As an economic flyspeck, Curio City doesn’t give me any special insights into the effects of health care reform on small businesses. So I’m coming at this from the personal, demand side.
Some people assume that I’m conservative because I’m a small business owner, so let’s get this straight up front: I’m not much of a capitalist. I’ve never been a money-driven person. In my youth I was a hippie communist (in principle, at least; in reality I enjoyed the fruits of middle-class materialism). My politics have ranged widely since then, but I’ve consistently been socially liberal and financially conservative.
When my wife lost her job in February and we had to start buying health insurance out of pocket, I drifted back toward liberalism (without the embarrassing youthful naiveté this time). To do otherwise would be hypocritical. Praise Obama that the federal government is subsidizing our COBRA coverage, and praise Kennedy that COBRA exists at all. Without those two social programs I’d have had to fold Kraken Enterprises months ago to beg for some degrading minimum wage job. And I'd probably not even have found one.
COBRA lets you keep your previous coverage at the employer’s group rate for 18 months after the layoff. Although it’s less expensive than equivalent coverage would be for individuals, the price is still ruinous. Imagine getting a new bill that’s more than your monthly mortgage payment, at a time when you’re scraping by on unemployment checks, self-employment income, and a pittance from your moribund home business.
The federal government has been paying 65% of our COBRA bill since March. Anne’s cheap-ass former employer only ever subsidized 50% of the price, so we actually pay less for insurance now than we did while she was employed. This subsidy has kept our household budget liquid so far this year.
The COBRA subsidy expires in November. I haven’t heard a peep about extending it. We will face a major budget crisis if Anne’s still unemployed when those federal dollars run out. (After being out of the mainstream workforce for five years, and with no education to speak of, and with the job market dead, I’m unemployable).
The obvious remedy is to join the ever-growing legions of the uninsured. But Massachusetts state law requires us to carry health insurance (federal reform will duplicate this mandate). Even if we choose to pay the penalty instead of insurance bills, letting your coverage lapse for more than three months gives future insurers the right to require a physical exam and exclude pre-existing conditions. By age 52 virtually everything that can befall a body is a pre-existing condition, so going uninsured would effectively make us uninsurable in the future. (Federal reform would forbid insurers from excluding the sick and the old).
We need subsidized, group-rate insurance – without an employer -- in a system that’s based upon employment. None of Anne’s professional associations provide insurance in our state, nor does the AARP (yes, we’re card-carrying fogies). Sure, Kraken Enterprises is technically an employer…but the insurance moguls don’t offer a one-man, chump-change corporation the same deals that the big players get. (Federal reform would enable small businesses to band together for leverage).
Fortunately, Massachusetts has a “public option” of the sort that makes conservatives froth at the mouth. It works like this: Commonwealth Care negotiates group rates with private insurers who offer a range of health plans. The state subsidizes premiums for those of us whose income is low enough. Thanks to our state’s health insurance reform, we will not be left twisting in the wind. The “public option” is insurance of last resort. It keeps us legally insured without going bankrupt (while providing only the most rudimentary coverage, of course). I’ll need to look into the details of Commonwealth Care if Anne’s still unemployed late this month. If it comes to that, I’ll post a follow-up. Here’s a Boston Globe article summing up the results of our three-year-old reforms if you’d like to know more.
High co-pays and deductibles make it too expensive for us to actually use our pricey COBRA insurance plan. We already have a pile of medical bills worth thousands of dollars, all of them due to billing errors. Anne has spent hours making phone calls and writing letters to set things right. And yet, the same providers that screwed up their billing are now turning us over for collection. This would not happen anywhere else in the civilized world.
Only government can fix an overpriced system that rations rudimentary care at badly inflated prices, and then screws up the accounting. The status quo is clearly unacceptable. Everyone should be able to agree on that much. Don’t feel too smug about your affordable job-based health plan. One serious illness or defective child could ruin you. Medical bills cause the majority of personal bankruptcies.
I haven’t read the Byzantine bill currently being shaped by Congress. I wouldn’t understand most of it if I tried. But from what little I do understand, it merely tinkers around the edges of our capitalist system without addressing its inherent flaws…and it gets more watered-down every time Obama tries to compromise. Congress is too timid to enact the real reforms that we need and the president is too conciliatory.
First: Health insurance must be separated from employment. We could eke out survival on our self-employment income if health insurance didn’t compel one of us to hold a conventional job. Nobody should be trapped in a job just because of health insurance. And, as an employer, why should I be in the insurance business at all?
Second: Health insurance should not be a for-profit industry. The profit imperative conflicts with granting payouts and the marketplace can’t work when consumers don’t see the prices, don’t pay them directly, and lack the knowledge needed to comparison shop. Health care is a service that everybody needs and nobody can afford, and therefore the payment mechanism should be a public utility with a bias toward payment, not denial. Let’s get capitalism out of the health insurance sector entirely.
