posted on September 20, 2001 08:08:15 PM newA Christmas Story
Imagine if you will, that your eBay business has done so well, and you have been so frugal with your money, that you now have the opportunity to open a retail shop at your local high-traffic shopping mall. And you have finally discovered how to purchase your wares in bulk straight from the manufacturer so that you can now compete aggressively with your fellow merchants. A true blessing if ever there was one.
The last few months have been a little slow, but you have every confidence that things will pick up this Christmas season. With any luck, and a lot of hard work, you should even be able to hire a few more employees come the start of the year. You are prepared to do whatever it takes to ensure that your profits are good this year, so that you can continue growing your business and expanding your product line. By this time next year, you might even be able to open a second shop across town.
But tragedy strikes -- an unconscionable evil hits another part of the country. You, as a caring and generous person, want to do whatever you can to help those who fell victim to this attack. Many of your fellow merchants have risen to the occasion and given large cash donations to help those in need, and you have done no less. In fact, you and your family discussed the matter, and decided to forgo any personal luxuries for the coming year so that you can contribute all that you can to help those who need it most. You do this willingly and without reservation, since you know that others would do the same for you.
You worry not for your own needs, since you know that the substantial cash reserves you gave will be replenished over time, and will in due course overflow once again. Besides, the best and most profitable portion of the selling year is nearly upon you. As part of your discussion with your family, you have even decided that you will continue to give throughout the year from the generous profits that will surely come this Christmas season.
You are excited to learn that the new mall where you set up shop has decided to help as well. They have agreed to do everything they can to donate to this most worthy and deserving cause, and to do so abundantly. This is most pleasing to you, and you ask what you can do to assist them with the project. After much deliberation, they come up with a proposal to help those in need, and explain what you and the other merchants can do to ensure that it delivers the greatest impact. The mall has decided that the best way to benefit those who so greatly need help is to run a mall-wide promotion to raise money. All of the merchants are encouraged to participate.
The promotion is a special sidewalk sale throughout the entire mall. Every merchant who chooses to participate will put out special merchandise at the very front of their shops and into the vast hallways which make up the mall. As part of the plan, the entire sale price of all sidewalk items will be donated to this great and noble cause. And the merchants will even pay the sales tax for you out of their own pockets. That way, every single penny will go straight to its intended destination.
This sounds like a worthwhile plan, and most of the merchants are eager to begin selecting merchandise to sponsor in the program. The mall patrons too are very much excited, since all the special merchandise will be right out front, and easy to find. As an added bonus, the merchants have even decided to pay the sales tax on all these special items. That way, every last cent of their purchase price will go to help the victims of this terrible disaster. All this makes the patrons very happy. And the merchants are happy too.
A month goes by, and all the merchants are so very pleased by the amount of money raised through this wonderful plan. They are so happy to be part of such a great and innovative way to help others.
Two months go by, and a few scattered merchants have left the mall. But no one knows why. Those that remain are more committed than ever to ensure that the program reaches its goal.
Three months go by, and only a small handful of merchants are left in the mall. And those that remain are puzzled at their plight. Nevertheless, those brave few will do whatever it takes to make the program a success.
Christmas finally arrives, and there are no merchants left in the mall. And there is no one left to wonder why.
(c) StormThinker 2001. Permission is hereby granted to redistribute freely, with proper credit.
[ edited by StormThinker on Sep 22, 2001 12:20 PM ]
posted on September 21, 2001 09:34:00 AM new
Stormthinker: Any chance of seeing the "sequel"....where the mall manager goes on CNN to blame the merchants for the reason HER mall's profits are down????
posted on September 21, 2001 09:50:43 AM new
Ah yes, and somebody breaks the hideous lamp with the shapely legs for a base but the sad thing is...there is nobody left to buy a new one from.
posted on September 22, 2001 01:18:49 PM new
you left out that the merchants in the mall are also validating parking and filling your tank with gas.
It's unfortunate that the mall just didn't take up a collection like every other charity under the sun, in this way you could just budget a percentage of every sale to go to the charity and it would be billed separately when you paid your rent at the end of the month.
Truly it looks like the mall was more concerned with the "eye candy" aspects of such a sale than if it would damage sellers.
