Well, we all expected it and now it’s here. UPS and FedEx have once again raised their rates. So, in 2009, it will cost about 60 cents more to ship a package than in 2008. More or less, depending on weight, where it’s going, etc. Lots of facts. But assume $10 in shipping costs.

According to our UPS Sales Guy and our UPS drivers (we don’t use FedEx), UPS is having an awful year – drivers are having to cut back on hours, are moving from driving positions to warehouse positions and they aren’t even hiring part timers for the holiday season.

On top of this, the economy is going to slow down next year – in fact, it’s already beginning.

So on top of current slower than normal sales and future sales expected to drop, you’d expect the last thing that would happen would be higher prices for the consumer, right? Wrong.

It seems that these businesses – and this country, in fact – could use a little supply side economics.

Imagine if UPS did not raise their rates and FedEx did raise theirs for 2009. What might happen? People currently using FedEx might switch over to UPS, instead. This would cause UPS’s per package cost to go down, right? They’d have more business and more deliveries on routes that already exist.

Imagine the concept. Lower (or the same) shipping rates yielding more income and lower costs. Voodoo economics works. It’s obvious, but why don’t these heads of these giant companies get it?

FedEx, in turn, would lose business because it went to UPS. So, in 2010 FedEx would probably cut their costs (if they were smart) to stay competitive with UPS. Prices would go down for all of us consumers, allowing businesses to ship at a lower cost, which would save shoppers’ money – so they more to spend at other places. So everyone benefits.

Makes sense, doesn’t it? It seems simple and obvious to me – even our UPS sales guy agreed (though he could have been playing nice) as he seemed mystified by the price increases as well.

Another idea might have been for UPS to acknowledge the slow economy and its effects and not increase rates this year to show that they want to help businesses keep their costs low. That would have garnered a lot of good will from companies who, quite frankly, are tired of being bent over every November with a predictable and confounding rate increase.

But, alas, USPS – who isn’t raising its rates in 2009 as far as I know – will get a bigger share of the shipments. Thus, UPS will have to deal with higher per package costs to take boxes from us. Maybe they’ll learn at some point. Maybe not, but their stock price is telling us everything we need to know.

So today, I get two letters in the mail. One from Coynes Company and another from Enesco.

Coynes’ letter says:

As many of you know, Country Artists in the UK became insolvent and on August 10th went into receivership; further on August 11th Enesco LLC purchased certain assets of CA UK out of receivership. Since then, Coyne’s has been working very hard to procure all the Country Artist items that you have ordered through us. Most of the product we ordered on your behalf did arrive into Minneapolis, but Enesco has prevented us from taking possession and as a result we have not been able to fill some orders completely.

Coyne’s has sought the assistance of the courts to be able to obtain the product to fill your orders. At present the court has declined to assist Coyne’s. Coyne’s, however, continues to pursue all legal remedies and will advise you of any changes as they develop.

The good news is that we do have some inventory available for immediate delivery and are offering some very attractive special to try to help you through this period of uncertainty. Please find the enclosed sheet detailing the specials and you can also find them online .. (blah blah blah)

So no wonder Coynes has not been able to deliver many items to me lately. We have about 20 items on backorder with them, mainly a Breed Apart and Tuskers but some Country Artist items too (no quick link available, sorry). I wonder why Coynes, when I call them about the out of stock items, does not mention this little issue with Enesco? It’d really help make me understand why there is such a delay on some rather popular items.

Also, today, I also get a letter from Enesco:

In August 2007, Enesco bought certain assets of Country Artists out of receivership, with the intention of distributing Country Artists’ products globally. It has always been Enesco’s intention to have an orderly transition and integration of Country Artists into our operations.

As part of that transition, Enesco made reasonable efforts to enter into a distribution relationship with Coyne’s, including to attempt to order fulfillment through 2007. Those efforts included releasing all Country Artists’ products for which Coyne’s had already paid for, prior to Country Artists’ receivership. Enesco has not held back from Coyne’s any paid-for product. Ultimately, however, Enesco and Coyne’s were unable to reach a long term agreement.

