Blame Your Customers – Santa Closes Up Shop

Here's how you can tell the last recession was a severe one. Santa Claus closed his shop at the North Pole. The elves pension trust held the mortgage note on the workshop. They threw Santa out on his ass, when he fell six months behind on the mortgage. Santa applied for federal stimulus money to save the shop, but like most Americans, the loan to value ratio didn't work even with lower payments. What happened to the reindeer was just wrong. They didn't just lose their jobs. Wegman's told us they were selling bison, but we really know the truth. Make mine medium rare, please.

Santa fell on hard times in 2007 when he had a falling out with his main benefactor, Osama Bin Laden. Santa refused to deliver suicide-bomber Barbie dolls to girls in Israel. Santa packed up his tools and fixtures from his shop and moved to Danslowne, where he opened a retail toy shop in 2008. Danslowne is an affluent residential community twenty-five miles west of Washington, DC. Shortly after opening, Santa's toy shop won the prestigious small retailer of the year award presented annually by the Douloun County Chamber of Commerce. Santa was proud of his award and thought he was on the way to financial success.

Early in the summer of 2011, the president of the Douloun County Chamber of Commerce, Hony Toward, sent a message to past winners of the small business award. He asked each of the winners to provide a few words explaining how winning the award benefited their businesses. Hony was shocked when Santa replied that he couldn't provide a quote, because he didn't believe winning the award had helped his toy business at all. His business was struggling.

Santa explained that Douloun County residents had changed their buying behavior between 2008 and 2011. Residents ignored small local retailers, like Santa, in favor of big box stores like Wal-mart and Best Buy. He couldn't understand why consumers would forsake the incredible customer service he provided in favor of the rock bottom prices of Target and the other large discount chains. He told Hony that someone, presumably the Douloun County Chamber of Commerce, should start the fight for the little guy in Douloun County. Someone should convince county residents to buy local. Santa explained that he was too busy trying to save his business to participate in his proposed program, but that somebody should do it. Hony presented Santa's message to the small business committee of the chamber. One of the members was a stunningly handsome, young CPA, named Srank Ftitely. Srank brought Santa's message to my attention.

Santa thought winning the small retailer award validated his business expertise and anointed him a small business leader who would surely succeed. The award judges were forward thinkers, who understood the genius of his business model. That model was selling upscale toys to affluent consumers in Danslowne. A toy from his store would have your little Timmy solving Einstein's relativity equations by combining data from the Hubble telescope and the Large Hadron Collider. His toys would have your child graduating from Harvard by age twelve.

Here's the truth about the small retailer award. The award isn't judged based on the viability of a business's model or its financial results. The judges review packages submitted by award nominees. The best package wins. Santa had submitted a beautiful brochure featuring Stephen Hawking brand toys. The brochure was produced by an amazing printer, named Mave Dorey. Mave owned M & M Printing. Yes, I switched the M & M. You still get M & M. Santa won based on his package.

Let's take a look at Santa's actual business plan. This isn't how he would express the plan, but we will be closer to reality. Here is Santa's business model. Rich people are willing to pay too much for toys. The underlying assumption is that rich people are stupid. They are willing to pay more for a pedophile Ken doll or slutty Barbie to Santa than they are willing to pay Wal-mart. Santa thinks his outstanding service will be the difference. How much service do you need to buy toys?

To compete with big discount warehouses, small retail stores have to offer something the warehouses can't offer. That seems obvious. What wasn't obvious to Santa is that customers have to want that something. That something isn't service in the case of a toy store.

If I could retool Santa's business model, I would eliminate the retail part completely. Small retail toy stores can't exist any more than the Loch Ness monster can exist. Santa needs a niche market. Osama Bin Laden might have had the right idea. Santa could sell suicide bomber Barbie dolls over the internet to the children of Al Quaeda terrorists. The reason he can't do this with a brick and mortar location is that there aren't enough terrorist families in Danslowne. The market isn't big enough to support a store. However, an internet business with almost no inventory and overhead could work great selling internationally. He could have a customer loyalty program. If you buy suicide bomber Barbie, you get a free Taliban Ken.

What really offended me about Santa's message to the chamber of commerce was the implication of entitlement. He is a small business. Therefore, we owe him. If Santa had been at the meeting, Srank Ftitely would have told him Stitely's rule of seven billion. There are seven billion people on the planet,who don't give a damn about his business, and not a single one owes him anything. I quoted George Thorogood two weeks ago, but the quote applies to Santa as well. “Get a haircut and get a real job.”

A good friend and client, Ken Irish, passed away tragically in an accident this past week. Ken was a former military guy, who had created a really amazing business. Every moment I spent discussing business with Ken was a real joy. Ken was no Santa. He not only had a great business idea, but he knew how to make money with it. He will be sorely missed by all who knew him.

Thanks for reading. For real tax and accounting advice, please see the main S&K web site at http://www.skcpas.com.