Monday, May 19, 2008

Some random musings about SL business...

So I'm finding that the tough thing about business in SL is that there are no longstanding business traditions to fall back on like in RL. Even the most venerated of oldbies have only been at it for under 5 years, which in RL terms is barely out of apprenticeship. Much of RL conventional business wisdom does not apply to virtual trade. Plus the everchanging SL landscape renders any expert opinions quickly obsolete. What worked 2 years ago will not necessarily work today. Hell, what worked 2 months ago will not necessarily work today. So basically, when it comes to doing virtual business, we're all just making this stuff up as we go along.

Take freebies, for instance.

Conventional wisdom is that a good freebie will pay for itself in extra exposure and good will. People will see the freebie, and if they like it, will come back to the store to buy more things at full price.

That's the theory at least. Reality has been somewhat different. In the month since I released the Mellie3 Simply Nekkid skins for free, by sales have DROPPED by 30%. Transactions have risen 4x, accounting for all the freebies people have been grabbing, of course, but overall sales are down a third. Go figure.

I dunno, maybe its the recession. Or maybe it could be that there are so many freebies released every day that there is no real need for anyone to actually buy anything. On any given week, you could very easily find enough good free stuff to outfit 3 avatars. Just scanning through the fashionplanet feed, it seems like a majority of the stuff featured in blogs are freebies of one sort or another.

Is it possible to oversaturate the market in freebies? Is there a point where "free" loses its marketing power just because there's so much of it? I dunno.

Of course the drop in business could also be because I dropped the price on full-price skins from 1250L to 950L, which if everything else was equal, would account for a 20% drop in overall sales. But then that's another piece of conventional SL business wisdom that a lower priced product will sell more copies to value-conscious customers, and thus make up for itself in increased sales. The problem is, where exactly is that "sweet spot", where the price is so compelling that folks will flock to snap it up, but it can still generate a profit? When I first opened my store, I put out a set of Natural Beauty skins for 49L, and they sold like hotcakes. They easily sold more than 10x as many as my full price skins. Thing is, when I added up my receipts, even with far fewer sales, the full price skins generated 3x as much income.

So who's got it right? Bare Rose, selling huge sets at outrageously low prices? or Stiletto Moody, who shoes are the price of 3 entire BR outfits? Of course, its obvious what the typical shopper will answer to that; everybody loves to get more for their money. But then again, there's something to be said for luxury items. Is it possible that a pair of shoes that you have to save up a couple weeks for can somehow give you more pleasure than something affordable? Who knows? But I'd be curious to find out.

Of course, you might say that my experience is due to my product being crap. That's always a possiblity, and no sale or promotion will help that. "You can't polish a turd" as my grammy used to say. Anyway, nothing I can do about that but keep trying to improve my products.

Thing is, how much effort should one realistically spend? Sure I love making skins, and I would continue to make them for myself, even if I couldnt sell them. My primary compensation is being able to say "Look what I made." Thing is, while I do love creating skins, I really really dont like everything else involved with packaging them for sale. That part is real work, and its about as satisfying as doing data-entry at an accounting firm. (One of the reasons I don't really get too worked up over skinthieves stealing my textures is because i know that if they do, the jokes ultimately on them. They still have to rip them, re-upload, make new vendors, new demos, price them, name them, etc, etc, etc. Mainly, all of shitty gruntwork, but without the satisfaction of being able to say "I made this". Hell, its not even like they're huge sellers in the first place.)

Anyway, if its simply for creative expression, then surely one could get achieve without having to do all of the extraneous drudgework that goes into packaging products for sale and maintaining a storefront, right? If you count up the hours, it seems like the ratio of creative work to non-creative work is around 1 to 4, at least when it comes to making something that needs lots of variations on a theme like skins. And as far as drudgery work goes, the pay sucks. Now you could say that i need to do better marketing, put on events, sponsor fashion shows and treasure hunts and the sort. Find new ways to get the people into the store. But then that's even more time spent on non-creative work. Someone needs to make a JIRA to suggest a way that I could put newbies to work doing all of the non-fun production stuff that needs to be done to put my skins on the shelf. THAT is something I'd vote for.