Coyne’s has filed a lawsuit against Enesco, seeking to prevent Enesco from selling CA products in the US. We believe that the lawsuit is frivolous and have filed a motion to have the case dismissed. In addition, based on the court’s determination that Coyne’s is noe likely to succeed on its claims in the lawsuit, the court has denied Coyne’s request for short-term relief prohibiting Enesco from selling Country Artists’ products in the US.

The lawsuit has temporarily delayed Enesco from launching Country Artists’ brands into the US. However, we are working diligently to support you through the 2007 holiday season and continuing through 2008 and beyond.

While the comprehensive CA line will be available in January 2008, we would like to inform you that limited quantities of select CA products will be available to ship for the holiday season. Blah blah blah.

Reading both these letters as they came in today was pretty interesting. I’m no expert, but it seems like Enesco is going to come out ahead here and get the Country Artists line. Enesco, much like Department 56, is really gobbling up the smaller lines lately in an effort to reduce competition.

I, for one, hope Enesco does come out on top. Nothing against Coyne’s – I like their company and products. But Enesco would not previously do business with us because we are web based only. Given that we already carry this line that Enesco now distributes, I can’t imagine them turning us down for an account again; which should also allow us to carry quite a few Enesco products next year.

Here’s to hoping.

We’ve been selling our products on Amazon for about 3 or 4 months now and I’ve begun to notice a pattern with the sales. It seems like we get 3 or 4 good weeks of sales, followed up by 2 or 3 weeks of slower sales. I’m highlighting this trend with a graph of our sales over the past month (numbers obscured, just showing the concept).

amazon-sales.jpg

You can clearly see the rise, the steady sales, the drop, the rise again, then the last dip. Over the past weekend, sales have really shot up once again and we’ll probably do record sales over the weekend for our items on Amazon (thanks customers!).

I’ve been trying to pin down the reason(s) for this. At first, I thought it might be feedback related; but our feedback was trending very positive (about 92% positive) before the latest dip, which was about 2-5% higher than before and we also have more products in stock than earlier in the season. So that’s not the cause.

We’ve also been updating UPC codes for our products, so they relate better with current product on Amazon. Sales did not rise or fall after starting to include those to our feeds, so that is not the cause either. On this note though, we’ve noticed that bigger companies (Target, for example) are using the improper UPC codes on some products which causes problems. Since they are the “authority” for some products, their information supercedes our own. This has caused a few problems over the past week, where Target claims a given product is 72 inches long, when it’s actually 36 inches. Target uploaded the product as 72 inches, using the 36 inch UPC code. Nice, Right?

I’m guessing that Amazon somehow cycles the sellers around, to make sure everyone gets their products listed well on average, instead of having a few people always appear on top. This makes quite a bit of sense; showing different results all the time would help customer retention.

Either way, the ups and downs are very confusing. We are just hoping that the cycle is up during the busy Christmas shopping season.

Having upgraded my warehouse twice (from 1,200 sqft to 4000 sqft and currently at 6600 sqft), we’ve learned the warehouse layout is probably the most difficult part of managing inventory. With an ever growing product line, properly arranging shelves, rows and items is essential to an efficient business.

We’ve made many mistakes in this regard, and are paying for this mistakes now. So here are some easy mistakes you can make:

  • Not anticipating growth (adding new skus, specifically)
  • Not preplanning product sizes
  • Not arranging shelves properly

 I’ll discuss these one by one.

Not anticipating growth

Each time we moved; we had to rearrange our products. When putting items on the shelves again, we never left open space which would allow for future skus that are related (thus making it logical to keep them together). Having to move large sections of boxes/items later is a real pain, and a needless waste of time.

Not preplanning product sizes

This was our biggest mistake, I believe. When we first started looking into shelving, we looked at auctions. We spent about $100 on shelving that would have cost us about $1000 regularly. A great deal – always check out local auctions before going to a retail outlet for racking (even if it used; auctions get you a FAR better deal). They were all pallet racking. We fixated on this and continued to buy pallet racking, even though many of the items we carry are very small. This results in not only making items hard to put on shelves but also leads to lots of dead space (air) that cannot be used.

