Forum Moderators: buckworks
I have noticed as the gas prices here in the US have really surged in the last week, that our sales have also tanked.
Anybody else seeing a sales slow down that they feel is probably due to surging gas prices?
There are many other factors, like people taking last minute summer vacations, but with gas prices climbing so high, many people are even forgoing these last minute vacation. I'm also wondering if the spike in gas prices is also causing people to tighten their wallets for fear that it is only going to get worse in the coming months and the might need to save that extra income they have now to afford higher gas prices in the coming months.
That is because the US government wacked a huge tariff on lumber coming from Canada. Eliminating competition for US producers. It is a huge issue north of the border, most Americans are unaware.
>>>the price of wood (plywood & lumber) has shot up as well.That is because the US government wacked a huge tariff on lumber coming from Canada. Eliminating competition for US producers. It is a huge issue north of the border, most Americans are unaware.
I certainly didn't know! All we ever heard was that the reconstruction in Iraq jacked up the demand for plywood, and that leaves the supply in the US much lower than usual!
"Ottawa has pulled out of softwood lumber talks scheduled to begin next week, signalling its displeasure with the U.S. government's refusal to comply with a NAFTA ruling that would have put an end to punitive duties on Canadian timber."
from [theglobeandmail.com...]
We have had all kinds of lumber mills close in the last couple of years and the US government has collected 6 billion in duties, despite having a free trade agreement.
over the past few years we can hardly give away our long leaf yellow pine. i for one can attest to the fact that the tariff has done nothing to benefit the US timber producers
somebody is telling a big fat lie. just like the oil/gasoline situation...we are all getting the run around. Can someone tell me how it is the the oil companies can report a 39% increase in quarterly profits while their material cost (cost per barrel) has skyrocketed?
;-)
Can someone tell me how it is the the oil companies can report a 39% increase in quarterly profits while their material cost (cost per barrel) has skyrocketed?
Sure!
Profit is usually based on percentages.
Lets use the old "widget" example. I have a widget that uses some raw materials. Those raw materials used to cost me $30/widget. I want to have a 40% margin based on my raw materials costs and other things like labor and fixed/variable overhead, thus my retail price is:
$30/.6 = $50
Now, all of the sudden, my raw materials have gone up in price to $60/widget. Since I can't sell at a loss and I want to maintain my 40% percentage, the new retail price is:
$60/.6 = $100
I now enjoy a 100% increase in my profits. The cost for my raw materials have doubled and so have my profits.
Although this may be a little simplistic and other factors come into play (fixed overhead didn't double, neither did my labor costs, variable overhead might have doubled), so I may chose to look a little closer at my margins and discover I can live with a 30% margin now, so I recalculate and get this:
$60 /.7 = $85.71
Not quite the increase in percentage profit I had when I was enjoying 40%, but nonetheless, still substantial.
It's not smart, in business, to pass on any cost increase dollar for dollar, since you are more or less "investing" (IE- taking on risk) in inventory and should expect a return on that investment.
I'm probably preaching to the choir on this, but no-one should be suprised that oil companies are making a larger profit on higher raw materials costs. (Especially those raw materials that are non-renewable like oil.)
As a thought exercise, think about this:
Let's say you have a friend and this friend is psychic and can see the future. The furure looks bleak, and, using a commodity from this thread, he sees that in 10 years the only mature trees left in the world will be in, say, Portland, Maine. He also sees that the cost of lumber will be about 1000 times the price of today.
Do you:
A. Invest in matches and flame-thowers out of envy over the land owners in Portland?
B. Sell short in the chainsaw market?
C. Buy land in Portland and maybe even mortgage your home and everything you own for that land?
D. Buy up every Adam Sandler movie ever made?
If you said, "C", then isn't it ok for oil companies to enjoy a profit? (I kinda like "B", but then again, I'm kinda like that.)
With either choice, you would enjoy some fairly substantial rewards ($$) over the risk ($$) you took. I know I wouldn't feel guilty, but I can't speak for everyone else.
I'm not thrilled about the price of gas. I drive a fairly large 4x4 pickup because it's a fairly big part of my business as well as a good choice for the inclement weather we "enjoy" up north. So I'm certainly not cheering for the oil companies, but I don't see any reason why they can't enjoy their profits because of their foresight.
How high would gas prices have to go before I have a major change in my driving habits? Pretty high. $10-$12/gallon? Even then, like I said, it's a pretty major part of my business. With higher gas prices, I may even be able to add a new benefit to my own widgets, thus increasing my sales and the bottom line ($$).
Still, the point of this thread is how gas prices are effecting online sales. Too soon for me to tell. I do know that many of my friends are downsizing their vehicles and there is probably going to be a surplus of larger used SUV's and 4x4's, so that market is going to tank pretty quick.
