RL Recession Effecting SL Economy.

Having been in SL as a business owner for more than 3 yrs and having spoken to other business owners it seems that people are spending less money in SL
Business are by and large loosing sales and traffic.
This is my opinion based on my personal experience and having spoken to other "old" business owners.

The only exception to this is new businesses. Some are reporting growth still but I would speculate even in a recession a new ( and quality ) business will experience growth because they are in the " discovery stage " were word of mouth is still a factor and as such they are still being " discovered" and experience sales growth.

I am curious whether businesses who had regular and steady sales from 2007 have noticed a loss in sales/traffic this year?

It would seem with each RL announcment of another bank going bust has a knock on effect of the mind set of people.

An example of this would be 12 people stood in our store "now" compared to the same amount stood in the store this time last year.
We have noticed people are not spending as they once was.
Lots of standing around and window shopping but not as many sales
People are more careful with their money.
It is a mind set. If people are more money aware in RL I don't believe they log into SL and suddenly dont give a damb...its a subconcious thing.

Also, when other business owners feel a loss in sales they too are more careful about their spending and this is typical in RL too. Cannot see any reason why a virtual economy should behave any differently.

I know I am not spending as much in world as I was 3 months ago.

I dont want this thread to be about me or TRU and I understand the reason people dont like to admit their business is struggling ( much like LL deny the recession has effected them. It has - takes a week for a Lindex sale to go through were as 3 mths ago would take 24 - 36 hours.. the demand isnt the same )

So far I have not seen any posts about recession in RL effecting SL but it makes perfect sense to me that it would. Why shouldnt it?

There is the argument that people are staying in more in RL and as such spend more time on in house entertainment so spend more L$ than $$. I dont think its as simple as that.

Sure, more ppl may log in just as they do in Winter instead of Summer but they will still be more concious about money as we all know L$ has a real value and most people have to buy it.

Whats your experience?
Opnion?

Open debate

(edited to fix my awful spelling mistakes lol )

I have never been big spender when it comes to things other then land in SL but at one point yes I spent more on things in world i.e textures, etc stuff I didn't know how to make to help me create things.
I rather make things but not very many of my things have ever sold but I do things because I enjoy them, running business often cost me more then I earn so I am less will to pay
for cost of running business here.
I made more money camping in 2006 and spent more money on things I wouldn't now because I had way to make money after I spent tons on land and couldn't spend in any more cash from rl.
I am definitely trying to spending less here because I am making less money and things cost more in rl.

It is a well known fact supported by research, though this not being my field I'd be hard press to cite anything -- When people feel themselves poorer, they start spending less, even if little actual losses were incurred, for example, if the value of their property which they didn't intend to sell anyway abruptly drops. And the first thing to go is normally entertainment expenses.

How exactly this effect would affect spending in a virtual world is not well studied at the moment, and would make someone a nice research paper...

I think people will spend less money in SL but if more people are unemployed or working short-time, they'll spend more time in SL. The recession could lead to an influx of new members - especially basic free members.

The next hurdle will be as people's computers get old and need replacing - fewer people will be willing to splash out on new computers when their old ones expire or seize up.

I also have a theory that virtual worlds and other online stuff might have had a hidden impact on society. A lot of people are addicted to these, including people in well-paid RL jobs. If people are able to fulfil their ambitions and fantasies in virtual worlds they are likely to want to spend less time and money doing other RL entertainments. Probably television is the biggest loser, but things like gardening, going out to the pub, Sunday afternoon walks might also be sacrificed to SL, WOW, Counter-Strike etc.

And how do we know that some of the people who are arguing about whether to give away X billion dollars to the banks aren't secretly more preoccupied with how to get more people visiting their dance club island in SL?

Agreed. Statistically, entertainment tends to loose money in a recession or depression, unless it's an addictive form, like alcohol or porn. SL is addictive and compared to most RL entertainments, cheap, so I don't think LL will loose members, but there will be some belt tightening on SL budgets. However, it will be felt most by in-world retailers, not LL itself, as some of the new members that do come in will buy land and stuff, but not the high end objects and services. More smaller-time residence will replace the older ones with large estates and budgets.