So, think about what you are selling, not only now, but in the future. Most pallet racking is between 36 inches and 44 inches deep. We’ll discuss problems and issues with this later. Pallet racking shelves are difficult to adjust after they are assembled (especially if you buy used ones!) so we recently purchased these (96 inches long x 24 inches deep x 84 inches tall). Shelves can be adjusted about an inch at a time and can be done in seconds, which makes it perfect when a product line changes or you want to put different stuff on the shelves. Buying extra levels is rather cheap too, so increasing the system from 3 shelves to 5, 6, 7 or more can happen very cheaply.

These are perfect for smaller items as well, but Rick pointed me out to this item as well, which he says is perfect for even smaller items. Look at how many skus can fit into a small area. That’s awesome; but we don’t sell stuff that small. At least not yet.

I guess the moral of this is; don’t get married to one type of shelf. I’d recommend buying shelves as you need them, rather than filling a warehouse with shelving in anticipation of future needs. Changing or moving shelves later on can be really difficult.

Not arranging shelves properly

When arranging the warehouse, I think its best to work from your walls and then move inward. The walls are the most difficult to arrange, and the biggest lost space in the warehouse. We currently have 44 inch shelves against the wall. This is stupid, because it is hard to reach items in the back of the shelf – if indeed items are even sitting back there. Unless you are going to put large box items against the wall, I’d recommend putting shelves against the walls that are about 24 inches deep.

When working your inner shelves, think about your arrangement before you do it. This is probably part and parcel with buying shelves as you need them instead of buying them in advance.

Are you planning on pulling product from one side of the shelf or both sides? Large items can typically all be pulled from the same side, smaller items probably from both sides. I’d try to keep a row consistent; if you make a section with items to be pulled from one side, do it all the way down the line. Other way around as well.

So, if you have a row of shelves where you pull from one side, instead of making an aisle on the other side, back up another row against it. This lets you double your rows without taking up un-necessary room. With my excellent photoshop skills, I demonstrate how much more efficient this is:

Warehouse Shelf Layout

Each of these layouts features the same number of shelves and the same number of sides to pick product from. The one on the left has 4 columns of shelves – one against the wall (picked from one side), two in the middle (picked from two sides) and one on the left (picked from two sides).The one on the right has 6 columns of shelves. One against the wall (picked from one side), 4 rows of shelves in the middle (picked from one side each) and a row on the left (picked from 2 sides).

Both setups – if given the same number and types of products – can hold the exact same number of items/skus. The layout on the left takes up about 20% less floor space, allowing you to maximize your total warehouse space far more efficiently. If you have a lot of large products (or ones that you stock a lot of), the layout on the left is more a far more optimal setup (and probably pallet racking is a good idea for those shelves). If you carry a lot of small products (and you can ensure picking from the right AND left sides of the row), then the layout on the right is better for you (and probably normal shelving – not pallet racking) is your optimal setup.

Many companies will have a combination of this of course; but remember – think before you put down rows of heavy shelves that are difficult to move in the future.

Just coming back from a tradeshow, I had some thoughts on what it takes to start up a business and grow a business, looking at it from a pure cash flow basis.

If you are just starting out and do not have a lot of money to spend, you are going to have to resign yourself to carrying items that everyone else carries. Usually from dropshippers. A dropshipper is a company who is willing to ship product for you. They stock, you sell, they ship. The profit margin here is usually low and the costs involved are higher on a per order basis, usually because of shipping fees, handling charges etc. So, you will have a hard time becoming competitive. But; the initial risk is very low.

As you start stocking stuff, costs go up, but profits do as well. Since you buy in quantity, you can get better prices on items, controlling your shipping costs better and maintain a more unique type of product. Less competition always equals better profits.