OH NOZ!!! Socialism!!!! Yup. So what? Capitalism has failed an estimated 50 million Americans. Can government really do worse? The success and popularity of Medicare suggest that government is not as incompetent and inefficient as the capitalists want you to believe.
But Congress is not addressing either of these core flaws. Is their tepid tinkering better than doing nothing? Not if token reform props up the old wobbly system and kills the momentum for revolutionary reform. Maybe it’s better to let the whole system fail catastrophically.
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, September 04, 2009
Friday, August 28, 2009
Whither the American Consumer?
Hither the American consumer:
Total income: +96.2%
Total COGS: +75.2%
Payroll: +29.5%
Net Income (Profit): +411.4%
Year-to-date:
Total income: +11.8%
Total COGS: +11.3%
Payroll: +17.8%
Net Income (Profit): -76.2%
I beat my sales plan for the first time since April, the cost of goods sold is rising slightly less than revenue, I narrowed the profit gap a wee bit while still increasing my own pay, and the bottom line is showing black ink. Not bad for the worst economy since the 1930s.
So what are my prospects as September ushers in another Christmas season?
The macro economy is rising from the dead. Our regional housing market has bottomed out. Having been settled for nearly 500 years, New England doesn’t have open land to plop down the big tracts of overpriced McMansions that dragged down the sprawl cities. And Yankee thrift prevented the average down payment from dropping much below 20%, compared to near zero in boomtowns like Las Vegas; that means that we didn’t have many new homeowners with negative equity. Housing might not lead us back out of this mess, but at least it’s no longer dragging us down. Even the overbuilt sprawl cities are showing a pulse.
Gloom always sells better than good news so dire warnings are still easy to find. Some economists foresee another plunge as collapsing commercial real estate prices drag down more banks and persistent unemployment keeps the American consumer on the sidelines. Three hundred banks have already failed this year and 111 more joined the “troubled” list this week.
Wise men intone that consumers, bloodied by falling retirement accounts and home values and frightened by persistent unemployment, will remain on the sidelines. As a lifelong tightwad myself, I approve. But if everyone was as thrifty as I am, capitalism would have collapsed a generation ago. I have boundless faith in Americans’ instant-gratification materialism – Curio City depends on whimsy, after all. When they see their 401ks and house values rising reliably again, Americans will shrug off their ill-fitting prudence like a fading nightmare and resume the impulsive and frivolous spending that has powered the economy since the 1980s. When you combine a revived consumer with Obama’s aggressive deficit spending (most of which kicks in in 2010), you have the potential for a real boom – possibly even one whose proportions will mirror the recent collapse.
I’m going to buck the wise men. So remember, you read it here first: Gradual improvement will lead up to a robust December and accelerating growth after that. Year-over-year numbers should look quite good as we go up against last year’s most dire months (October through April).
The other possible scenario is stagflation – we get the slow recovery that economists predict while inflation and interest rates shoot up because of all the money that Washington printed this year. In that scenario we continue struggling for years to come. Let’s not dwell on it.
*****************
I braced for a run on free money when I announced the new Customer Rewards Program last week. Didn’t happen. AFAIK, nobody has used the Refer-a-Friend feature to earn an instant $5. Exactly three new customers have created accounts that generated 3 points altogether. One returning customer might have tried to take advantage of the program, but he failed to log into his account and so didn’t earn any points. I’m glad that customer reward points are not going to break the bank, but mostly disappointed that my big innovation for 2009 flopped. Well, it’s a long-term thing that should build momentum over time. We’ll see how it goes.
Following the SCORE exec’s advice, I have been slowly building up cash and selling down merchandise. My open-to-buy is now in four figures and I can begin acquiring new merchandise just as Christmas season gets started. In fact, my rough OTB formula tells me to spend all of my cash on hand; I need to be careful.
I applied again for another new MC to replace the Advanta card that I lost this spring, but I’m not optimistic. The people at Citizens Bank (where I have my business checking as well as a personal account) are notoriously incompetent. The clerk who took my application insisted that I’m a sole proprietor, and not an S Corp, and could not grasp that my store has one name and my company another. Clerical errors will probably sink this application. Still, I'm holding back on placing orders until I get a ruling on this credit card.
Next week: Curious Business tackles healthcare reform.
Total income: +96.2%
Total COGS: +75.2%
Payroll: +29.5%
Net Income (Profit): +411.4%
Year-to-date:
Total income: +11.8%
Total COGS: +11.3%
Payroll: +17.8%
Net Income (Profit): -76.2%
I beat my sales plan for the first time since April, the cost of goods sold is rising slightly less than revenue, I narrowed the profit gap a wee bit while still increasing my own pay, and the bottom line is showing black ink. Not bad for the worst economy since the 1930s.
