NevBlog

Neville's Digital Surrogate Brain

Economy

Have Sales Gone Down In the Poor Economy?

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Here’s a question I’ve been getting more and more geared towards my business House Of Rave:

Have your sales gone down in the poor economy?

It’s actually a fantastic question and relatively interesting to hear different answers from different business owners.

So, have your sales gone down in the poor economy?

MY ANSWER:
YES…..but not in the traditional sense. Let me explain:

Most people expect that sales simply stopped coming in after the economic downturn, this hasn’t been true even though House Of Rave sells things people buy only on disposable income.  In fact, if you never told me there was a “recession” going on, I probably wouldn’t have noticed too much….people still order all the time (although I’ve seen a very significant drop in big orders from large corporations).

The MAIN problem I’ve had which takes a DIRECT shot at lowering my sales is all the cool products are out of stock.  Almost all of my previous best sellers are no longer being manufactured.

HouseOfRave sells “hard to find” and “unique” products….which often means “they don’t sell it in big stores”.  This has been great so far, but a problem I’m seeing now is manufacturers are on tight budgets and don’t have the capital required to mass produce slower selling items.  I may be able to sell 10 per day of an item, but a manufacturer might need to sell 10,000 of them per day to keep cash flow moving.

….so unless an item can move HUGE quantities quick, the product might be discontinued.

This has been the predominate way that my business has been affected.  The cool part is, with more marketing and more effort I’ve been able to maintain and grow both the profit and sales of the business, but it’s required more effort than in the past (keep in mind I used to put NO effort into it at all).  Before, I would just slap products on the site and they sold….it doesn’t seem to be quite as easy anymore.

Many smaller manufacturers and product patent holders are going out of business now.  Think about it, to manufacture just ONE simple product you must spend hundreds of thousands of dollars for materials and labor, store them, then find people to buy them.  Before you make even one CENT from the product, you could blow through a half-million dollars on credit.  If the product is a flop (note the importance of beforehand PRODUCT RESEARCH) you’re screwed…..and I’m just using the example of small-scale manufacturing of novelty products.

While my business doesn’t have the extreme overhead of these manufacturers, I feel their pain indirectly when a cool product of theirs goes out of stock.

Lousy Interest Rates = Spend

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When the economy sucks, the government will generally lower interest rates so it’s more enticing for you to SPEND money rather than SAVE.

Well they’ve done that big time right now, and I did a little sleuthing around at some of my non-risk-bearing accounts.
Example:
About 5 years ago I set up an Emigrant Direct account because internet banks usually offer higher interest rates than most traditional banks…and I’ve pretty much forgotten about it.
I stashed away about $25,000 in that account and checked it recently to be greeted with:

1.2% annual return??? HAHAHAH!!

This means my roughly $25,000 will earn $300 for a whole year of sitting there. Meanwhile the inflation rate right now is “officially” between 3-4%….and in reality is probably much higher.

So while I earn $300, my money loses $750 in value (at least). The account is no longer a “No risk” account…it’s now a money pit.

Well that’s a losing proposition, so while I already have an investment account I use to throw into businesses that make me money, it looks like I’ll be almost forced to put some of that money to good use.

However with all the current tax breaks encouraging businesses to spend right now, taking money out of permanent savings accounts and spending them on money-making endeavors seems a smart idea right now.

Shopping spree time :-D

Whole View of Economy Skewed?

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I was born in 1982, and taking a look at financial records, the United States was in a secular bull market since 1982 till 2000.

This means my entire upbringing as a child was in the wealthiest nation in the world, during a bull market. Not a bad time to grow up! However that good fortune and easy times as a child may not last much longer due to the current economic outlook of the United States. Now I’m an adult trying to build a fortune in the largest debtor nation in the world. So now the fun begins.

There seems to be a few different reactions to a coming economic downturn:

  1. People who will get scared, then bitch and complain. Most likely will blame certain incidents, the president or other scapegoat for their troubles.
  2. People who will research and understand what is going to happen before it happens, then react accordingly.
  3. People who have no idea what’s going on, will soon be affected, then react later to the new environment.

I’d like to be in that minority of people who understand FIRST what can happen, then prepare in a way which will keep me financial stable and even prosperous despite a bad economy. This course of action requires the most work, reading and research which makes it a sure bet only a tiny fraction of the people will do it.

Of all the really crappy financial information I’ve screened through, I by far think the absolute best advice anyone is giving right now is Peter Schiff. He’s got two recent books out (both which I’ve read) which are excellent. Just Google him and do your own research. He’s been deemed “Dr. Doom” in the recent years because in all his past interviews he used to predict “crazy” things happening like a housing industry meltdown or investment banks defaulting. Well people are starting to take notice now.

The only thing that can “fix” the economy is a recession. This will flush out all the bad businesses, bloated companies and excessive government expenditures.

Here’s an analogy I tell friends which compares the United States to a regular guy (perhaps themselves):

Imagine a guy who works a normal job, doesn’t make all that much money, but lives a really nice lifestyle. He spends more than what he makes because he just puts everything on a credit card and makes minimum payments. He can live this way for a while, but he just goes further into debt and eventually he’s got to pay for it. He must either make more money or spend less to get out of debt.

He can’t just easily start earning enough more money to pay for the debt, so he must start cutting down his expenses.

The United States is just like the guy in debt. The only way to “fix” his problem is to get rid of the nice apartment, stop eating out as frequently, or stop buying so many expensive gadgets.

You can log onto hundreds of financial blogs which started because the owner was deep in debt, and almost invariably got out (usually in just a few years) because they cut their expenses and paid off the debt. Same thing will happen with the U.S….or at least should happen.

The bad part is, when a country “cuts down on expenses” it means the entire country goes into a recession (at least “recession” is the scary term used to describe a slowdown of spending). However the upside is when people get rid of all the debt, they come out smarter about their purchases, can operate with less and can then start saving for their futures or investing back in themselves so they CAN make more money.

I won’t bother going into anymore economic analysis than that, it’s your job to start doing some financial research on why the dollar is falling and will continue to fall, but it brings me to this point:

In the coming years, it’s imperative to be working harder than ever before. Absorption of sound financial information is essential. I’d also highly suggest you increase your savings right now…just in case. Research, reading and frugality will be more important than ever before (Well, not EVER….I mean in my generations lifetime). This is also an excellent time for lots of opportunity, as you’ll find lots of new opportunity when things are being shaken up!