Anyway, these are just a few of the random thoughts swirling around in my head lately. Regardless of the general hopeless tone of this posting, I still insist on spending my time making new skins. Just to show that i'm not all rant and no rabbit, I'll end with another preview of the new Tuesday skins. Here are a bunch of new makeups that I've made, but havent yet come up with names yet. Click on it for the larger size.



Lex Neva said...

As to your 30% reduction in sales... it might have nothing to do with putting up the freebies. In fact, they might have been the reason you didn't have a worse decline in sales in April. Something snapped in the SL market during most of April, and sales seem to be down significantly for many vendors. I saw my all-time best month of sales in March, and then April came around and I suddenly dropped around 40%.

I think it had to do with all the downtime and failed deliveries. Customers just don't trust buying things in SL anymore, even if they're copyable and you're perfectly willing to redeliver failed purchases.

Annyka Bekkers said...

oh yeah. I forgot all about the fun with the asset server. Funny how you can put unpleasantness like that completely out of mind

Belle Lefavre said...

Great post! You are so right about SL Marketing being a whole new world in many, many ways. In regards to the difference between Bare Rose and Stilleto Moody - I think you have marketing for both just like in RL there are markets for stores as different as Wal-Mart and Saks.

You wrote: "Thing is, while I do love creating skins, I really really dont like everything else involved with packaging them for sale."

I think that a ton of content creators would agree with you on this and I've actually opened a store to help new designers who either don't want to handle marketing and promotions for themselves or simply don't know how.

I may not be talented enough with photoshop or building to actually create content but I do know how to package, promote and sell it! :-)

Linda said...

I do think that the overwhelming amount of freebies these days probably have made a lot more people less likely to impulse buy just to satisfy the 'want something new' urge.

The change in terms of available freebies just since last summer, when I started, is incredible. A free skin then was like the Holy Grail. Now, there have been free skins blogged that I have not bothered to pick up, and certainly lots of other freebies that I pass over.

I have no idea how typical or atypical I am, but I do know that I am pretty darn indecisive about shopping both in SL and RL, and one thing that will make me make up my mind instead of thinking 'eh, I can get it next week instead' is limited editions that are available only for a period of time.

Of course, with making limited edition items come even more of the drudgery work, so unless they really sell well its probably not worth it.

But I do think that promotion and marketing, whatever form it takes, will definitely become more and more important in SL as the market grows up. I've heard from several creators that their sales are down, and to me it looks like a few brands are managing to steal all the thunder on the basis of having been quicker to grasp the emerging importance of marketing.

Freyja Nemeth

Mouse said...

This post just really got me! I know exactly what you mean, I feel this way a lot (especially the part about, maybe my sales are down cause my stuff just sucks). I started in SL in late 2006 and freebies were so rare, it was amazing. I'm afraid that they are now out of hand, and what to say but we've all had a hand in it! But at this point, I think that overall SL had a dip in April, due to the unreliability of the grid and the economy in the US. Oh and by the way, your skins are beautiful.

Annyka Bekkers said...
This comment has been removed by the author.
Annyka Bekkers said...

*I had to delete the last comment in order to edit it. Stupid Blogger!*

Aw thanks, Mouse :) I'm now a little relieved that the lousy month has been probably been due to the crappy performance and daily warnings from LL to not buy anything. (How are you supposed to compete against THAT?) I had completely forgotten about that. At least its not me.

And youre stuff most definitely does not suck!

And speaking of drudgework production, I'm starting to think a publishing house model makes alot of sense. By that I mean where you split up the tasks, so you havean artist creating the textures and prims, a production artist assembling and packaging it, and maybe someone else doing marketing and promotion. Right now SL is like a cottage industry, and we're all forced to do all tasks ourselves. Its more personal, but its not really efficient. Armidi is leaning in that direction, and I imagine that sort of setup will become more and more common if SL ever starts actually working properly.

queenkellee said...