So what are my prospects as September ushers in another Christmas season?
The macro economy is rising from the dead. Our regional housing market has bottomed out. Having been settled for nearly 500 years, New England doesn’t have open land to plop down the big tracts of overpriced McMansions that dragged down the sprawl cities. And Yankee thrift prevented the average down payment from dropping much below 20%, compared to near zero in boomtowns like Las Vegas; that means that we didn’t have many new homeowners with negative equity. Housing might not lead us back out of this mess, but at least it’s no longer dragging us down. Even the overbuilt sprawl cities are showing a pulse.
Gloom always sells better than good news so dire warnings are still easy to find. Some economists foresee another plunge as collapsing commercial real estate prices drag down more banks and persistent unemployment keeps the American consumer on the sidelines. Three hundred banks have already failed this year and 111 more joined the “troubled” list this week.
Wise men intone that consumers, bloodied by falling retirement accounts and home values and frightened by persistent unemployment, will remain on the sidelines. As a lifelong tightwad myself, I approve. But if everyone was as thrifty as I am, capitalism would have collapsed a generation ago. I have boundless faith in Americans’ instant-gratification materialism – Curio City depends on whimsy, after all. When they see their 401ks and house values rising reliably again, Americans will shrug off their ill-fitting prudence like a fading nightmare and resume the impulsive and frivolous spending that has powered the economy since the 1980s. When you combine a revived consumer with Obama’s aggressive deficit spending (most of which kicks in in 2010), you have the potential for a real boom – possibly even one whose proportions will mirror the recent collapse.
I’m going to buck the wise men. So remember, you read it here first: Gradual improvement will lead up to a robust December and accelerating growth after that. Year-over-year numbers should look quite good as we go up against last year’s most dire months (October through April).
The other possible scenario is stagflation – we get the slow recovery that economists predict while inflation and interest rates shoot up because of all the money that Washington printed this year. In that scenario we continue struggling for years to come. Let’s not dwell on it.
*****************
I braced for a run on free money when I announced the new Customer Rewards Program last week. Didn’t happen. AFAIK, nobody has used the Refer-a-Friend feature to earn an instant $5. Exactly three new customers have created accounts that generated 3 points altogether. One returning customer might have tried to take advantage of the program, but he failed to log into his account and so didn’t earn any points. I’m glad that customer reward points are not going to break the bank, but mostly disappointed that my big innovation for 2009 flopped. Well, it’s a long-term thing that should build momentum over time. We’ll see how it goes.
Following the SCORE exec’s advice, I have been slowly building up cash and selling down merchandise. My open-to-buy is now in four figures and I can begin acquiring new merchandise just as Christmas season gets started. In fact, my rough OTB formula tells me to spend all of my cash on hand; I need to be careful.
I applied again for another new MC to replace the Advanta card that I lost this spring, but I’m not optimistic. The people at Citizens Bank (where I have my business checking as well as a personal account) are notoriously incompetent. The clerk who took my application insisted that I’m a sole proprietor, and not an S Corp, and could not grasp that my store has one name and my company another. Clerical errors will probably sink this application. Still, I'm holding back on placing orders until I get a ruling on this credit card.
Next week: Curious Business tackles healthcare reform.
Friday, August 21, 2009
Upgrade Today for a Rewarding Tomorrow
Alert the media: I’m finally running Sunshop 4.2.0! The upgrade went smoothly, considering that it was my new developer’s first experience with both the software and my store; I’m encouraged about future projects (like the 4.2.1 upgrade that’s due out within weeks). Now I can finally offer a semblance of the customer rewards program that I envisioned in my original site design four years ago. The trick is setting the values high enough to motivate customers without breaking the bank. Three new customers who placed orders on the Rewards Program’s first day didn’t earn points because they didn’t create accounts, but a long-time customer just earned the program's first points a few minutes ago. Nice to see a newsletter pay off!
I had originally set $10 to earn 1 point, with 1 point being worth 50 cents (a 5% rebate). Anne declared that earning 50 cents is not very enticing. So I decided to make the points more valuable (1 point = $1) but harder to earn ($20 = 1 point). It’s still a 5% rebate, but the perceived value is higher...and I can hold double-point promotions with less confusion than raising and lowering the value of points would cause.