I absolutely and completely agree with this statement 100%. There have been new businesses saying "Wait a minute. No! Im prospering right now" And the reason is because they are new. They have not been around long enough to know what their steady income is and pinpoint waves of rise and decline.

There has definitely been a decline in the amount people are willing to spend. RL comes first, and RL is shaky and unstable. The last thing most people want to do right now is blow their money on a virtual game when they have no idea what tomorrow brings.

I mentioned elsewhere how my small-scale business has dwinded to almost nothing. I used to sell a few items from my home and a colection of small stall plots dotted around the grid. Things sold, and then, all of a sudden they stopped selling. Recently I relaunched the business - more, better products at much lower prices. I also put them on OnRez and had 5 roadside vendor plots. But still almost no sales.
My sales slowdown was last year, before the recession hit.

It seems to me the "why pay to play mindset has run rampant" the lure of camping for cash has brought those retailers doing it a lot of campers to pay but no customers. So campers have been replaced by bots and now we have a population of bots, creators and social non-spenders. Not that's there's anything wrong with free players, it's just they don't put money into the piggy bank, some just shuffle it around a bit inside.
Perhaps newer businesses do slightly better because they have fresher concepts or are quick to ride on the latest SL features.
With the focus on stability and no official word on the next big thing SL seems to be stagnant.

If people are less willing to spend US$ on SL then there should be an obvious downward trend on LindeX volume and I don't really see it.

Personally, if I go to a store then I'm willing to spend. If I leave without buying something, it's because there wasn't anything there that I wanted or because I thought it was overpriced for what it is, not because I'm unwilling to spend.

As far as TRU is concerned: I've been one of those "window shopping" customers. I wanted to spend, but I couldn't find what I wanted (no decent way to find what I wanted, and I'm personally not paying L$600 for 2 textures I really want, 4 I might have a use for someday *maybe* and 10 that I know I won't ever use).

If you look at the current end of the "Advice on sales" thread, you'll see that other business owners are having the same experience, LillyBeth - including me- and we are putting it down to the same thing - the RL financial situation.

New businesses can certainly appear to 'prosper' during this time because they have low sales, and any sales at all means prospering. For instance, a new business may consider itself to be doing well if it makes 4 or 6 sales in a day, whereas established business owners would be jumping out of upper floor windows if sales got that low. It's relative.

So you are not alone. It does appear to be the same all over the SL business world.

The Motley Fool published an article about this:

http://www.fool.com/investing/value/2008/09/25/an-unreal-financial-crisis.aspx

right now a lot of people are waiting for this bailout to see if it passes..
If it does it's going to be an even worse year in 2009..
unemployment will be going up an additional 7% and home foreclosures will be going up let alone prices on just about everything..
if this bailout plan does go through America will feel a pinch like it has not in a long time..
it won't be that they cut back on spending in sl..it's going to come down to..should i keep my internet connection or pay my electric??

people that have lost a job with a house payment are not going to sit in sl they are going to be out trying to find a job that is going to be harder to find or if they have one they are going to be trying to work more if they can..

this bailout is a terrible idea because it throws money at bad companies..it's like investing in swamp land..you don't invest in dying stock..you let them fold..

they abused a deregulated derivatives market and got everyone in over their head and now are going to be bailed out and the ceo's left to keep all their bonuses and pay while the tax payers end up losing their homes and jobs..
ya lets pass a plan to break them even more so we have time to tuck our loot in swiss bank accounts or liquidate and leave the country and the world in even a worse mess down the road..

you don't throw good money after bad..
this is just a bunch of investors that sit on a board passing a plan that saves where their money is invested..
you will see the media smiling and anyone on tv about this bailout..what you won't see is the ones that have to pay it back how they feel until it's too late..
thats us..the ones that are in sl and the rest of the working class that bust our butts for our money..

sales will be going down in sl and everywhere else in the coming 2009..
thank you local corporate bank for this.

My business has been running around a year and a half and havent' seen a drop in sales, it stays pretty much the same each month. I don't know if the type of business you have here makes a difference.

Kitty, if you have concerns with how we run our business then by all means send us yoru suggestions in world but the point of this post was about the SL economy in general.
But now you have raised it I am compelled to defend.

