Think Outside the Shop March 2, 2008

I made a couple of sales calls in the Upper Haight today and got the same response everywhere I went: “We’re not buying anything right now because it’s slow. Come back again in April and we’ll see.”

On the way home I lamented to my fiancé about how I wish there were stores in the Lower Haight that could sell Sweet Meats. After all, that’s the neighborhood we live in, and it would be really nice to have my products so close to home. There are no toy stores in the Lower Haight, however, no pet stores, no home accessories stores and only a couple of gift stores that do not have a decidedly ethnic slant. I sent an e-mail to the owner of Doe, my personal favorite neighborhood shop, but if I’m going to be honest with myself and with her, Sweet Meats are not really a good fit with her woodsy collection.

Then, as we were passing Costumes on Haight, my fiancé said: “Maybe you could sell them in some other random store, like a record store, or clothing store, or Costumes on Haight.”

“Costumes on Haight? But how are plush meats a costume? You can’t wear them.”

As the words left my mouth I saw the strangest, most wonderful thing. Taped over the crotch of one of the costumed mannequins was a paper t-bone steak, the exact size, shape and color of the plush one I happened to be carrying. I walked into the store and approached the register.

“Excuse me,” I told the man behind the counter. “I live in the neighborhood and was just walking past when I noticed your paper steak in the window. I think you can do a lot better.” And I plopped my plush t-bone on the counter.

“Oh. My. God.” said the clerk quietly, “How much is it? I’ll buy it from you right now.”

“Well, these are just samples,” I said (I still needed to show them to two more stores this afternoon).  “I’ve been showing them around for months and they’re a little ratty. But here’s my info in case you want a fresh one or the store wants some for display or prop purposes.”

The clerk took my info and I offered to come back in a couple of hours and drop off a sample that the store could keep for a while.  He said that would be fine and that he would show my info to the owner in the meantime.  Just then, I was spotted by my friend Christine, looking more natural in a hot pink bob wig than anyone I’ve ever seen.  We chatted for a minute, and when I turned back to the counter, the owner was standing in front of me, ready to order his first set of  meats for the front window.

Needless to say, I felt luckier than ever to have such a smart, problem-solving, future husband.  It just goes to show you, there are many unexpected, potential outlets for your stuff, especially if you’re a local. I thought I had enough to work with already, but beyond the usual suspects of gift stores and food establishments is a whole world of unexplored options.  So if you’re feeling frustrated that the well has run dry in your area, try hitting up those costume shops, video stores and record stores. Because anything on earth can be a display, and if it can be displayed, it can be sold.

Advertisement

Finding Stores to Sell Your Stuff February 24, 2008

Okay, so you’ve got a brilliant, well-designed product. You’ve gotten the ball rolling on getting it made, and you’ve done all of your promotional work. After all this, you have a dozen orders to show for it. So what do you do now?

All of the press you get and marketing you do will only cover half of your sales–the half in which stores come to you. Despite all work that goes into creating marketing materials, sending press kits and exhibiting at trade shows, this is the easy half of selling, because any buyer who approaches you is 10 times more likely (in my personal experience) to place an order than a buyer you approach yourself. On the other hand, there are at least 10 times more buyers out there who don’t know you exist than those who do.

So how do you find good sales leads? You don’t just want to look names up in the phone book. Casting that wide a net will surely not be worth the time. Here are a few tips for finding stores that really fit your style:

1. Go door to door. If you haven’t visited all the shopping districts in your area yet, this is a good place to start. You can take a good look around prospective stores and ask up front who does the buying. Usually it will be the store owner, who may be amenable to arranging an appointment to see your products. Store owners are also more likely to take a chance on a new product if it’s designed by someone local. One note, however: many stores will not want you to sell to more than one other store in the same neighborhood, so go for the big fish first (e.g. stores with additional locations in other towns).
2. Shop online. Using links from a favorite blog or just searching for products similar to your overall aesthetic, you can find a ton of stores around the world that might be a good fit.
3. Travel online. Starting with the cities closest to you, visit chamber of commerce or tourism web sites for links to stores in that area. AAA also has a huge online archive of articles from Via, their travel magazine, like this round-up of bookstores in the Western U.S.
4. Trade! This is by far my favorite way to get info about stores. Contact an artist or designer you know in another city, or find a sympatico design buddy through a favorite web site or message board, such as Etsy or Craftster. Give them the names of stores in your area that might carry their products and receive some names in exchange. Last month in L.A., for example, I met a really nice designer named Christopher Jagmin who’s also releasing his first line. I sent him some stores to contact here in San Francisco, and he sent me some in Boston and Phoenix. Luckily, we’ve both seen each other’s products in person, so it’s easier to tell where we can really “see” those products being sold. If you and your design buddy don’t have this advantage, send each other a sample.