Switchables stained glass night lights, once among my strongest product lines, stopped selling entirely when a new competitor appeared. Apparently this retailer is following the “Tentacles of the Kraken” strategy that I rejected as too labor-intensive for a one-man operation. The new store – one of five that they operate -- is named after the product. It sells the entire line (including dozens of cutesy designs that I rejected). Because they carry nothing else, they can offer cheap fixed-rate shipping – something I can’t match because Sunshop won’t let me define shipping costs by product category. That’s a lot of obstacles for me. They have a bigger (and less thoughtful) selection…they are named after the product…their prices are the same as mine…and they have cheaper shipping. Oh, and a brand new, nicer-looking store, too. To top it off they’re outbidding me on most of my keywords. Bummer. I hate when somebody new comes along to eat my lunch…but that’s capitalism for you.
Well, the lunch was free for a long time. Now I face a dilemma: Should I order the new August styles and try to compete, even though the line has died completely? Or should I just try to liquidate my substantial inventory and cede the business to the new kids?
I have longevity going for me. I worked hard to achieve natural page-one Google search results. Shoppers (like me) who run AdBlock, or who ignore paid search ads, should find my store first. Also, some of the many people who’ve ordered Switchables from me in the past ought to come back for more -- customer loyalty again. I'm still in the game as long as I have those two things going for me.
As long as I’m telling fascinating product stories…DayClocks made a decent comeback when I started discounting them. A quick spot check found only one serious discounter ($24.99 on Amazon.com plus free shipping? WTF?). A couple of other stores are still doing the shady old “free shipping” on an inflated price trick. I reduced my discount by a buck to see what happens. I'd love to get full price for these clocks again.
Incidentally, I want to widen this blog’s focus to include more general thoughts about life, politics, the economy, etc. – the context in which Curio City exists, in other words. I’ve said that before, and I’m sure my legions of fans want to know Curio City’s take on health care reform, for example. Such subjects are more likely to win the attention of social media users as I continue to grapple with Facebook and (moan) Twitter. This week I just happened to have a lot of store-related news.
Speaking of Facebook, see that new signup box in the right column? Yeah, don’t be shy. Click that “Become a Fan” button right now. I’ll send you infrequent announcements and, once I have a few fans who aren’t friends and family, special discount codes, too.
I had originally set $10 to earn 1 point, with 1 point being worth 50 cents (a 5% rebate). Anne declared that earning 50 cents is not very enticing. So I decided to make the points more valuable (1 point = $1) but harder to earn ($20 = 1 point). It’s still a 5% rebate, but the perceived value is higher...and I can hold double-point promotions with less confusion than raising and lowering the value of points would cause.
Switchables stained glass night lights, once among my strongest product lines, stopped selling entirely when a new competitor appeared. Apparently this retailer is following the “Tentacles of the Kraken” strategy that I rejected as too labor-intensive for a one-man operation. The new store – one of five that they operate -- is named after the product. It sells the entire line (including dozens of cutesy designs that I rejected). Because they carry nothing else, they can offer cheap fixed-rate shipping – something I can’t match because Sunshop won’t let me define shipping costs by product category. That’s a lot of obstacles for me. They have a bigger (and less thoughtful) selection…they are named after the product…their prices are the same as mine…and they have cheaper shipping. Oh, and a brand new, nicer-looking store, too. To top it off they’re outbidding me on most of my keywords. Bummer. I hate when somebody new comes along to eat my lunch…but that’s capitalism for you.
Well, the lunch was free for a long time. Now I face a dilemma: Should I order the new August styles and try to compete, even though the line has died completely? Or should I just try to liquidate my substantial inventory and cede the business to the new kids?
I have longevity going for me. I worked hard to achieve natural page-one Google search results. Shoppers (like me) who run AdBlock, or who ignore paid search ads, should find my store first. Also, some of the many people who’ve ordered Switchables from me in the past ought to come back for more -- customer loyalty again. I'm still in the game as long as I have those two things going for me.
As long as I’m telling fascinating product stories…DayClocks made a decent comeback when I started discounting them. A quick spot check found only one serious discounter ($24.99 on Amazon.com plus free shipping? WTF?). A couple of other stores are still doing the shady old “free shipping” on an inflated price trick. I reduced my discount by a buck to see what happens. I'd love to get full price for these clocks again.
Incidentally, I want to widen this blog’s focus to include more general thoughts about life, politics, the economy, etc. – the context in which Curio City exists, in other words. I’ve said that before, and I’m sure my legions of fans want to know Curio City’s take on health care reform, for example. Such subjects are more likely to win the attention of social media users as I continue to grapple with Facebook and (moan) Twitter. This week I just happened to have a lot of store-related news.
Speaking of Facebook, see that new signup box in the right column? Yeah, don’t be shy. Click that “Become a Fan” button right now. I’ll send you infrequent announcements and, once I have a few fans who aren’t friends and family, special discount codes, too.
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