As you get bigger, you can consider bringing in a container from overseas. You’ll have to buy -a lot- of stuff to do this; but your products are (possibly) even more unique than the previous two options. The downside here is initial investment. It can be very high. I’d have to say (based upon the 2 containers I’ve brought in) about $20,000 each time. Plus it takes more time to get the stuff in stock. But when you do, you usually have plenty to sell. And the profit margins are higher (about 50% higher than stocking product) – but it can put a crimp in your cashflow if you are not careful.

Here’s the quick and dirty rundown of the concepts here:

  • Dropshipping: Low Investment, High competition, Low Uniqueness of Product
  • Stocking: Medium Investment, Medium Competition, Medium (to High) Uniqueness of Product*
  • Importing Direct: Large Investment, Low Competition**, High Uniqueness of Product

* If you are a good buyer and find the right vendors; it is entirely possible to get product that virtually no one else sells online. Thus a “high” uniqueness is very possible.

** Keep in mind that no matter what you sell, if its popular enough the big monsters of competition will always be there (Walmart, Home Depot, Target, etc), but you have less competition from other small to medium businesses. And that is key.

Last year, Mother’s Day week was our biggest non-christmas day in terms of both orders and number of boxes shipped out. That was 170 shipments out the door. Given our size, that’s pretty good, I’d say. And I kept saying last year that if we did about 80 orders/day on average, I would barely even try to grow the business, just maintain its current level and be perfectly happy there.

This year; things have changed quite a bit. I’m being a little more ambitious. We’ve added several new lines of product (bathroom and a greatly expanded kitchen line as well) and while that hasn’t paid off (quite yet!), all the work done last year is paying off in droves. This week is, again, Mother’s Day. We shipped out 299 boxes on Monday and we did another 177 boxes today. For comparison, our busiest Christmas shipping day was 400 boxes. So, quite an improvement and an accomplishment!

It was unfortunate that the Hardware Show was in Orlando this week, which made it virtually impossible to attend; but all in all, I think it was worth it. A very hectic work week though. Our new employee has been doing great (only here a month and knows location of just about everything that regularly sells). But still, I don’t think we are quite set up for such a volume of orders. Running around like headless chickens; that was everybody today and this week. Fun, fun!

I’m hoping for a little bump from the new sites we’ve just put our products on; such as Sortprice.com (can be seen here and also here). We’ve also signed up with PriceGrabber. I’m not a big fan of comparison shopping sites (the conversions are low), but we got a bunch of free clicks and will see if the conversion rate is steady or somewhat decent. 2007 is shaping up to be a good year.

Can’t do it without all the wonderful (sometimes not) customers that shop with us and visit. And especially to those that recommend us to their friends/family. I know we get a few of those!

After a long wait, we’ve finally implemented product videos onto one of our sites. Pretty simple to do, through You Tube. The compression makes the color look a little odd, but it serves its purpose. Here’s a quick link to a product so you can see a sample of how we’ve implemented videos. It’s pretty simple really (well, for any site other than a Yahoo Store).  Thanks to Don for working on Good Friday and getting this completed for me. It works great and easy to use. Don is always good at that!

I wish YouTube had an autoplay feature and an auto-repeat feature as well. The videos for these items are only 10 seconds long and have no sound. I see no reason for them not to start working without any interaction.

There are days when I wonder “Is copywriting worth it?” The big stores, Amazon, Target, Walmart, et al, do not invest any time in copywriting for products. They take the simple “just the facts” approach to an item, completely overlooking ambience, personal impressions, etc when displaying the products they sell.

I pay someone to write content for me that does just that – add ambience to a product. Sometimes, I wonder if its worth the expense and extra time it takes to put product online. Occasionally, that question is very difficult to answer; other times it is much more simple.

Today, my copywriter sent back about 200 product descriptions to me, taking me about an hour to put them online and in their proper categories - finally fleshing out the new line of products I mentioned in an earlier post. Well, no less than an hour later, someone comes onto the website and purchases about 15 of those products and a few others as well.  As Borat would say, “Nice”

So, when I ask myself in a week or so, “Is the expense worth it?” I’ll have that answer once again.

