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Sigilini and Mike: Congrats on 1,000!
Our next goal is 3,000, with 4,000 being the ultimate goal We just crossed 2,400…
As to steady sales…yes. This week we doubled our sales from last week. All volume related.
The more you list, the more you sell (within reason)…
Week of 7/1-7/7
Total Items in Store: 2,405 (Up 57% YOY)
Number of Items Listed: 136
Number of Items Sold: 80 (Up 105% YOY)
(Includes 3 Etsy, 1 Bonanza, 0 TrueGether)
Weekly STR: 14% (Up 4% YOY)Total Product Sales: $1,982 (Up 92% YOY)
Cost of Items Sold: $436
Highest Item Sold: $102 – Under Armour Bozeman Speed Freek Hunting Boots
Competition: Highest Priced Sale: Veronica wins the week and Veronica leads for the year 16-11.eBay Clothing
# Listed: 1,536
# Sold: 49
STR: 14%
ASP: $22.05eBay Shoes
# Listed: 284
# Sold: 14
STR: 21%
ASP: $35.78eBay Hard Goods
# Listed: 585
# Sold: 14
STR: 10%
ASP: $23.53Etsy Hard Goods
# Listed: 160
# Sold: 3
STR: 8%
ASP: $33.19Another solid week from a revenue perspective. We were up 105% compared to last year, all on increased sales volume. We missed our listing goal of 150, but we still were strong considering we took Wednesday and Thursday off from listing to work on other tasks. We are making a push to get more hard goods packaged up and moved to the warehouse, assembling more shoe racks here at the house, and looking to move some new clothing items to the warehouse as well. Expansion continues…
ShipRush is working out very well. A little steeper learning curve, but much more robust. It was nice to see our Bonanza Sale come in direct to ShipRush without a hitch. Also got a 2% cash back card to start using for more business transactions (like ShipRush).
This week will be hectic. I have the contract gig Monday and Tuesday, then a lot of listing on Wednesday, drive to Albuquerque for my niece’s wedding Thursday and Friday, source ABQ Saturday Morning then drive to Denver and source there Saturday Night (if needed).
This will be interesting for us. We started doing some short duration sales about 2 months ago to see if it would spur some sales and it seemed to work. We haven’t run any sales in about 3 weeks and our sales have still seemed to be running solid.
We are OK with the sales only being on the items that are Day 15-30 only. Makes sure that our new items are at least out there for 2 weeks before we discount them.
“Does what you sell matter?” – Yes. We don’t do women’s clothing other than jeans or shoes. Neither of us care. Is there money there? Yep. Do we want it? Nope.
And we are similar about what listing what we like. Veronica has really started to like the shoe game, and she is enjoying that. But we don’t do anything just for the money.
Mostly, I just hate inefficient processes. They waste time and effort. That is why I love podcasts…learning while listing…
“So do you think your predictions will help you avoid the reality many of us have of sales not growing in a linear way as our inventory gets bigger?”
No…and yes. I don’t think you can completely remove the effect of long tail items. But you can control the bad buys / the bad listings / the bad pricing effect buy constantly reviewing your STR and questioning any degradation that you see Year-Over-Year. This is why I split out Clothing, Shoes, and Hard Goods. For the most part, I really shouldn’t be getting a lot of long tail items in Clothing and Shoes. Yes, Suits, Sport Coats, and Jackets sell more in Q4-Q1, but hopefully by watching the STR and trying to understand why it is going up or down, I can mitigate it. Or if I can’t, I can understand the business that I am creating…and forecast accordingly
Any prediction is only as good as the assumptions it is based on. And it doesn’t change fundamental facts. But by doing the exercises, you can understand more of what causes them, and you can have a better understanding of where your business is headed.
PS – If you will notice, I have forecasted lower STR’s this year vs. last year. So no, I don’t think that reality changes…unless I make drastic changes to the business.
Jay, this is why Left Brains and Right Brains need each other.
Right Brains challenge the norm and look for the new and creative.
Left Brains require that activity occurs in structure and discipline generates focused work.You have SOME of that Left brain side in that you look for numbers to provide some guidance. “Show me the proof.” “How much are your sales increasing with 30 Day Listings?” “What is a Gamechanger for our numbers?”
I’m much more Left Brain, so I look for small advantages that build. A few more sales here, an increased price there…these add up to big changes overall. If I can improve a process that increases our profit by $1/hr., lots of people don’t see that as valuable. But I get that $1/hr FOREVER.
I’m more like a Casino…they do well with just a few percentage points in their favor… 🙂
Jay: But in an aggregate sense, you don’t have different inventory. You buy the same type of stuff all the time. Variations on a theme.
If you look at your numbers, you trend at a certain range of sales volume every month. Less now than 4 years ago, but your STR is very predicable. Your ASP changes more than your STR does, but when you look at it in terms of a month…you are in the same range all the time.
Each item you have in inventory is different, but you are still selling the same TYPE of item every month.
If I took the time to get your monthly numbers (Inventory, STR, and ASP) for the past 3 years…I’m betting I could get close to forecasting your revenue each month.
Yeah, then a lot of that is increasing inventory, especially if the items are long tail. You are increasing the inventory way faster than the sales can keep up.