In answer to your "no decent way to find what I wanted"

TRU has 4 key word/price/artist search terminals in store ( 2 at either end nr the entrance) and a seperate website that also allows you to search by key word. ( about to be re-opened in 1 week )

Plus a teleport system at both ends of the store that takes you to each sub category.

Some ppl like browsing it gives them inspiration and dont actually like the search terminals. Everyones different.
When you have as many artists and textures as we have accumulated over the years I think we have done the best we can to overcome the search issue.

The website combats LAG and rez delays, the search terminals combats well, "search" and I am unaware of another other texture store that has any form of search system, period.

Regards to the " 2 textures for 600L " then yes we dont sell singles. Sorry, we tried this once and as a business we lost out financially. We have huge overheads and we need to make profit to exsist.

The issues you raise about TRU has no significance to the topic of this post and are issues that have always been there and will always remain issues to you and some other people
Which is why I said " I dont want this to be about me or TRU " its a general debate about SL's economy.

You don't have to defend anything, you run your business as you see fit .

You mentioned you have people visiting who don't end up buying anything and I can just give my take on that and when it happens with me it's because I didn't find anything to buy. I never took a stand on whether that's a minority or a majority case, but if noone speaks up about it you won't know one way or the other either and it happens whether it's textures, clothes, furniture or whatever else.

If the amount of US$ spent on the LindeX isn't dropping noticeably then people are just spending as much as they did before. If you're doing noticeably worse then the reason isn't a bad economy but either more competition (same pie size, but everyone ends up with a smaller piece), or due to less appeal/demand for what you're selling.

I've noticed a slow-down too! I'd say it has to do with the RL Financial situation also.

Hopefully October is good to me like last year!!! (it's my best month of the year)

I can't say that I understand the LindeX, other than using it to convert L$ to US$, but what LillyBeth has found is the same as what other business owners have found, and it's so unusual that there must be a reason for it other than people just don't fancy what's on offer.

For whatever reason, sales on Wednesday and Thursday were especially bad for a number of business owners, and probably many more who don't look in this forum - possibly yesterday too.

Something has definitely changed, imo, and the only thing I can come up with is the RL financial situation.

I actually think that there is a similar amount of money going into SL and being spent in SL however I do think there are changees in the way people are spending. People are becoming more money concious and this reflects in SL. As the SL market becomes bigger with more people creating and more peple selling consumers have a much wider variety. With the addition of sites such as on rez and SLX where set up and on going costs to sell things is almost non existant (maybe needing a place to rez a prim box) then people are able to sell for minimal over head.


As a consumer I KNOW there will almost always be several places that will sell an item im after. Ill use clothes as an example cos i shop for a ot of them. IF I walk into a shop and see a dress i like for L$400 and i think ooh its nice I will be sitting there debating it because I know that at another store a mere TP away i can find somethign similar for 1/2 the price and in store three i might find one for L$100.

As SL grows so does themaket and so does the competition between sellers, btu beyond that so doe the savy of the consumer. SL is seeing less new people coming in so the money being spent is often by people who have been here a while and know what is avaliable and how easy it is to find what you want.

Really good subject to talk about.

I'm not sure my situation makes much sense to compare to other people, but here's how it is:

As a rule so far for the past 2.5 years, Caledon is essentially solid full. If there are occasional empty lots it's because I didn't get round to dealing with them yet (I get busy for a few days sometimes).

It's a bit tougher for private parties moving land in Caledon - generally they want more $L for the rental rights than the current market will bear, or expect to move land right away. Also it's uneven. I've seen near-identical lots where one sits for a month with little interest - while the other is snapped up after 10 minutes. Go figure, but that's common. Parts of Victoria City still trade at $L 40+/m, in the rare event that there is trading at all.

* * * * *

Historically:

Back in 2006, 2007: Ridiculously strong growth in fall/winter with dropoffs to 'good' in spring, and summer a few clicks better than spring.

Now 2008. The spring dropoff was precipitous, but me being me, I had planned on something far worse. Still a waiting list for land; always has been, but now it's a lot more picky and a lot less desperate. Seeing things pick up for fall already.

A few events really rocked the land market; while it doesn't affect me *directly* it's not exactly great stuff. First of all, many are disappointed that regions are a lot less expensive these days. 40% less than they used to be, as of March. Second, there are a lot less new people, which takes demand pressure off parcels, thus making them a lot harder to move if you want to cut back on land.

