Forward Into the Past!

Staples advertised the Samsung Galaxy S4 for a penny because the S5 is due out next month. My wife insisted that I get a Galaxy because that’s what she has – and what do I know about it? -- so I’ve been watching the price ever since Best Buy offered it for free over Christmas. One cent was close enough to free; I finally leapt into the 21^st century with a newly-obsolete smartphone!

Staples turned that 1-cent telephone into a $231 Amex charge. The mobile phone business ranks right up there with car dealers and mattress salesmen for opaque accounting and must-have add-ons (Case! Screen protector! Extra memory! Accident insurance!). After all rebates and refunds are applied, and not counting the ink cartridge that I tacked on, that $231 shrinks to $91. But Amex isn’t going to see it that way.

How does Massachusetts get away with collecting sales tax on the nominal $600 retail price? Staples listed a $49.99 retail with a $49.98 credit on the receipt. Even though I only paid a penny, I can understand paying tax on its true $50 value. But $600? Come on. Has anybody ever really paid $600 for this phone? AFAIK the state doesn’t tax the pre-discount prices of any other merchandise.  

Verizon’s going to get a cut, too. Our phone bill increases by $35 a month after some hocus-pocus with the account. Curio City’s phone bill just went from $15 to $50/mo.  

Of course, now I’m $231 farther away from paying the corporate registration and tax prep fees that were this month’s goals. The phone was at the bottom of my list of needs for this year. But hey, it was only a penny!

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Google says my top social referrer last month was Pinterest, followed by Facebook, Blogger (that’s you!), Naver (?), and Ning (??). That reinforces last week’s conclusion that I really have to invest some time in understanding Pinterest, as much as I cringe every time I think about it.

My Tax Dollars at Work

An unexpected letter from the Mass. Department of Revenue – never a welcome sight – led to a discovery: I screwed up my excise tax payment. I paid my tax on time, but accidentally designated it for 2013 (why was this even an option?) instead of 2012. I didn’t discover that the error was mine until after I’d already sent them an aggrieved email disputing their “notice of assessment.” 

Days went by with no response. I considered paying the delinquent 2012 tax while leaving the 2013 payment alone; I’d be paying tax twice this year, but I would get out of it next year. I have enough money to do that. But geez, $456 is a lot of money to throw away even if I would “get it back” a year from now. I finally picked up the phone and steeled myself to endure a long wait on hold before taking on that unique combination of indifference and impotence that we all associate with civil servants.

The phone queue took only a couple of minutes. As soon as I gave my corporate ID number to the fellow on the line, he said “Your payment has been moved.” Stunned, I stammered something about the penalty and interest. “Your account has a zero balance. You have a clean bill of health.” I thanked him and hung up. Total elapsed time: Under five minutes.

Skeptical that it could really be that easy, I logged into my Webfile for Business account to double check. Sure enough, we’re square. Unreal! I must not be the only businessman who ticked the wrong box. 

So today’s tirade against government is canceled in favor of this testimonial. The DOR discovered and corrected my error after I sent them a message that didn’t have the whole story. My only complaint is that they left me twisting in the wind for a few days rather than emailing or calling to let me know. Knowing DOR, they’ll snail-mail that information next week. 

Far from being a Reason to Hate Massachusetts, as the subject tag says, I offer kudos to the Commonwealth. Now don't blow all that money on schools.

Not My Cup of Tea

I couldn’t sleep Tuesday night after Republican Scott Brown won Ted Kennedy’s Senate seat. The ground trembled as hell froze over and poor Teddy spun in his grave, and the wailing of the damned echoed all night. Wednesday morning I cowered indoors like the other survivors, peering fearfully out my window at the shattered political landscape. Zombie Democrats staggered blindly through the rubble, searching in vain for brains (having long since depleted those of the Coakley campaign). Mutant Republicans emerged from dark burrows, blinking their little pig eyes and cackling with joy at condemning 30 million uninsured Americans to early deaths.

OK, maybe it wasn’t quite like that. On Wednesday morning the sun rose in the east. The Boston Globe waited on my front porch, crammed with verbiage trying to make sense of the apocalypse. The electricity was still on, the furnace worked, water still flowed. My cat had his breakfast and then went out. I had coffee.

Coffee always helps.

Don’t worry; you didn’t stumble into a political blog. I’m taking this detour because I’ve written about our health insurance struggles before (use the subject tags to see those posts), and because Curio City went to sleep as everyone’s Christmas credit card bills came due last week. Last year’s numbers were fattened up by a single $1,200 sale; without a comparable lightning strike this year, January probably won’t reach LY’s numbers -- forget about my 15% planned increase. 2010 is not off to a promising start. But one big sale can always turn it around, and that sale could materialize at any moment. (While I was finishing this post a $120 order from France arrived; a few more like that would save my bacon).

So this week I’ll explore why Massachusetts fell for a Republican who’s sworn to use Ted’s seat to kill the cause of his life.

Voter turnout was heavy in the wealthy suburbs. Independents went overwhelmingly for Brown, who favors extending the Bush tax cuts for millionaires. These people with big incomes and generous health insurance plans and investment portfolios and fat retirement accounts feel threatened by the Democratic agenda. Turnout in the urban Democrat strongholds, OTOH, was weak as the machine failed to rally the lower-class faithful behind their deeply flawed candidate.

