doses of rescue money here and there to keep the charge card out of the red. The objective is to keep my options open without loaning the company a lot of new money.

I started with an expanded line of purse hooks. They would not have been my first choice, but the vendor is offering trade show pricing plus free shipping. I can’t resist a bargain. And maybe they'll get a bump from Mothers Day.

Next up is a line of recycled bicycle chain housewares (Use the Related Products tab to see the whole line). I expect them to sell slowly, but reliably, like the Vinylux products. I’m bringing these in right now to take advantage of the upcoming Aging Hipsters linkage. Which, it occurs to me, I’m supposed to finish today. Drat!

Neither the purse hooks nor any of the other new things on my list have blockbuster potential, but they all enhance my overall product mix and promise to sell steadily. Steady sellers are just as important as bestsellers, if you have enough of them (remember the 80/20 rule?). Meanwhile, I’ll keep some cash ready in case I luck into the Next Big Thing. If my friend Matt had not mentioned lighted caps last summer, I never would’ve found them. If I hadn’t had a few bucks in my open-to-buy at the time, I might never have tried them. There’s a huge right-place, right-time factor in product discovery.

To recycle some of my frozen inventory dollars, I should be ruthless with the markdown pen, and then send out another newsletter announcing a sale. Markdowns hurt the bottom line, but merchandise languishing in the cellar hurts the top line. So those are my objectives for the next week or two: Bring in new product. Turn over the Aging Hipsters list. Take draconian markdowns on my oldest stuff. And announce it all in a newsletter.

The hoped-for Sunshop upgrade didn’t happen, btw.

About Newsletters

My Constant Contact bill rose from $15 per month to $30 when my mailing list topped 500 email addresses (at the beginning of last week, I had 506). My mail open rate averages 21.3%, and Constant Contact says that the average for retailers is 26%. So those were two good reasons to prune my list.

With some effort, I figured out how to identify those addresses that have never opened a newsletter. 335 of my 498 contacts were on the never-opened list, leaving only 163 presumed “good” addresses. Last week I sent those “dead” addresses – which included a surprising number of friends whose ISPs must be blocking my emails -- a confirmation request. A week later, a handful of them had confirmed that they want to stay on the list (although none of my friends confirmed). Now my monthly fee is back down to $15, and I expect a much higher open rate from the 180 good addresses remaining.

None of this is likely to help the bottom line: each newsletter ultimately only delivers 1-3 “extra” sales (those with coupons work best, of course). They barely cover the cost of the newsletter service, much less my time spent creating them. But there is value in keeping my name in front of people, and like most other things about Curio City, newsletter results improve very gradually as I keep building a bigger and stronger customer base. Also like most things about Curio City, it’s not growing big enough fast enough.

Reasons to hate Massachusetts

Sensing that Kraken Enterprises is a great source of untapped wealth, the Commonwealth just raised my unemployment tax contribution rate from 2.53% to 4.78% -- retroactive to the first of the year. Thanks, guys! I guess I can collect a few bucks a week if I lay myself off. Which I might have to do, if this bloody state keeps raising my taxes. Massachusetts has the highest unemployment taxes in the nation, and pays the most generous benefits.

Reasons to hate Blogger

This interface for post creation blows. I can't tell what font or size I'm using. The spacing goes all wonky. Headlines never look like they should; it absolutely refuses to resize the "Massachusetts" headline above. Whenever I open a published post to edit it, the font appears to be 72-point.

I am nearing my 100th Blogger post. Maybe it's time to move the blog.