It looks like these sellers are do for some free rent months...........
posted on September 24, 2001 12:30:18 AM new
Stormthinker ~~~~ Very Very Very Realistic story. I can see it happening, and although e-bays inital intention may have been good (WE WILL NEVER KNOW) they shoudl have thought about this marketing move a little more before they did. I think it would of been much better if they did it over maybe 2 weeks, AND EBAY EITHER MATCHED THE FINAL VALUE OF THE ITEM, OR AT LEAST DONATED THE MONEY FROM THE LISTING FEE AND FINAL VALUE FROM EACH AND EVERY AUCTION. From the surface it looks like ebay is trying to do good. BUT IN REALITY, IT IS A SCAM!
posted on September 24, 2001 08:32:16 PM new
And in the far back end of the mall, where only the dedicated shoppers go to get the items not available elsewhere, the Back Alley merchants chuckle with glee!
They were wise, and only donated what they could afford, leaving them a small cushion of cash to tide them over till the sidewalk sale ends.
They remember when the mall had few merchants and many customers, and profits were high, and what happened soon after. They remember when the mall raised the rents. They remember when the mall instituted other Customer Incentive programs that hurt the bottom line. They remember when the mall started advertising, and suddenly everyone was a merchant!
As they watch their fellow merchants fold, the "Back Alley Cat" merchants are counting their profits and waiting, waiting, waiting.
Their wares might not be the flashiest or the most popular, but those that gotta have them still pay happily to get them... and there just are not many of these rarities on the sidewalk.
The Alley Cats purr with pleasure at every merchant that closes their store and leaves the mall forever...less competition for them!
Also, because they know that their superior business plan of a cash reserve for hard times might leave them lean and hungry, but they will still be in business!
The merchants might go, but the buyers remain... because the other malls in town are run down and ugly, with second hand goods at high prices... or so they heard. (They have never really been there!)
In other words... if you are relying on RETAIL SALES for your shelter, food and clothing, you better learn the rules of the business world: HARD TIMES ARE ALWAYS JUST AROUND THE CORNER. SOMEONE ELSE CAN SELL IT CHEAPER. AND THE MALL ALWAYS PUTS THE CUSTOMER FIRST.
THis too shall pass... will you be around?
I will.
posted on September 24, 2001 08:48:07 PM new
ibuypaper,
Perhaps you are not aware that 90% of all profit during the normal retail cycle occurs during this 100 day AFA prison sentence. It is hard to imagine any merchant in any market who has cash reserves sufficient to carry them through the entire Christams season without sales, and also sufficient to cover the loss of 90% of their yearly revenues normally used to carry them through to this time next year.
The 100 days of the AFA program may as well be 328 days (90% of one year). It works out the same either way. Do you have reserves accumulated during the slow 10% of the year to carry you through the remaining 90% with no profits? The Christmas season is *not* just one of many equal seasons of the retail year -- it is the entire retail year. If eBay did this to us during the already slow summer months, we would all be yawning instead -- for no profits are made during that time anyway.
posted on September 24, 2001 09:29:32 PM new
Storm, I am aware of the 90% theory.
For what it is worth, between my parents and myself, I have intimate knowledge of 3 small business, each with yearly sales between $50,000 and $200,000. And NONE of them made anywhere NEAR 90% of the yearly gross sales in the 100 days of Christmas. The largest percentage was about 40%.
I am also aware of "Dont Count Your Chickens Till they hatch". "Save for a Rainy Day." "A Penny Saved is A Penny Earned."
And a bunch of other parables and sayings that caution one to Be Prepared.
If one is using ebay as their business income (and anyone who is relying on it to eat and pay bills is a business), Then they should have done their homework. They should have planned for slow times. They should have planned for sudden overhead increases. They should have planned for economic downturns. They should have planned for disasters.
I am just as distraught and upset over ebay's timing and structure of A4A and the effect on other sellers. I, myself, can not afford to list many A4A auctions. Ebay clssically does everything from a Buyer perspective; they are a business. It, palin and simple, SUCKS.
I have just lost patience for the sellers on ebay who have not a clue. Anyone running a business who does not have a cash reserve, or a line of credit available, to get them through at least 4 months of bad times is just plain near-sighted. ESPECIALLY on ebay, where it is well-known that nothing is constant.
I have put at least 20% of gross sales in reserve for bad times ever since I started selling on ebay. I have a bank line of credit and a low interest credit card available for bad times like now. (And for sudden windfalls of product.)
I planned for a 4 month sales slump.
Sure, I will quite possibly be hundreds of dollars deeper in debt by the time this is all over. But I have planned for it! That is the point.
What happens if the seller suddenly has a medical emergency? What happens if their house and all their inventory burns? What happens if a flood washes them out? What happens if their car is totalled and they can't buy or ship?
No business can survive with a month-to-month cash flow structure.
Every single seller should LEARN from A4A, and prepare for the NEXT TIME.