In general, thank you for writing a "businessy" post -- As I'm struggling with bringing my own visions to reality and planning a store, I've been wanting to reach out to other content creators for advice, but besides the forum, there doesn't seem to be much out there in terms of open discussion.

As for the production house model, I think that's a great idea! I know for one, I would be willing to do the drudge work of packaging (which actually I don't find that drudge-y) to have an opportunity to work under a designer I admire, perhaps developing a classic apprenticeship/mentor relationship, even if just for the chance to once-in-awhile pick their brains or ask for advice!

Oh and just a chime in opinion on the Bare Rose vs. Stiletto Moody business models...I think one key component to BR is that she is constantly releasing, which keeps people coming back to her store over and over. I know myself I justify buying June's outfits even if I only like 1 item in them because they are so affordable!

One general shopping thing I have noticed about myself is that I will generally buy things I like but if it's over $300L I have a much harder time dropping the dough. (I'm really talking about clothes and accessories here, skins are kind of their own beast) Not sure why $300L is my "cut off" point, and I do buy things over $300L all the time, but I'm much more hesitant and it puts me in a different sort of shopping mode, instead of "get what I like", it's "pick the one I most want". But then strangely I will easily spend more $L in a store that has a bit more reasonable prices than one where prices are higher. In my head I call this the Wal-mart complex, where it's easy to go crazy and buy a bunch of things when they seem cheap but forget they do add up quickly to a lot of money!

Gidge Uriza said...

I think that the economy is hurting a lot of people. I can also say that the prolific amount of high quality freebies lately has been rather astounding.
But on the flip side - I can also say that if I pick up your freebie and like it - I'll be back.

With lindens in hand. :)

Annyka Bekkers said...

Thanks for the comments, QueenKellee and Gidge. :) Sorry for being an awful bloghost who doesn't reply to her own discussions :( Sorry, I've been distracted for the last week.

Anyway, QueenKellee, I agree about the production house model. It does make alot of business sense, and it would seem like a smarter way to work. Plus it would give people who might not be Photoshop experts or primwizards a chance to play a meaningful role in content creation. I wish there were more actual "jobs" in SL for non-creatives to do than the few there already are.

The thing is, I actually have some reservations about how such a system would probably work out in reality. I would hate to see a few big content companies emerge who dwarf the independents and can then control what gets on the shelves the way big publishers can control what books get on the shelves at the Barnes & Noble.

The big part of the charm in SL is that there are no gatekeepers of content. You don't have to convince anybody that your stuff is good enough to warrant getting published. Unfortunately, the price of that independence is having to handle all the peripheral stuff.

There's always partnerships, which lots of people do, but there are serious trust issues there, and you really need to have some sort of real-world relationship with someone to make it work out.

MeganK Draper said...

Sorry, i'm a little behind on this one.. ok, like a lot behind, but I just had to add that if it wasn't for the fact that you put your nekkid mellie at 0L, I probably would have never purchased all of the Tuesday skins that I did. I liked that the mellie was a skin I could actually wear out in public and get used to for a few days instead of trying a demo on in the store and not having time to really take it in. It was my intention to return and buy the mellie in some different makeup styles but I ended up going with the new release instead which ended up being better business for you in the end as well.. so don't get discouraged over freebies. They really do help, maybe just not immediately :)

Annyka Bekkers said...

Thanks Megan, I appreciate that :))

Things are a bit better now. When I wrote this post, it was just after 2 absolutely horrific weeks saleswise and I was feeling pretty frustrated. But as Lex pointed out, it most likely had to do with the near daily asset server breakdowns more than anything else. Which still sucks, since they still don't seem to be able to fix it for good, but at least it's not just me.

Shockwave Plasma said...

I have always wondered how you can have a decent economy, when many of it's citizens don't need food/housing, and can get almost everything for free.

Like Mouse I started early 2006 and freebies were rare and not usually high quality.

My 3 month old alt has great clothes, great skins, and I have not had to buy anything for her.

I suspect she still lives with me, but you never know what your alt does when your not looking :-)

Personally, it's time I had an upgrade so I'll drop by.