USCF BOOK & EQUIPMENT SALES HISTORY
An email from Eric Johnson mostly quoting Mike Nolan, also quoting Bill Goichberg
First line and bottom of page: Johnson
Very useful information follows:
On 17 May 2004 14:53:14 GMT, in rec.games.chess.politics
nolan@... (Mike Nolan) wrote:
>recmate@... (Recmate) writes:
>>The failed project was a custom rewrite of the entire system so membership,
>>ratings, sales, etc. would all work together. I believe such projects were
>>fairly common in the 1990s (and often failed), but since then programmers have
>>tended to move toward a modular approach (as the USCF Computer Committee
>>recommended in 2000, but with no attempt at implementation resulting until
>The 2000 project actually WAS a modular approach using an existing
>package that the USCF paid around $25,000 for. Unfortunately, the package
>(UVA, a general ledger/accounting package) wasn't up to the task nor were
>the people working on 'enhancing' it.
>>Obviously, it was poorly handled. I was mainly questioning what I saw as the
>>reporting of $500,000 annual B &E losses for many years, which I find an
>>exaggeration. However, even in years we broke even or made a small profit this
>>was screwing up, because there should have been substantial profit from sales.
>Here are some numbers from the audited financials over the years.
>USCF Book and Equipment Sales
>FYR Sales Cost/Sales Catalog/Supplies Total Payroll
>2002-03 $2,867,335 $1,881,108 $332,879 $1,680,443
>2001-02 $1,826,956 $1,231,552 $236,359 $1,562,523
>2000-01 $2,533,506 $1,705,204 $234,332 $1,528,829
>1999-00 $3,000,787 $2,018,396 (included) $1,550,009
>1998-99 $3,427,575 $2,525,856 (included) $1,648,879
>1997-98 $3,455,110 $2,480,470
>1996-97* $3,121,785 $2,220,348
>1995-96 $3,600,283 $2,627,579
>1994-95 $3,506,032 $1,924,900
>1993-94 $2,901,214 $2,103,132
>1992-93 $2,574,686 $1,924,900
>1991-92 $2,412,101 $1,740,600
>1990-91 $2,112,580 $1,517,318
>I believe that prior to the 2000-01 fiscal year the USCF was indeed
>making money from B&E, even after including overhead expenses.
>I've added a few other figures from the audit. Note that it appears
>there was a change in how the auditors broke out the data when the USCF
>changed auditing firms for the 2000-01 audit. In 1999-2000 (and probably
>in earlier years) it appears that catalog and shipping supplies were
>included in the aggregated cost of sales. Thus to be comparable you have
>to add in the catalog and shipping supplies costs for 2000-01 and beyond.
>Total sales went down in 2000-01 as a result of a decision to downsize the
>catalog. However, it appears that costs went UP.
>By 2001-02 B&E sales were half of what they were a few years earlier,
>but the USCF actually spent more on catalogs and supplies to generate
>$1.8 million in sales than it did to generate $2.5 million in sales
>the previous year!
>Now look at the total payroll column. I don't have detailed data
>for those years but it seems reasonable to assume that the percentage
>of payroll directly attributable to B&E (sales, shipping and purchasing
>personnel) was fairly constant over the years, and I estimated that B&E
>was around 25% of total payroll for 2001-02.
>The important point here is that as B&E sales dropped by about half,
>USCF's total payroll stayed relatively flat.
>In summary words, the strategy to downsize the B&E operation, which began
>in 2000, was accompanied by an INCREASE in catalog costs and did not
>noticeably decrease payroll!
>The big loss in B&E was sustained in a single year, 2001-02, when sales
>were $1.8 million. The USCF also reported large (mostly unrealized) losses
>in its investment portfolio that year, following the trend of the overall
>In 2002-03 sales rebounded by over a million dollars. The factors leading
>to the losses reported for 2002-03 were not primarily B&E, they were
>membership revenue issues.
>B&E could have been better in 2002-03. As Bill noted, a good portion of
>the increase in catalog expenses in 2002-03 was essentially wasted. The
>fall catalog went out relatively late in the holiday season and the
>spring catalog was printed but few copies of it were actually mailed out
>due to cash flow issues. There were SKIDS of them in the warehouse!
>My analysis of 2001-02 suggested that a 'fully loaded' breakeven point
>for B&E was around $3 million. It was almost certainly lower than
>that in the late 1990's, when sales were WELL ABOVE $3 million.
Yes, this is an excellent summary of the history.
For all the nay-sayers...please note that the federation made very elementary errors.
* Late mailing of catalogs
* "Saving" money by not mailing already-printed catalogs (aka DUMB). Even if you have to mail them out a hundred at a time...you mail the things out!
* Maintaining payroll at a time when the "strategy" was to eliminate the sales operation! In essence, they were having a fire sale (high cost of goods sold/lower than cost prices)...thus...guaranteeing themselves a net loss when sales were booked. OK for cash in a pinch, terrible for the outside world to see.
I will tell you that in early 2000 I begged Dr. Redman to throw every available penny into the direct mail operation...to mail the things out by hand if necessary, but to do everything in his power to ensure maximum catalog penetration (even in a time of very low liquid funds).
He did the opposite. He was convinced that the online world had forever damaged the catalog business. And his ED had no background in direct marketing.
Rather than blame or fault catalog operations per se...please remember that it was (to very charitable) imperfect implementation that sunk the sales ship during this time.