These rich suburbanites were seduced by something called tea baggers. Besides its sexual meaning (Google it if you dare), “tea bagger” is also an unfortunate name for a populist political movement. The so-called Tea Party is an anti-Democrat movement disguised as tax rebellion -- not really a party at all, but a loose confederation of libertarians, Republicans, and mad-as-hell conservatives who oppose Obama and progressive society. We paid them no heed here, thinking that these right-wing nutjobs couldn’t breach our liberal stronghold. Underestimating the enemy within was the Democrats’ first mistake.

Things are bad in Massachusetts. The unemployment rate rose 0.7% in December to its highest level since 1976. The Democrats raised our sales tax last year and extended it to alcohol for the first time. Beer is all I've got! Things are not getting better; in fact, with federal stimulus money drying up and the state’s rainy day fund gone, they’re about to get worse. There is a lot of unfocused anger and anxiety that naturally gravitates to whomever’s in charge. When the Democrats put forth an arrogant, dull candidate whose campaign strategy was to run out the clock and claim what was rightfully hers, they gave conservatives an opening. Many people think that Martha Coakley’s career as a prosecutor showed a knack for doing evil, too. (I voted against her in the primary and did not intend to support her in the general election until the seat was actually threatened). Martha Coakley was their second mistake.

We are not accustomed to competitive elections in Massachusetts. The Democrats didn’t know how to react, so they didn’t. Coakley came out of the chute too late with a barrage of mean-spirited attack ads and robo-calls – the same vicious tactics that cost Kerry Healey the governor’s mansion in 2006. Being obnoxious was their third mistake.

For their part, the Republicans had a charismatic candidate with a well-organized campaign and a populist image. They also attracted a crapload of outside money in the final week of the campaign. His main message – I’ll kill health care reform – was exactly what the teabaggers wanted to hear. If they can kill insurance reform, they can cripple Obama and bring down his whole presidency…presumably so that we can return to the halcyon days of the Cheney administration.

How Americans can think this is a good idea eludes me.

Somehow they turned the election into a referendum on the federal health care bill. That shouldn’t have been possible. Massachusetts enacted stronger reforms and achieved universal coverage four years ago. We had very little stake in so-called “ObamaCare”. Some liberals oppose it for being too weak – an expensive giveaway to the very insurance companies that we ought to be dissolving. But in terms of state and local issues, it should have been a sideshow.

OK, so what?

A year ago I might have joined the Brown bandwagon. I’m not a Democrat and Coakley makes my skin crawl, even though her politics line up with mine pretty closely. I have a long history of backing underdogs and political insurgents. I do, however, support Obama’s progressive agenda – remember that he was the underdog just 18 months ago. The health care bill wouldn’t affect me much, but it was a first step in an ambitious agenda that will reduce our oil dependence, fight global warming, lessen income inequality, and address a whole roster of social-justice issues that get conservatives lathered up. After the disastrous Bush-Cheney presidency, and under the spell of Sarah Palin, Republicans should’ve been locked out of power for a generation.

A year of unemployment and dependence on government programs have partly resuscitated my 1970s-vintage inner socialist, purely as a matter of self-preservation. I want unemployment benefits and COBRA subsidies to be extended for as long as the economy remains in the crapper, even if that’s years more. I wish that other Americans had a federal equivalent of the Medical Security Program that will reimburse 80% of our health insurance premiums for as long as Anne’s unemployment benefits continue. Without these liberal programs, we’d have severely cut our standard of living and spent down our retirement accounts. I would’ve had to fold Curio City to beg for a minimum wage job. I’m no hypocrite; I have to support the party that’s supporting us during these hard times. If that makes me a reluctant Democrat for the time being, then that’s what I’ll have to be.

What have the Democrats done for me lately? Congress extended the 65% COBRA subsidy by six months, retroactive to last November. We are expecting our first reimbursement check from the Medical Security Program any day now; our mortgage payment this month depends on it. Anne’s unemployment bennies were renewed through the middle of March. We’re solvent into April, and possibly even as far as June. But take heart, teabaggers: Our COBRA eligibility expires in August. The MSP will drop us when Anne’s unemployment benefits run out this spring. By then we’ll be suffering the way we deserve to suffer.

Maybe Anne will find a job before it comes to that. Never mind that Massachusetts employers destroyed another 8,400 jobs last month and drove the state unemployment rate to its highest level since 1976. Maybe the Democrats will come through in time with another rescue plan. The Republican now moving into Ted Kennedy’s chair makes that a little less likely.

In spite of our insecurity and my misgivings about Scott Brown, I’m taking a wait-and-see attitude. What else can I do -- move to a more liberal state? Perhaps some good will come of this. Perhaps strengthening the moderate, secular wing of the Republican Party will weaken the evil religious wingnuts. Perhaps the Democrats will focus on jobs and the economy before they take an even weaker stab at health insurance reform. Perhaps Democrats at the state level will straighten up and fly right. Perhaps having a friendly new Republican in Congress will blunt their "Party of NO" tactic of kneejerk opposition to every Democratic initiative.

Leaving all of that aside, a Senator’s primary responsibility is to bring home federal tax dollars. Taking out more than you paid in is all that really matters in the end. Kennedy was a master of pork; no conceivable successor could fill out his money belt (although Coakley might be ruthless enough to have made a good show of it). Some pundits say that having one foot in the enemy camp might open the federal spigot a wee bit more for us. I’m not sophisticated enough to understand how that’s supposed to work, but the idea’s out there.

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.