Other than that, it's mostly the disposable income that's going to probably get hit the worst:
Theater movies
Candy
Lottery tickets
Pine-scented de-oderizers for vehicles
etc.
I wonder if there is going to be a market coming for "home delivery" type businesses? (Think local grocery stores, your local Wal-Mart/Sams Club, etc.)
Perhaps this would be a good time to get out to your local community get them set up with a local delivery service with online shopping and get some commissions there? Now there is a business idea! A one-stop online "store" where they can click any business and order online and someone else delivers everything. If the store already has a website, upsell them to an RSS feed? To put on your site to feed them sales?
Hmmm...
Thanks for your explaination, however IMO your scenario is only applicable to those industries that are immune to opposing competitive pressures.
Profit is usually based on percentages.
Discretionary products (unlike gasoline, which is a necessity), do not enjoy the same immunity. When it becomes a choice between filling up the tank at $70.00 or buy a new pair of pants...the consumer will choose the gasoline so he/she can drive to work. So...the local clothing store, even with higher shipping cost to get the pants in stock has to lower the price on pants to encourage the consumer to come in to his/her store to buy to pants...while sacrificing profit margin.
In the end it will all balance out, but it will take some time. For instance, I was considering buying a Hummer a few months ago and when the price of gas hit $2.00 I decided not to. Until us Americans stop driving gas guzzlers and stop buying products made in China, the oil companies and oil producing countries will have to lower the price of crude...even though the profit margins will remain the same.
The rule of supply and demand remains the same...but the rule of what the market will bare is yet to come.
It is not given away, it is cheap, because there is lots of it. We can't help that we have massive tracts of forest and it drives down the price elsewhere.
I built a house not long ago. Canadian studs (the wood kind) are far superior to yellow pine or euro lumber. No twisting or warping and very light weight, yet strong. You canadians could sell your lumber could be priced higher than that from any other source (including US). Builder's here will use nothing else but Canadian lumber anyway.
The price is determined by the market, it is not a state run monopoly. Plus, many of the lumber companies up here are American owned, Weyerhauser comes to mind.
"gas prices up, online sales down"...
For me last week was down about 40% for the quarter. This weekend, cut my prices about 10% and increased exposure by adding a few more relevant keywords for adwords and YSM...sales are back up to normal.
Anybody else's sales back to normal this week, or still down?
We have not had any decrease in sales. Our online business is continuing its mild growth curve.
I did buy some more AdWords, and that seems to be helping some. But even with this mini-slump (which I expect to continue until the end of August), this summer has been quite a bit better for me than last summer. I credit that to expanding my products. In the past, the majority of them had a more seasonal demand.
As further insurance, though (especially after my site being eaten by a search engine), I am working on a book related to my products. I expect to have that finished and pitched around to publishers by the late fall. If they don't want it, I will self-publish it and sell if off the site. I have several hundred people signed up for it already.
Last week's slump may not have been due to gasoline prices. Had to be back to school shopping. Here school started the first week in August. Everywhere else maybe last week.
This reason I say this...sales volume this week is incredible. Even with the minor tweaks, ie; slightly lowering prices and adding a few more adwords could not explain a 200% increase over last week.
Did we have a premature panic reaction?
I'm still trying to figure out our "season". It never fails that my customers seem to have a reason for calling. Usually one that I've never thought of.
The nice thing is that I'm keeping track of them and there will be lots of 'the present season' sales at my widget site next year.
PS- I think I get Christmas, so that one is easy.
"implies more than i know" (scratching my head on that one...could take that one of two ways, or both).
i suppose you stumbled across a "pre-season sale" somewhere? with most every product there are peak months and off months. with ours demand is really strong between sept and may. june thru august are usually off about 40% of the peak season. right now we are on the cusp of our season...so it seemed like a good excuse for a sale.
Glad it's been a good week for you!
For instance, I was considering buying a Hummer a few months ago and when the price of gas hit $2.00 I decided not to.
So then "oldpro" is the cause of my slump!:) We sell truck accessories, and noticed a big dip when gas went over $2.00 per gallon. Then we had a big increase as the automakers got their latest incentive programs going. Then a big dip again as the gas went up - it passed $3.00 per gallon for premium here today.
I think it will keep affecting sales for most goods - but mostly in a psychological way, as some others have said. In general, I think consumers will get used to the new prices on gas. Some stability would certainly help though. If the prices were stable, then the news would talk about it, and people could stop being afraid of the unknown future. Instead they could worry about those variable rate mortgages they all go on their new McMansion in the suburbs. Greenspan was talking about a deflation in the market and the papers all reported a 2% drop in housing sales. Another crop of paper millionaires is about to lose it all.