I was literally expecting far worse market conditions (come on people it's virtual land! ), so I stayed pretty conservative. Had I used the boom times to boost to 143 regions instead of 43, I'd be hurting terribly right now. But I didn't, and by not being greedy in 2006/2007 it really saved my tail in 2008. I've been solid full the whole time.

Some people have accused me of... well, how to explain this. By not expanding to meet demand, I plainly spurred competition - other estates sprung up where I didn't provide. Of course, they took the hit a lot harder than I did when the market got a bit worse, not being Caledon - I have been accused of using them as economic heat shields, letting them burn away while my own estate stayed intact. Hey, not my fault! In my own defence, I can honestly say that's a situation beyond my ability to engineer. Rational people will get that. For those who still think I came up with stuff like this in my secret lab, well, 'muhahaha'. What could I possibly say.

* * * * *

For what it's worth, I'm only adding one more standard region to Caledon in a month or two, sticking a fork in it and calling it done (geographically). We are Caledon, not Anshe's mega-continent. It's anyone's guess what will happen to value/demand when I'm not adding a million square meters a year any more.

Sure I'll add some colonial regions far afield from Caledon next year but nothing major. At some point, one has to ask how much of one's life should be tied to this thing or that. While I love the grid, if I took on much more businessy activities I think I'd do something outdoorsy. I'm already cooped up too much between my office (RL biz) and the computers at home. Not really a business decision? Well, maybe not for most, but for me it is.


On a more speculative note:

- guessing interest will climb as I serve international markets (dollar weakening)
- demand may have upward pressure when Caledon land scarcity kicks in hard
- demand may have downward pressure as other themed regions with longstanding empty lots desperately woo residents
- guessing strong estate land interest through fall/winter 2008 with precipitous dropoff in March 2009 as usual
- Note that I don't think the RL economy will have much to do with anything - or might actually boost things as people turn toward the grid due to overall inexpensiveness

* * * * *

Daring, ridiculous, over-the-top wild stab at the future:

I'm guessing what we are seeing now may typify the next ten years of business on the grid. Yep, serious. Look at Ultima Online for instance. It's still there, going strong 10 years later. Competition? Sure. But that competition has also defined, expanded and legitimised the market as a whole. Look at older worlds like there.com where people said: wow I'm making 500 dollars a year selling things! They still do. The overall market is wildly bigger, but the net effect has meant: not a lot of change.

Actually I disagree
I think the "type" of noob coming into SL has changed.
When SL kicked off I was at There.com ( and TSO before that )
Back then I think there were 10,000 registered users.
PPL in There said SL was for the creative types were There.com was more for the social types.
I think back then that was very much the case.
SL was about content creation, it was new and unique ( and still is )
But now 4 yrs on, new SL'ers are joining to experience social sides alone.
CSI. Education. Business Meetings. None of these have anything to do with content creation and these are just a few examples of "reasons" LL market SL.

I think the typical noob joins SL and spends their L$ on avatar looks and not much else.
So the established clothing and hair Co's are probably still doing very well.. ( content theft and full perm stores aside )

I think ppl are put off content creation now because there are so many existing stores its a jungle. I know I wouldnt bother starting a business if I joined SL now.
It was always a bonus to be here at the start much like MLM

So from a person and selfish point of view texture demands will be affected by the change of SL noobs. The % of noobs who want to move onto content creation imo has dropped significantly and a rough estimate I would say from 2004 60% to 2008 20% who go on to want to develop content to sell or for fun.

So more ppl are joining SL but not interested in getting creative.
I guess schools in SL could confirm this more than I could.

Of course there is the factor or more competition in a particular field.. as previously quoted same pie less to go around.

Texture stores (were textures were original and not just stuff off the net as they all were in 2004 believe it or not ) have grown for sure.

When I started making (fumbling around really) my own textures I was one of 2 stores that did so.
All the others just grabbed off the internet.
That was the done thing back then and very few ppl cared one way or another.

There are still a large amount of texture stores whos stock is still largley off the net, one springs to mind that has a fake traffic of 30,000 and its 80% freebie website wallpapers divided into colour categories.

