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Friday, April 1, 2016

Admirals Are Finally Done And Time For A Step Back To Assess

I was determined, after two months of working on the 1911-1928 Admiral Issue to get them completed by the end of March. So last night, I worked until almost 5 am to list the last of the coil stamps and War Tax issues - close to 100 items in all. I managed to complete it and get off to bed for 5 hours of sleep before hitting it hard this morning with a long post to my Canadian philately blog. In two months, I had listed over 1,000 stamps from this issue, making this possibly the largest on-line offering of mint Admirals anywhere on the internet. Needless to say I am pretty exhausted. So I decided to spend the bulk of today stepping back and assessing where things stand now, how the business has performed up to this point and trying to re-gain some perspective to combat the daily fear that has begun setting in. You see, our cash reserves are running out. They aren't low yet, but I can see them decreasing and I know that the business has to be generating enough to support Steph and I while generating a return for my investors. It is not there yet, so I have been naturally concerned.

I haven't really taken the time to analyze the data yet, as I have a tendency to just want to move forward with listing material. One thing I have to explain here before I continue is that the process of setting up an online store is a LOT different from setting up a bricks and mortar store. How? Well the biggest difference is the amount of time it takes to "stock the shelves" so to speak. With a bricks and mortar store I could have had my stock all set up and ready to sell in 1-2 months. However, because everything has to be scanned, entered into E-bay, and catalogued, this process will take at least 18 months, if not twice that long. I'm starting to realize that 18 months may be what I need to get Canada alone set up to talk less of Nigeria and the rest of British West Africa. Of course, because I realize the importance of marketing on a daily basis, I have spent a lot of time developing my blogs and posting content as I go along since that is the most efficient way for me to document and share my knowledge. However, this fact about the time required to "set-up shop" has impacted the order in which I have chosen to list material. I had a hunch when I set out to establish this business, just based on 5 years of casual operations on e-bay that the average sale would be around $20, so I knew that the fastest selling material would be items in the under $20 price range. In other words most of the modern material.

If I had been focused on hitting high sales from the beginning, it would have made sense for me to list the cheapest material first. However, I didn't do that. Why? Well three reasons:

1. If I listed this material first and it sold too quickly, I would have to spend a significant chunk of my time buying and replenishing inventory that had sold and would not have much time to deploy my more expensive stamps.

2. Listing the expensive and rare material first is critical to projecting the right image: that of a serious player who can supply every collector need. Even if sales of this material are low because it is long-tail merchandise, having the exposure on e-bay and Google is critical to building the brand. This is especially so because it is generally the more expensive stamps that will be the subject of most specific Google searches.

3. Having the material listed for a while gives me a chance to see what the market conditions are for it. I am not following a low price strategy, due to the fact that it is difficult and time consuming to replenish this kind of inventory. Charging a higher price allows me to keep a larger amount of it in stock and then I can tinker with the pricing and see what the impact is on sales.

Thus my focus has not been on having high sales. Rather, my focus over these first 18 months has been to try to get the store set up as efficiently as possible, while doing everything I can to develop our brand.  So to that end, I have done very focused listing, where I gather together all the material I have on a particular issue and list everything I have en-masse. I have now covered all the material from 1851 to the end of 1926 and the Queen Elizabeth definitives covering the period 1952 to 1962. Steph will soon be listing all the post 1952 material en-masse. My next major block of material to list is the rest of King George V and all of George VI. This material is still relatively expensive, but there are lots of $20 and below items as well. So if my hunch holds true about the average sale being $20, then sales should increase quite a bit as this material is listed. Plus the advantage of doing it this way is that most of this material is easy to replace, so if it does sell quickly, then with the the early stuff under control and out of the way, I can replenish the modern material without cutting too deeply into my listing time.

So the question is, how have the numbers actually played out over the past 8 months? I decided to crunch some numbers and look at:

  • Total sales dollars for the month
  • Total number of items sold for the month
  • Average sale dolars
  • Total number of new customers that month
  • The total number of new customers who went on to become repeat customers
  • The percentage of repeat customers
I haven't been able to figure out how to insert a table here, so instead I took the following picture of my computer screen, which shows the various statistics:

My monthly periods run from the 23rd of the month to the next month. This is because I didn't really start listing material until July 23, 2015. So any analysis of sales should start then. As you can see, sales grew steadily until late November 2015 and then they decreased for the Christmas season, which is not that surprising. Most people don't give stamps as Christmas gifts because of how specialized the hobby is, and most collectors at this time are spending their discretionary income on their loved ones. That slump is felt by nearly every retailer, and it usually continues well into January. Steph was the one who pointed this out to me as I hadn't factored that in to my business plan.  In February and March, sales have picked right back up again. They are not as high as November, but then again November included two stamps which sold for $3,000 USD. So if you factor those two stamps out the sales these past two months have actually increased. The number of new customers each month is stabilizing at about 30 a month, and the number of those who are becoming repeat customers is increasing all the time. The number of stamps being sold each month is increasing steadily, and the average sale is around $20 - just like I thought!

What does that indicate? Well I think it means that sales would have been a lot higher these past 8 months, if I had listed more material that was within these customers price ranges. I would have seen a higher number of repeat customers in those early months. The number of repeat customers has been increasing largely because each month, I have a wider and better range of material on offer than I had the month before. All of this suggests that we should see a major increase in sales once the modern material is listed. It also indicates that I should be going back to these customers who have not bought in a while and marketing to them, since they won't have any idea of what the store looks like now compared to how it looked when they last shopped. I will have to look into the anti-spam laws in Canada to see what I am allowed to do in this regard. My understanding though is that I can contact any non-Canadian customer at will and it is only the ones in Canada that I have to be concerned with. 

So, all in all, it would appear that my business plan is unfolding more or less the way I had envisioned. We have $191,000 of priced stock listed now, $40,000 of which was listed this past month. My original business plan predicted a sales rate of roughly 3% of my priced inventory from the month before. So on $150,000 that translates to $4,500. So sales for March are pretty much bang on compared to my business plan. In April, we would hope for around $5,700 if the 3% statistic is accurate. 

Let's see what happens!


  1. What do your sales have to be in order to 'make a living' - say $60,000 a year NET - a relatively low wage for 2 ppl living in TO.

    It seems to me that the investment in inventory to do that will have to be HUGE, and that your ROI is extremely low.

    1. An excellent group of questions.

      To make a living, as you put it, sales would have to be in the order of $75,000. The ROI is actually extremely high because my cost of sales is low. The inventory does not sell quickly, so yes the investment in inventory has to be huge, but it is already made. My inventory is close to $1 million, with only 15% of it listed so far.

      That investment will be sufficient to more than generate that income eventually and actually the business will reach a point where it grows at a geometric rate as my reach expands globally.

      This is a very long term strategy and a lot of thought and planning has gone into this. It is hard to explain in one post, but I am attempting to reveal little tidbits of it as the business unfolds.

      Yes the return is not immediate and yes the wages are going to be low initially. But that is true for any business that is built from the ground up. Tell me - what business do you know of that you can start that will make you more than $60,000 a year right out of the gate? The only way I know of to do that is to work for someone else - a position that you can get stuck in for life. This is all about trading that security and certainty for a chance to build something better.