No matter what happens, be patient and keep at it. Many store owners are extremely busy, so it might take weeks or even months for them to place orders (or respond to your e-mail at all). That said, you should always follow up after giving them some time to look things over. It takes me an average of four to five conversations with any buyer before actually making a sale.

And what have we learned? January 26, 2008

In case you haven’t been paying attention to the news this week, the economy has been on some kind of bizarre roller coaster ride. The stock market has made huge gains and losses from day to day, the Fed cut their short-term interest rate by a staggering 0.75%, one of Europe’s largest banks was defrauded out of billions of dollars, and the President and the House have settled on a bipartisan “economic stimulus package.” All this comes on the heels of rising unemployment and the sub-prime mortgage crisis, not to mention during the World Economic Forum in Switzerland.

So what does all this economic craziness translate to? In short, making things hard for the small wholesaler like me. I’ll go into the details of my recent sales experiences in a minute, but let me just put some general advice out there first. If you are thinking of releasing a line of design goods for wholesale:

• Make sure you have a back-up source of income.
• Take a bookkeeping class and price exactly how much your line will cost to produce, ship, store and market, so that you know exactly how much money you will need to raise, save or borrow to pay for your entire first shipment.
• Start with something small. Smaller, less expensive items are easier and cheaper to ship, to store, and to find buyers for, because it means less investment in cost of goods and store space for owners.
• Start early in the year. The whole process, from pricing manufacturers to receiving your first shipment can easily take six months and stores begin buying for the holidays in July and August. You will definitely want to ride that wave your first time around.
• Set up a website where you can sell your goods retail, in addition to wholesaling them. You may sell fewer items at a time this way, but you’ll make a much higher profit off of each one.

These pieces of advice are ones I wish I had received before starting out on my Sweet Meats venture. It turns out that releasing a line of plush toys is a royal pain in the ass. Not that I regret doing it, or that I will give up anytime soon, but it is an expensive way to learn through trial and error.

Last week I exhibited at the California Gift Show in Los Angeles. The show ran from the 18th-21st, and while many people expressed interest in my products, none were really buying. I got the same response from everyone when asked if they would like to place an order: “Let me talk to my sister/wife/partner/boss about it and we’ll let you know.” This is exactly what buyers say here, too, when I visit their stores. I find this especially frustrating with buyers who already know my products. A few have mentioned seeing them sell out at craft fairs and one even owns a Sweet Meat already. What gives?

I have a few theories about the lack of sales to store buyers–all of them, I think, equally likely and valid:

1. It’s after the holidays. Business is slow, and the last thing store owners want to do is buy more items that will just end up sitting around.
2. The economy is not great and people are much more cautious in their spending in general, but specifically don’t want to invest in anything new and untested.
3. I’m not a good salesperson yet.
4. My price points are wrong.
5. I’m waiting until March (when I can sell these retail, as well) to send out press releases.

I’m going to give door-to-door visits a couple of more weeks to work out. At least this way, if people don’t order from me, I can ask them why, face-to-face. Then hopefully I can fix whatever I’m doing wrong and get back on track. Either way it works out, I’ll keep you posted.

Comparing Merchant Services January 9, 2008

In order to properly compare merchant service providers, you need to know exactly which services you need. Here are some possibilities:

Merchant account: a place to put the credit card money you earn until it is approved and transfered to your bank. If you accept credit cards at all, you need this. There’s a link to a great diagram of this process in the previous merchant services post.

Virtual terminal: a web site where you key in credit card info your customers provide to you by phone, mail, or in person using a credit card imprinter and carbon receipt. If you don’t need to process your customers’ cards right away, either in person or online, this is a good option for you.

MOTO processing: “Mail order/Telephone order” processing is like a virtual terminal, but you dial in the information on a telephone rather than enter it online. Very often you can use a cell phone for this to get instant approval, though it may cost you extra.

Payment gateway: software that allows customers to enter their credit card info directly on your web site. Using a gateway requires a shopping cart as well.

P.O.S. processing: “Point of Sale” processing requires a swipe-able terminal (usually costs extra to rent or buy) that processes credit cards instantly. This is what you would use if you had your own brick-and-mortar store. It requires its own phone or wireless connection to operate but your per-transaction fees will be a lot lower than if you process cards later using a virtual terminal or MOTO processing.

Shopping cart: software that allows people to find, choose and submit products to order. This, on its own, cannot process payments.

SSL certificate: “Secure Socket Layer” protection for your web site. Puts a protective shield around your web site so people cannot see your customers’ sensitive information as it is transmitted. Some payment gateways come with SSL protection included.