I think when ppl starting to develop texture stores they looked at the leading store at that time and knew they had to set their standards as good if not better.
And as TRU at least at one time was considered the leading store in that category thats what they did.

But taking all that into consideration you wouldnt expect a "sudden" drop in sales literally over night.
The affect of competition on a store is a gradual process, just as it takes time to build your customer base it also takes time to loose it. It doesnt happen suddenly.

The 2 drops in sales hit us in April 08 and again in Aug 08 both by 30% each drop.

Historically, we were stable and constant with an increase at Xmas which held until the following Xmas when we had another increase.

Last Xmas was no exception, we had the increase then in April we had a drop which took us back to our pre Xmas sales figures. That was "fine"
But then in August we took another sudden drop of another 30% and like others have mentioned in a similar post, I personally ( we have 70 artists ) cannot recall "when" i made as little as I am now.
It certainly over 2 yrs ago.

Another dip and I dont know what we will do. We have had to loose staff, stop sponsering educational places and stopped the classified ads ( 95% of our customers find us by word of mouth )

7 months ago when I released a new 3D set the sales were instant. Customers literally checked out the new arrivals dept waiting for new sets to be dropped off. Now sadly I make a new set and it sells no more or no less than any other older 3D set.

So there you go, more information than I think many business would reveal but if it gives others some sense of " ahh its not just me then " then I am happy.
I know seeking reasurance that its not just you or something you have done or not done can be hard esp when many ppl wont share that kind of info because they dont want their competitors to know.

My sales have consistently and significantly grown since i opened in Sept. 2007. I am constantly adding new items, talking to my customers about what they are looking for, offering some of my own items for free etc. for marketing. The only thing that effects my biz is when SL is messed up and ive seen alot of that in the past couple of weeks. As soon as SL gets better then my biz goes right back up to new heights. This last week alone, i could not tp, could not open search, could not open forums, could not post events on the web, could not complete transactions etc. all at dif times on diff days. Oh and of course...i couldnt log in. I believe that those are the only real factors that affect my sales. If people cant find me, cant tp, cant log in.....no way they are gonna be able to come to my store and spend money.

Most of my content creation has been for me to live in, use or wear - but I've always tried to make nice things so I've offered them for sale too. My aim has been to earn enough to pay way in SL, which I have only managed to do for short periods of time!

Perhaps if I spent more time creating and marketing instead of exploring and clubbing I'd make more L$

i'll go one further even... the past two weeks, starting with hurricane ike, which really pounded on my own sales, then the following monday's 'market crashing panic' news starting up 'finished' it - i was down to 20% of my usual for most of the week. (although actually, while ike was taking up the weekend news, the following monday's 'crash' news may already had been percolating around, and have been part of that starting weekend's blah-ness. but ike was tearing a big power-outage right thru the middle of the u.s. there too...)

it's picked back up though fortunately. while i'm always encouraged by the 'persistence' of residents and shoppers, the fact is, at the end of the day, 'little-to-no money in everyone's hands' equals a turning down the volume knob to everything. it's the landlords who'll maybe keep up slightly better through this (unless we gotta grid mortgage crisis too! ;0)

and wow, sl made the motley fool huh?? (even if 'not for a good reason';0) still pretty kewl...

and p.s. is someone at the nws a south park fan, naming these storms 'ike' and 'kyle'? ;0 was there an 'eric'? ('hurricane cartman' though... ;0)

If the LindeX volume shows a significant decline then there's less L$ being bought and people have less to spend so sales would decline (the only real "cost of living" we have is tier so shopping and I think most people would rather cut on shopping and pay tier than the other way around) .
If doesn't on the other hand then there's as much L$ being bought as before, so in order to account for declining sales the L$ has to be spent differently than before.

I'm not trying to argue , but I do think it's important to know whether the basic presumption of "people are spending signficantly less" is actually true or not and unless consumers chime in one way or the other you won't know for a fact. I do agree it makes sense to attribute it to the current RL situation, but it doesn't hurt to find "evidence". The RL economic situation has been bad for a few months already, not just a few weeks ago.

One disadvantage SL has is that there isn't anyone measuring consumer spending habits or you'd know one way or another right away .