Quick turnover is the lifeblood of the retail business; too much money tied up in inventory is a killer, and anything that helps speed up turnover is a good investment. I think that’s a good lesson for today.

For the second time this year (already), a vendor we buy products from is going into receivership. This time, it’s Pacific Rim Import Corporation. They carry many home and garden decorative items. While they were never a huge vendor for us, they did have a few of my personal favorite products. Some, sadly, I may never see again. The fish wind chime, the pinecone wind chime and some decorative plates – all, sadly, gone. My representative holds out hope that Pacific Rim will come out the other side, possibly under a new name. I guess its possible, as another company I deal with went under last August and came back in December. Similar products, but not identical.

Pacific Rim’s departure will leave a big open space at America’s Mart though. I think they had showrooms on at least 3 different floors. Probably very expensive to maintain those. I wonder who will take over those showrooms?

I always thought Pacific Rim’s prices were a little high for the quality and types of products, which is never why we carried more than about 100 to 150 of the available 3000 to 4000 products. I also thought their freight allowance system was too difficult (and done this way on purpose). But, we did manage to place a huge order with them today and swing a nice discount (in the 40% range) at the same time.

I’ll miss my representative there. She said she is taking a vacation (heh!) but I really thinked she liked it there and hopes that Pacific Rim will be back. So do I.

Everyday, it seems like, we get the most irritating set of calls. You can almost set your watch to it. They are a drain on time, resources and especially our patience.

Here are some of my favorites that happened just this week:

Customer calls and says they want to find out their order status. Customer gives an order number that is not ours, so they ordered from someplace else. We explain this; and customer says – I know, I ordered from this other .com company. We ask – why don’t you call them for your order status? Customer says its because they won’t answer the phone, so she is calling here instead. We reply – how are we supposed to help you with another company’s order? Customer realizes how stupid this call was, apologizes and hangs up.

No. I did not make that up. It really happened. We’ve even had people who ordered from Amazon.com call us for their order status.

People seem to forget that many stores carry the same products. You cannot only buy Tide at Walmart. But, if you buy Tide at Walmart, you cannot expect to go to Target and get a refund if you do not like it. It’s not that difficult.

It’s when a customer is lying that irritates me, personally, the most. I took a call this week from an angry customer who ordered a product and wanted to know the status. I could not locate the customer in our system, so I ask where did they order it from. From you (of course! Geesh!). Okay…so I ask did they order it from a television commercial. They say yes. So I explain that we do not advertise on TV and that its a different company. They said they searched for the company and came up with us. Well, we do sell the product (we are retailers afterall), but do not advertise on TV. I wish there was a way to make that explanation shorter!

But, when banks give customers bad information it is appalling. We had a bank tell a customer to call us about a missing order. Why did the bank have the customer call us? Because the company did not have a phone number on file; the phone operator did an internet search and figured we were the people to call. How are we supposed to respond to a customer who says “the bank said you were the people to call” - of course they believe their bank rather than this poor schlub on the phone. The only thing I could tell that customer was to call the bank back, confirm the information, and that I’d probably never hear about the issue a second time. And I didn’t or haven’t.

Customer calls and gives us an order number, that is not ours. Again, we explain that she ordered it from someplace else and should contact them. Customer is confused and thought she ordered it from us. Nope – call the people you purchased it from. Customer is now mad at us, because she can’t remember where she ordered from and demands we find out where her order is. And she says “I’m never ordering online again!” I’ll breathe a sigh of relief.

Customer orders something from television (we don’t advertise on television) and demands their order status. It’s been 6 weeks, they say! Well, call the people you ordered from. Their phone number doesn’t work. Did they bill you? Yes. Check your statement, their phone number is there, most likely. Customer hangs up. You’re welcome.

 Add to this, the multitude of “SEO companies”, pay-per-click engines and general nuisance calls and you get a full slate of complete wastes of time calling in. It’s enough to drive a person to madness.

And we wonder why bigger companies like Amazon, Ebay, etal don’t make their phone number easy to find. Sometimes questions just answer themselves.