A4A sucks, but if a seller plans for the 100 Days of Christmas to make or break them... well, they are now broken.
posted on September 25, 2001 06:05:46 AM new
<b>ibuypaper</b> Very good points. In this society it is very easy to fall into the trap of living from "Paycheck-to-paycheck" or week-to-week. You have given me a lot to think about. Everyone knows that they should have emergency funds tucked away, a certain number of weeks income available for hard times. But putting a plan in place is hard for some, me included. But definitely your reminder has not fallen on deaf ears. Especially in the name of business, there are always slow times to be expected, though you may not know when, sales are not going to be consistent 100% of the time. In the future I am going to put away a certain percent (not decided on yet) of sales for a "rainy day", or a great deal on inventory, that was a good point too...
posted on September 25, 2001 10:16:42 AM newI have intimate knowledge of 3 small business, each with yearly sales between $50,000 and $200,000. And NONE of them made anywhere NEAR 90% of the yearly gross sales in the 100 days of Christmas. The largest percentage was about 40%.
ibuypaper, I never said that 90% of gross sales occurred during the Christmas season. I said that 90% of PROFITS occurred during that time. (By profits, I am referring to business profits, not individual item profits. In other words, taxable income.) The reason for this is that your fixed costs like rent, insurance, etc are FIXED throughout the year. During the slow summer months, you still have to pay these costs even though your sales are down. You may well be making sales during the summer, but you are not making PROFIT. And most businesses don't. In retail, an apparently small difference in sales (say 10%) can make a huge difference in profits -- because your fixed costs for rent etc were already paid out of the first portion of your sales. This means that you get to actually KEEP your profits on that last little bit of sales, instead of giving them to your landlord.
It doesn't matter how great your sales are during the non-Christmas season, if you haven't made enough money to cover the rent that month, you haven't actually made a profit -- even though you are making a profit on the individual items that you sell.
[ edited by StormThinker on Sep 25, 2001 10:21 AM ]
posted on September 25, 2001 11:47:41 AM new
StormThinker, your post is great and makes a number of points about good ideas gone bad, how parts make up the whole, and others.
ibuypaper also has good points about unique items, smart shoppers, and strategies to live through tough times.
I've always been fairly conservative with money, and like to have a couple of months reserve on hand. In the last thirty years, I've lived that way about 90% of the time - there are times when I couldn't, but I always worked to get back there.
For the people who will make this xmas season their last on eBay or in retail, I feel bad. Mostly because I've grown to love buying and selling, and would be sad if I had to give it up completely.
I've read these boards, I've picked people's brains, I've saved my money within my limited means.
I don't remember when you could just put anything on eBay and it would sell - I wasn't there that long ago. So, I busted my a** to learn how to make a living doing this. My point is it was never easy.
I hate the A4A auction idea because of many reasons. My perception is that eBay used a horrible tragedy to promote their business. While some think the ends justify the means, I'm not among their number.
I can see both scenarios happening - the mall almost closes down, and few merchants begin anew.
Shake-outs happen a lot. Some will work harder to make the same or less money than last year. Some will quit. Some will even see better profits. It's just the way it is.
posted on September 25, 2001 12:20:08 PM new
StormThinker have you checked those s4s auctions that many sellers have started? S4S, s4s or Sellers for Sellers is the ebay selling community's way of helping each other through the slow time that we have been faced with. We welcome all buyers and sellers alike. Check ebay chat under auction listings. It is the most positive thing that this group of people came up with. There was almost 1000.00 auctions listed as s4s auctions. We are bidding on each others and just found it to help with the void that I have been lefted with. Check it out... I joined and my heart sings at what I have found there...
posted on September 25, 2001 12:21:19 PM newStormThinker:
Great story!
As a stray cat, though, I prefer to strut with ibuypaper and the alley cats.
>>>your fixed costs like rent, insurance, etc are FIXED throughout the year<<<
eBay costs are not fixed.
Final value fees are not fixed, nor are listing fees and electronic payment fees.
Closer to the idea of "percentage rent".
What are you considering as "rent"?
Server cost?
A minimal percentage for most of us!
posted on September 25, 2001 01:21:47 PM new
Zoomin,
For pure eBay businesses (i.e. for sellers who don't also have a B&M business), it might be more useful to substitue the terms "discrentionary funds" for "profits", and "household expenses" for "fixed costs". Using these alternate definitions, I think that many eBay sellers can relate to how that last $100 can make a big difference to their families after they have already paid the mortgage and other household expenses that month.
