After having record sales in July and August, it was inevitable that sales would slow down at some point, and that point came this month. We are currently at just over $2,700 on the 28th of the month and need $88 today to maintain a $100/day average. Our sales have not been this low in a while. Whenever this happens, what I call "entrepreneur's depression" begins to set in and I spent a good deal of this month feeling the "oh my god, what have I done?" feeling that I get whenever the sales slow down.
But after much reflection, I realized that these cycles are part of running the business, and that the sales figure in any particular month does not tell the whole story. There were many, many positive developments and realizations this month that will be game changers for the business moving forward, I believe:
But after much reflection, I realized that these cycles are part of running the business, and that the sales figure in any particular month does not tell the whole story. There were many, many positive developments and realizations this month that will be game changers for the business moving forward, I believe:
- Last month, I began the the practice of writing letters to my customers, on nice parchment stationery, letting them know about current developments, thanking them for their purchases and support and offering them the very best level of personalized service possible. These letters are individually personalized. If the customer is in Germany, the letter is written in German (thanks Google Translate!). If they are in Japan, it is in Japanese. My goal was to make the customers feel a connection and to let them know that they can get help whenever they need it. It is working: levels of customer engagement have skyrocketed this month, whereas in the past, my boilerplate e-mails went largely ignored by customers. Also, I have seen an upswing in return customers - maybe for small amounts, but more repeat business nonetheless.
- I also completed the design of my website, with the only remaining step being to edit all of my imported listings from E-bay, and to set-up my Google Adwords campaigns. I watched all of the Adwords tutorials, as well as some non-Google advice pieces and I now believe that I have a good handle on what I need to do to set up a successful, low cost campaign to drive traffic to my site. That is a major step.
- I have finally realized that I may never get all my material listed online, but that as long as I build a good base of customers who trust me and are willing to order from me directly, it doesn't matter. Having the material to sell is what matters. So that has enabled me to finally accept the slow pace of listing and to let go of what had been a wholly unrealistic goal that was causing me a lot of stress.
- I have also realized that they key to profitability may eventually lie in moving away from classic material eventually toward modern material exclusively, which is completely the opposite of what most of my competitors are doing. What I have come to see is that in the world of E-commerce, your labour is your biggest cost, and the more quantity of one product you can have, the more you can streamline your systems. The problem with selling classic stamps online is that they are all unique. If you spend 10 minutes to list a stamp, you only have one chance to make a profit on your labour, for once the stamp has sold, that listing is dead and cannot be re-listed without a new description and a new scan. If you believe your time is worth $20 per hour, then every 6 minutes has a notional cost of $2. If the average listing takes 12 minutes, say, then you have to make a profit of at least $4 on that listing just to cover labour. While that can certainly be done, it is much better if you spend 12 minutes listing something in a quantity of 50 or 100, because then, you make profit every time there is a sale. Sure, your dollar amount of profit per sale is lower, but the sales are much more frequent because the stamps are cheaper. With 50-100 items on hand, that is 50-100 opportunities to make a profit. I haven't quite decided yet whether I want to go 100% modern eventually, but I'm thinking about it, and the slow period is what got me started. So slow periods and stress are important catalysts in driving innovation.
On this last point, I want to expand a bit. Modern material has been scoffed at by established philatelists for decades now. Most collectors treat material issued after 1945 as postage, except for a few countries in Asia and Africa. However, it is important to recognize that pioneers and innovators are always laughed at: "invent an airplane? Ha Ha! everyone knows we can't fly!", or "Explore the oceans? Ha! Your ship will fall off the edge of the earth! Everyone knows that!". I now see a tremendous opportunity in stamp collecting, where most people see a dying hobby. I see an even larger opportunity in focusing on the modern, post-1945 period, where most collectors see only "postage". To me, it smacks of a complete lack of vision and creativity, and if you can't find a way to sell a 3c US stamp from 1946 that is in perfect mint condition for more than 3c, I think you aren't very good at selling. Nothing is that cheap nowadays! So why should stamps be any different? I have written about this in detail in another post:
This brings me to the takeaway for all of you entrepreneurs for this month: how do you decide whether you are on to something good and should stay the course, versus realizing that you are pursuing a pipe dream and should quit while you are ahead?
For me, the answer lies in analyzing the fundamentals of your business model:
- Are you getting new customers and new interest for your product?
- Is a larger proportion of your sales and profit coming from your innovative product, as opposed to your "blue chip", established product?
- Are your actual sales of the innovative product growing?
- Do you face significant price competition?
If the answer is yes to the first three and no to the last question, then you are definitely on to something and should not abandon it under any circumstances. If your overall sales are stagnating, it may be a sign that either more marketing is required to reach more customers, or it may mean that you need to broaden your product offering. For example, I can see very clearly that it is possible to make a good living selling only Canadian stamps, but I do not yet know whether it is possible to make a living selling only Canadian stamps issued after 1945. I suspect that it isn't possible and that if I want to make my living this way, I will have to expand and offer modern, post 1945 stamps from other major countries like the US, Great Britain and Australia for example. I may find that once I do that, that I am able to make an even better living. The key is that my sales trend so far indicates that the interest is there, and that there are collectors who are eager to collect modern material. I actually believe that modern material is the key to getting younger people interested in collecting, as they are more lively and colourful, and they are more relate-able, because they depict a world that is familiar to younger people, or if it isn't completely familiar, it is familiar enough. In order to be interested in Queen Victorian material to the point where you are willing to spend the kind of money that these stamps cost you really have to have a keen interest in that period of history, which a lot of younger people don't have. Even if they do have it, young people today do not have the kind of wealth that people from the previous two generations have had. So for this reason, I see the strongest growth coming from the more modern material.
But it is a long, hard road to establish a business selling this modern material, which is why almost no one is doing it. It takes a lot of discipline and thought to build the product offering and to get it listed and promoted. But, the fact that no one is doing it is what makes it such a good long-term strategy: it cannot be easily emulated by the competition, or at least not quickly. Anyone can become a vest-pocket, e-bay dealer, selling $25-$200 blue chip stamp sets. It is quick, it doesn't involve much work. But by the same token, E-bay is awash with these types of sellers, all offering the same thing. So there is a tremendous amount of downward price pressure resulting from the immense competition. So it is worth remembering that the long, hard road, in the end is often the most satisfying and the most impervious to race-to-the bottom competition.
So when you are starting a business, and the going gets tough or sales slow down, it is important to go back and look at the fundamentals of your business model carefully and objectively. If the demographics support your idea, then you should press on. You may have to market your idea aggressively, but you should be able to do it successfully if your initial efforts show that there is a baseline level of demand for your product or service, and that you can offer it profitably.
