Posts tagged “management”.

Corporate Values

Two corporations contrasted. First the dog eat dog world of ex-Bain CEO John Donahoe’s eBay.

I read with interest Ina Steiner’s article on eBay’s fourth quarter 2011 report in EcommerceBytes. Several points in that article should make both the micro-seller still trying to sell on eBay and the would be investor pay attention.

“eBay’s growth in the number of global active users on its Marketplaces remained flat at 6% despite a television advertising campaign in the U.S. that promoted eBay’s “buy it new, buy it now” message.”

So, (as we say on eBay,) it does not appear that the undoubtedly expensive TV campaign produced a visible boost although it may have contributed to an invisible one, possibly the numbers would have been worse without it. We shall never know. What we do know is that thanks to eBay’s manipulated search, traffic to the site does not translate to sales for small or micro-sellers.

Much was made that GMV was up 10% year over year, the 4% drop in GMV from the previous quarter for what should have been the highest selling period of the year, well, not so much. However, some points to ponder:

  • The way to beat Wall Street expectations is to estimate low.
  • As Auntie May says “You can fool some of the people some of the time but you can’t fool all of the people all of the time, just ain’t nobody that dumb”
  • An increase in GMV does not necessarily equate to an increase in profits; for example according to Bloomberg, in 2010, GSI Commerce Inc earned less than a penny for every dollar in sales.
  • Approximately 1% of growth is attributable to the addition of sellers shipping costs to eBay FVF. Doesn’t sound like much until you realize how big the numbers are.
  • What percentage of the earnings gain for the fourth quarter came from the $8.5B sale of eBay’s stake in Skype to Microsoft?

The biggest shocker

(Donahoe) then made the surprising statement, “Over the last 3 years, I have replaced 75 of the top 100 people in this company,” making it particularly jarring later when he joked about using a hammer as a “new people management tool.” (An analyst from UBS jokingly asked if it the hammer was something Bain had taught him about management.) EcommerceBytes

My favorite analyst, Jeetil Patel of Deutsch Bank reiterated his ’sell’ rating on eBay,

“underlying weakness at the company lies ahead in 2012, especially as the U.S. dollar strengthens and comps get tougher in March and beyond.” He adds that with gross merchandise value and profit growth likely to slow ahead, “there is growing risk to Street expectations.”

although he was a little off in his pre-results crystal ball gazing, if I still had any eBay shares I would take his advice.

Costco

In the January issue of Costco Connection the cover story is “The Building of a Dream, the empire built on values” . As I read the article I was struck by the contrast in corporate philosophy between eBay and Costco, particularly when it comes to ‘people management’. No hammers.

Many of the C-level executives at Costco started their careers as box boys or cart pushers at now defunct FedMart. Outgoing CEO Jim Sinegal began his career unloading mattresses and dropped out of college, new CEO Craig Jelinek started as a box boy and maintenance worker at age 16.

Costco has been criticized by Wall Street for it’s generous employee benefits program. Jim Sinegal’s responses -

“Wall Street is in the business of making money between now and next Tuesday. We’re in the business of building an organization, an institution that we hope will be here 50 years from now.”

“Taking care of your employees and turning inventory faster than your people is good business. In the final analysis, that’s what it comes down to. You can have the loftiest goals in the world, but they’re meaningless if you don’t make a profit. If you can’t deliver on the bottom line, you’ll disappear.”

  • average pay for a Costco worker is $17 an hour with health insurance including dental even for part-time employees who have been with the company over six months.Hourly workers receive twice-yearly bonuses based on length of service and hours worked.
  • Turnover is highest in the first 180 days and approximately 6% thereafter compared with an industry average of 59 percent.
  • CEO Jim Sinegal’s 2010 salary was $350,000 - his 2009 bonus was $200,000. He is on record saying he considers himself well rewarded by his stock options.
  • Costco promotes from within, about 90 percent of management jobs are filled in-house and most managers work their way up from the warehouse floor.

Not everything is sunshine at Costco, a gender discrimination lawsuit was filed in 2004. At the time Sinegal maintained that Costco had not done anything wrong, and would not settle. At the same time, he admitted that the presence of women in manager and assistant manager jobs was low,16.2% and 17%, respectively.

“We don’t let ourselves off the hook on that,” he said. “We think we can do better. We know we can do better.”