I started a franchised business in 1990, and when the economy slumped in 1991 everyone around me was talking about how bad things were. I was young and naive at the time, so I just worked my butt off and made some good money. The others that did the complaining lost their franchises. In my region, about half of the franchises went under - only to be replaced by other people that somehow thrived in the same store, with the same economic problems. It went a long way to prove to me that the media does a good job of overstating problems and getting the public all excited about financial worries that may not neccesarily apply to them.
Cheers,
CaboWabo
Starting wednesday I noticed a 10% decrease in traffic and a 30% decrease in sales. Wednesday afternoon after a ton of testing and having many "eyes" look over it we re-launched a new more streamlined checkout process that I am 100% positive "should have" increased sales. I have tested and tested and still cannot find anything that would have cost us sales, only helped them. There was alot of work and research that went into this so it is not just based on what looks good, but cold hard research facts.
It is next to impossible trying to figure out which one of these factors affected our sales, but I am strongly leaning towards Katrina.
We sell low priced jewelry so people are definatly buying it with their discretionary income.
Here in the Netherlands we pay 1.51 euro/liter nowadays. Converted into US $, that would be around $7.00/gallon.
I wonder what will happen if we all just decided to not go to the gasstation for one day. What can we do against these practices?
When are they finally going to produce those cars that run on water?
August was a smoking hot sales month...
Was for us too...started out kinda slow, then we ended August with the highest monthly revenues for the year. I still dunno what caused this.
However, like macker our 1st six days of sept are off 30%. I think the "shock and awe" of Katrina has got us all pre-occupied...not only with the concern for those that are suffering at present, but also with what the future holds for the economy.
It appears we may be okay on the gasoline front, as prices have dropped with reports of minimal damage to the refineries and rigs. But, there will be pricing pressure on such things as plywood, steel and other building materials. To put a silver lining on our storm cloud...this may cause housing values nationwide to increase, and at the same time reduce new housing starts. If so, the re-fi market may pump more cash into the market.
Then....Mr. gpilling...I might be able to buy that Hummer and order some accessories to #*$! out my ride.
BTW....gasoline here is about $2.80/gal, down from 3.15 last week.
The tidal wave in indonesia happen during our slow season, but I saw the same effect also.
Im not complaining. Im happy people are spending disposable income to help the needy, rather than impulse buying on the internet.
and they were down about the same after 9/11. It took close to a month for sales to recover.
Our sales did collapse the day of 9-11 and remained terribly weak for a month or more. A psychological downer for everyone in the US. Unlike Katrina, 9-11 was a slap at all of us.
Notice that the stock market, likewise, plummeted after 9-11 but was largely unfazed by Katrina despite the storms palpable business and energy ramifications.
Here are the factors I believe are driving up the price of oil:- the War
- booming economies of China and India
- huge increase in large vehicles on North American roads
- lack of refining capacity
- various trouble spots around the globe
- general increases in world population
- oil is a non-renewable resource and we are reaching "oil peak"Any more?
Panic buying?
I don't agree that it's just the American media that is all about creating fear. The reporting of Katrina in the UK is pretty apocalyptic too, and there's a strong focus on the rise in oil prices. So I wonder if there is an element of people stocking up, in case of future price rises?
But on the original topic, I seem to remember that last year there was a similar discussion about September being slow. I suspect it's quiet for most retailers, because of back-to-school spending, and putting off purchases so they can be bought as Christmas presents.
Notice that the stock market, likewise, plummeted after 9-11 but was largely unfazed by Katrina despite the storms palpable business and energy ramifications.
At first I thought this was strange also. However, after thinking about it...9-11 was in Wall Street's own self important backyard and to them, the land in which Katrina hit probably seems of insignificant economic loss. Also to Wall Street the influx of insurance money out of passive investments creates economic liquidity to the region. Sadly, I think the money changers see Katrina as an economic opportunity rather than the catastrophe of biblical portions that it is.
The cotton, soybean and peanut crops have been wiped out in the 3 highest producing states. All of the ammonium nitrate facilities are located in the Delta and have been wiped out. We are looking at a 2 to 3 month disruption in 10 - 15% of our oil refineries.
Even for a Sept...sales at the retail and wholesale levels are way down. Too bad Main Street don't have hedge funds.
Panic buying?I don't agree that it's just the American media that is all about creating fear. The reporting of Katrina in the UK is pretty apocalyptic too, and there's a strong focus on the rise in oil prices. So I wonder if there is an element of people stocking up, in case of future price rises?
A bigger element is monsterous hedge funds taking positons on oil futures. These gaints always go for the kill when they smell blood :(
Anyone else?
PS...Sales seemed to have really picked up for our highr ticket items in the Houston area ..seems they're seeing some extra $$$ ....