If you only sell things occasionally online (through Etsy, for example), you should go with a service like Paypal or 2Checkout‘s standard services. These are all-in-one solutions that include a merchant account and shopping cart wrapped up neatly in one package. The pros of using an all-in-one processor are that they are simple to set up and charge no monthly fees (I heard a rumor that Paypal charges smaller fees if your products cost less than $5 apiece, but I can’t find confirmation). The cons are that they take a bigger percentage of each sale than most other merchant service providers, and your customers have to pay on a Paypal or 2CO web page; they cannot use Paypal or 2CO’s gateways to pay directly on your web site. I currently use Paypal with a Mal’s free shopping cart for my online retail orders. For whatever reason, some people are uncomfortable with using Paypal to pay online (even though you don’t need a Paypal account to use it) and I lose about 10% of my business as a result. So far, the amount I lose in sales is still less than the cost of using a different merchant service provider.

If you mainly sell things at craft fairs, through the mail, and/or on the phone, and you do less than $3,000 in business per month, you would want to go with MOTO processing or something like Propay. Propay provides you with a merchant account and a virtual terminal. Their annual fees are significantly less than most other companies’, but they don’t provide a payment gateway. You have to buy Paypal’s Payflow gateway to sell things online.

Now that I’m starting to sell wholesale, I need to be able sell products directly through my web site, to take credit card orders at trade shows, and to allow people to order by phone or by mail. I therefore need a merchant account, a payment gateway, a shopping cart, SSL protection and a virtual terminal. My wholesale customers always receive their products shipped at a later date, so if a transaction is denied, we can resolve it before any goods arrive. I therefore don’t need any form of instant processing, either through a P.O.S. terminal or a cell phone.

The shopping cart I’m using for my wholesale site is Zen Cart. It’s free, open source software, which means there are a lot of online forums and documents, but no nifty 800-number you can call for support. It’s complicated as hell for a programming novice, and I’ve seen a lot of Zen Cart sites that look exactly the same because it’s too hard to figure out how to customize. Luckily, I have a fiance who’s pretty good at this stuff, so so far it’s working out for me.

For all the other stuff, including a full breakdown of the types of fees you can expect, I’ve made a nice little chart in Microsoft Excel for you. In it, I have compared the four different merchant service providers who gave me a knowledgeable person to talk to and could provide me with competitive rates for all the services I need. I didn’t include any P.O.S. info (sorry, don’t need it for my own business), but it’s all equation-based, so you can change around the sales numbers in lines 2-11 to see how the costs go up or down. You can also copy and paste any column and put in numbers for other service providers you research yourself. The formulas should remain intact.

Right-click (or control-click on a Mac) on this link and save the file to your computer. You can then open it in any spreadsheet program you’ve got. Hope this helps those of you out there who don’t know your POS from your MOTO.

Trade Show Report: Portland Gift and Accessories Show January 7, 2008

This weekend I flew up to Portland, OR to check out the Portland Gift and Accessories Show, run by Western Exhibitors. I’m exhibiting at GLM‘s California Gift Show in Los Angeles next week, so I thought it would be prudent to check out another gift show ahead of time. I wanted to see which other companies participate in these things, how their booths look, what their sales pitches are like, and so on.

I gave myself a full day and a half to go through the show. I don’t think I was even there an hour. All in all, the show was not at all what I expected and I left feeling very worried.

To begin with, the entire gift show fit into a single L-shaped exhibition hall. I knew from the outset that the Portland show is one of the smallest, so I wasn’t expecting MacWorld, but there weren’t many more booths than at a really large craft fair. Somehow it just looked bigger on the Oregon Convention Center map. I also expected there to be more visitors. Granted, I visited on the the first day of the show, and the Portland Gift and Accessories Show is the first show of the year. Also, there was an insane series of storms that hit the west coast this weekend, so that may have seriously affected people’s travel plans. Nevertheless, the number of buyers sporting blue id badges was seriously disheartening.

As surprised as I was by the buyers, I was even more surprised by the sellers. Most sections of the show were a pretty motley mix of decorative items, clothing and souvenirs. It looked like a cross between Chinatown, U.S.A. and a gift shop run by a retired couple in an old seaside town during the height of tourist season. There were evergreen wreaths and garlands, batik shawls, tiny bags of candy with punny labels, plastic wind-up toys, soaps made out of things like bamboo, goat’s milk and charcoal, salt lamps and geode coasters. There were also keychains with your name on them, strands of mineral beads, seat-belt purses and those wooden 3-D puzzles you build into models of dinosaur skeletons and famous buildings. The only new and moderately hip products were located in “Artisan’s Alley,” a single aisle all the way in the back of the hall, where the little old gift ladies had forcibly sequestered all the exhibitors under 40.