Below is the screenshot of my main forecast tab. This forecasts our revenue for each month. Other costs are forecasted differently, but your main question is on how to forecast Revenue.
Take your inventory at the beginning of the month. Multiply that times your monthly Sell Thru Rate. That gives you the total number of sales. Multiply your total number of sales by your Average Selling Price. Total Revenue.
You don’t have to know exactly what will sell, you are using monthly averages. I have tracked my numbers monthly, so I can see when I sell more (Q4) and when I sell less (July). Also can see the trend in our ASP. Yes, sometimes big items sell, but small items sell as well. With that variation, look at how consistent our store’s ASP is for the month. We sell $100 items and $15 items, yet we trend to an average. We have higher months and lower months in STR, but a reasonable range to predict from.
In your case, when I first started following you guys, you were running at about a 3.5% STR this time of year (using 2014 numbers), but you have now slid down to about 2.7% recently. Your STR is pretty stable, so you can reasonably predict how many items will sell (Inventory volume x STR).
Your ASP has more variation, so that would be (for you) the bigger item that would drive a variance in your forecast. But you could probably predict a $35 ASP for the month and be pretty close, probably a little on the light side.
Yes, you guys have been reasonably consistent in your revenue, but you are now at twice the inventory volume as well. You guys were making around the same each week when you were at 3300 in inventory in 2013 that you are now at 6300 in inventory. You have grown your income definitely, but not at the same rate as your inventory. You have the STR degradation we have all talked about, which from 3.5% to 2.7% isn’t huge at that level (you can still reasonably predict it each month), but it is a 20% drop (.7%/3.5%). But even with that, you could reasonably predict how many items will sell in your store each month.
The goal isn’t to be perfect, but to know what a reasonable expectation would be. Enough to see how your business will be in the future, especially if you want to make a change to the business. And by doing this, you CAN get a reason why your numbers change.
Look at June 2018 vs June 2017. What changed? We sold at almost the same rate (1% slower), but at the higher inventory we sold 57 more items this year. So volume of sales was up. We sold at a $4.61 higher ASP. So Prices were up.
Price/Volume Variance is always accurate:
Volume Variance is Change in Volume x Original Price.
Price Variance is Change in Price x New Volume.So our 2018 June was $2,585 higher than 2017. $1,097 was due to higher volume, and $1,489 was due to higher ASP.
End of the day, Forecasting is as much art as science. You want to err a little on the conservative side if you want to see how a change will impact your business. Of course, not so conservative that your forecasts tell you not to do something.
Simplico: What were the respective levels of inventory that you had during that time? That would give context. For example, if your inventory is growing a lot, this degradation would make sense.
Low STR in June isn’t necessarily concerning, but that this June is so much lower than last June would be concerning.
Almasty and Jay: You both make good points, and your perspectives are reasonable with your past experiences and current plans. From my perspective…even a used bookstore can reasonably predict their sales.
Item by item? No. Store in total? Yes. Weekly? Not really. Monthly? Yep.
We have a tilt towards clothing and shoes, but there is still a large variance in pricing within each. $15 shirt and $250 suit. $20 Sandals and $170 Boots. And hard goods from $9 to $1,900 print.
But by looking at our average Sell Thru Rate for a month and our Average Selling Price for a month, I can reasonably predict what our sales will be. By knowing how much inventory I have, what our normal STR is (for that time of year), and the ASP (both recent and for that time of year), I can make some reasonable predictions. By knowing how our other costs flow, I can predict what our net cash position will be each month. This was even the case when we were mostly hard goods. Over the course of a month, averages can be used to reasonably make a prediction.
Should everyone do this? No. Part time and just like the extra money? Probably not. Don’t really care about growth? Nope. Not worried about inventory space or care about maximizing returns? Nah.
But when we had to decide to bring in a photographer, the calculation is more than just how much you will pay them and how does that impact the net profit per item. It is also important to understand how your cash position will change by doing so. You pay them this month to take photos, but the item may not sell for 2 years. How does paying them now but sales coming later impact your cash for the next few months?
This is my main focus for forecasting. With our financial situation (mortgage in Denver with 2 college boys), we need to be able to forecast our cash. Bringing on a photographer was crucial to us, but by knowing how our business performs, I knew that we had a 4 month cash flow hole while we absorb his cost (and increased inventory purchasing) until it starts really paying off. And by forecasting the current and one future year, I can see what we will be generating in 2019. We also may be bringing on a second person in September. Another cash flow hole, but it is during Q4 so we can absorb it better, and it really changes things for 2019 (getting excited!).
For others with a lower STR, bringing on more help will take longer to pay off. If you are only selling 4%-5% each month, then adding more inventory and more labor costs now will take probably 8-12 months to pay off in a net cash position. If inventory takes a long time to sell on average, then it will take a long time to recoup the cost of labor when they sell.
This also holds true for anyone considering going full time. How much more spending will you do on inventory now that you are doing this full time? How long will it take for those items to sell? How much cash can you take out of the business while still funding a growing inventory?
Trust me, I understand that many folks are baffled at why we forecast our numbers. But we have goals and plans for the future both in and out of this business. So for us to reach those goals, we use this as a tool.
Like 30 Day Listings…it works for us. Others results may vary… 🙂