The financials in brief

Notes: Costco’s financial year is different from eBay’s, eBay Q4-11 = Costco Q1-12. Costco operates on a paid annual membership plan which increased by 10% November 1st 2011. This provides a high degree of accuracy in ‘user numbers’. Unlike eBay Costco pays a a quarterly cash dividend on Costco Wholesale common stock; The dividend Q1-12 was $.24 per share or $.96 per share on an annualized basis.

  • Renewal rates were 89% in the U.S. and Canada and 85% worldwide. New member sign-ups in Q1 were also up 15% year over year.
  • Net sales (not gross) rose 13 percent to $21.18 billion, excluding membership fees
  • Earnings over the period were $320 million, or 73 cents per share, compared with $312 million, or 71 cents per share, a year earlier.

Thoughts to take with you on advertising and customers.

“Customers come first. Integrity is the cornerstone upon which we must build consumer confidence that creates customer loyalty.” Sol Price

“Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you.” Sinegal (about Costco employees)

Y’all come back!
Henrietta!


Full disclosure: I am an ex-eBay (1999 - 2008) seller by choice, currently selling on Bonanza and my own website. I no longer own stock in eBay. I have been a Costco member since 1994. I have never owned stock in Costco.

Selling Made Simple - Inventory

In my last Selling Made Simple post I wrote about the need to keep records and accounts and how to determine if a profit is made. Today we are going to look at inventory records.

High volume sellers can afford custom or high end stand alone inventory management software systems. When I researched them in 2006 prices started at $2500, way out of my range. In the last couple of years companies like Auctiva, inkFrog and Vendio have developed inventory tracking and management software, as part of their seller tools suites, but what do you do if you don’t sell on eBay or through one of the subscription platforms?

If you are selling exclusively on your own website with a cart, inventory control should be automatic. Add one more sales channel and the possibility probability of inventory glitches, out of stock and same unique item sold twice rises.

I have a lot of stock, about 40% is currently available multiple inventory per item,  50% is new ‘old stock’ not replaceable and limited in quantity, the balance are unique items. A double sale on the majority of my inventory would not be fixable. My method would not work for a high volume seller but it is simple and works for me.

A method in the madness; my three golden aphorisms.

  • If you do not have a methodical approach in business you will mess up.
  • No matter how sophisticated your record keeping system is, if you do not use it, it is useless.
  • Keep it simple

The database is your friend

Set up a database for your stock. Every item. It does not matter if you do it on the computer, with a card index system or in a ledger or book. There are pros and cons for each system.

If you keep your database on the computer please do back it up at least once a week. Keep a copy on disk,  or on a memory stick. You can also store (backup) a database in spreadsheet form on Google Docs. You can print out an item record when sold.

A card index system is handy in that it is portable, but that also makes it easier to mislay. If your item is unique, when sold you can place the card with the sale packet. (We will be learning about sale packets later)

From now on when you get a new item make the card or enter it into your database and photograph it. Upload copies of your pictures to a hosting service like Photobucket so you have backup for those stored on your computer. Note in your item record

  • where and when you got the item,
  • if more than one, how many,
  • a brief description,
  • what you paid,
  • how you paid (check number, cash)
  • the photo ID,
  • where you have it listed,
  • and where the item is stored.*

*A note saying ‘Priority box, third shelf, spare room closet’ can save you untold stress down the road. Ask me how I know!

Have fields or spaces for:

  • Sold date
  • Price received

Reasons for Inventory

  1. If you are running a business you will need to do inventory at least annually.
  2. Some states tax you on the value of your inventory.
  3. You need to know your starting inventory so you can tell what has been sold or vanished (it happens) during the year. See gross sales and Gross Margin
  4. If you have a disaster, fire, storm, or flood,  your losses should be tax deductible and you may be able to claim on your insurance.

A properly filled inventory card or database entry tells you how long your money has been sitting on the shelf. It allows you to make an informed decision whether to donate it and take the tax deduction (incidentally providing you with documentation for the value of that deduction) or how much to drop the price to get it off the shelf and out the door.

This particularly applies to trend or fad goods. Remember the prices Beanie Babies used to fetch? Were they a good investment? Are they still fetching those prices? I see an eBay listing for over 250, mint condition unopened in original packaging with tags and the high bid is $128. Twenty years from now they may be worth a fortune, but do you want to tie up your money that long?

Next time we will look at order processing records.

Y’all come back!

Henrietta!