So now I’m worried. I’m not worried that my butcher-shop booth will go unnoticed; I’m worried it will stand out too much–that the precious few attendees will bypass it completely as just too weird. Souvenir shops are not my market. Will my “L.A. Contemporary” division just end up being a tiny, marginalized “Artisan’s Alley?”

I’m trying to remain optimistic, however. I can’t prepare properly for the CGS if I already believe it will be a failure. Here’s what I’m telling myself to get psyched up:

• The California Gift Show is run by GLM, which also runs the holy grail of gift shows, the New York International Gift Fair. The product divisions are mostly the same between the two shows.
• L.A. is a bigger, trendier city than Portland (though Portland is pretty hip) so there will be more buyers looking for weird stuff. It’s also got pretty big art and designer toy scenes.
• Many more of the exhibitors will be from California, rather than Oregon and Washington, which should mean more booths similar in spirit to mine.
• The CGS is a bigger show, and is easier and cheaper to get to than the PGAS for most people.
• More people want to take a business trip to L.A. than to Portland, because it’s warmer and there’s more sightseeing to do in your off-hours.
• L.A. has way more stores and businesses in it than Portland. Heck it’s the biggest city in America!

I set a goal to place one minimum order every hour to pay for my inventory and the cost of the show. I’ve heard that’s ambitious but I believe enough in my products, my booth and my salesmanship that I think I can do it. Only time will tell.

Sales and What Tax? December 23, 2007

I had never even heard of use tax until the State of California told me to pay it.

I had recently registered for a seller’s permit, which is a requirement of doing business in California, and which affords you the privilege of collecting sales tax for the state. It’s an awesome racket. I get to work as a tax collector for the state! Without getting paid!! And all I had to do was pay $50 to sign up!!!

Unfortunately, if you want to be able to purchase things for resale, you’ve got to have one of these seller’s permits. It’s the only way to prove you’re a business and not just paying half price for items for personal use. But it also means that at the end of your first year in business, you will receive a deceptively simple-looking form from the state, asking you to hand over your sales and use tax.

The form is only one page long, front and back, but I couldn’t answer even the first question on it. I called my friends Oliver and Eleanor at The Present Group for help. Eleanor tried to walk me through the definition of use tax, but I asked so many follow-up questions that she finally gave up and said, “You really just need to take the class.”

“The class,” it turns out, is the Basic Sales and Use Tax Seminar offered by the California Board of Equalization. If you sell anything for profit within the state of California, you MUST take this class. Nothing I explain in this post will be as helpful as that free seminar and they will walk you through filling out your entire return step by step. However, for the sake of personal edification and to help you understand why you need to take the free BOE seminar, I will try to provide a brief overview of sales and use tax here:

Contrary to popular belief, sales tax is a tax that companies pay for the privilege of being able to conduct business in their state (8.5% in most of California). It is not actually a tax on consumers for the privilege of being able to buy things. Most businesses, however, can’t afford to pay nearly a tenth of all their sales to the state (in addition to regular income and payroll taxes), so they pass the cost on to their customers by simply adding it to the total sale.  Sales tax only applies to taxable goods (most things other than groceries), not services, and does not apply to non-profit organizations. It also only applies to sales that end up within your state of business, so if you sell things online, you only need to pay sales tax for things you ship to addresses within your state.

Filing sales tax forms is complicated because you need to pay sales tax not only to your state, but also to each individual county in which you did business, and every county has its own sales tax rate.  You can also deduct the cost of any sales tax you paid on materials you bought for your business from the amount you owe the government (more on the definition of materials later), since this is technically a resale transaction.

So what the hell is use tax?  Use tax is a tax businesses pay for anything they buy for resale (i.e. without paying sales tax), but don’t, in fact, re-sell to the public.  It is always the exact same rate as sales tax (e.g. 8.5%).

Let’s say, for example, that I buy fleece, buttons, scissors and a marking pencil for making plush meats.  I don’t pay any sales tax when I buy these items because I am buying them wholesale for my business.  The fleece and the buttons eventually end up as plush meats and go to a customer’s house; they have been re-sold.  I therefore collect and pay sales tax for them. The scissors and marking pen, however, stay with me at my studio.  I don’t resell those items, I use them, so I need to pay use tax on them.  This also applies to plush meats I “use” as gifts or promotional items but don’t sell.  (I don’t need to pay income tax on any of this stuff, since it is still a business expense, but more on income tax in another post.)

In the end, you see, anything you buy for your business requires giving the government sales or use tax.  They both cost the same amount, but need to be neatly divided when filing–I have no idea why.  I have only given a brief overview of the rules above. I would never attempt to file a BOE-401 form based on this information, but hopefully it will act as a good primer before taking “the class.”