Whats the difference in Making Money & Having Money in a jewelry
store?
What’s the difference between a store have a good bit of money and
less debt and those with little money and a lot of debt?
As someone who visits stores in person and also sees their business
and financials by connecting over the internet for almost 15 years I
can share with you what successful stores consistently do.
Notice I said “Have money"not"make money”. Whets the difference?
Plenty. Most all jewelers make money although many have very little
of it in their checking account. Many years ago I read a statistic
that said well over 55% of companies who declared bankruptcy had a
profitable profit and loss statement.
Here’s my list of what I’ve seen in the trenches, not in order of
importance.
- They charge easily double their shop actual costs for repairs and
custom work.
You might think you’re charging correctly but most stores I talk to
don’t charge enough for their labor (repairs & custom work).
You typically price by guilt rather than what you must charge to
make a good shop profit… “The customers won’t pay”. Not true.
Across the country to size a 14kt yellow gold simple 1 ct round
diamond engagement ring smaller RANGES from $18 to over $100 (you
read that right)
Almost all of them enjoy a 90% closing ratio. The $18 jeweler AND
the $100 jeweler.
If you’re not making enough money from the shop the only REAL
solution is to charge more than you are now. But you’re scared.
Think back to what you charged in 1995; 2000; 2005; 2010; 2013
You raised your prices. What happened when you did? NOTHING, they
paid. If they squawked, that doesn’t matter. As long as they pay and
come back. Hey things go up in price and people still buy. I think
it’s a sin to pay $30,000 or more for an automobile. Why? because I
bought a brand new one with a V-8,A. C and fancy stereo for $5,000.
Prices go up and we are deal with it. (Except for you and your shop
prices.
Repairs and custom does not have TURN, so increasing the number of
jobs coming in if a jeweler already has a full box doesn’t increase
profits.
Be more efficient? A laser machine will definitely do that but for
the most part a jewelers efficiency can be increased about 15%. But
if you’re short profits by 50% that won’t help much.
To increase shop profits you have to charge more than you are now
and people WILL PAY. Raise your prices, learn to present the sale
better and you’ll make more money while retaining a better than 75%
closing ratio. (Jewelers who raise their prices still have a 90%
closing ratio-but just higher profits)
- They handle inventory the way the very large successful retailers
handle it, as if it were a block of melting ice.
Before refrigerators became common blocks of ice were delivered to
homes. In the morning a block of ice might have sold for $1.00. But
as the horse drawn carriage drove through town the ice starts to
melt and gets smaller. By 3pm the black is half its size, who’d pay
full price for half a block? Being the block sits in a metal box the
driver still has the same amount of water as he left the warehouse
with at 5am-20 gallons of water. But as the ice gets older it has
less value.
Most jewelers think ONLY “margin”. “How much can I sell this for
above my cost?”. That’s a good start but that’s all it is. Have you
noticed how retailers in other industries, like clothing sell at
their regular prices when new items arrive and after 60 days or more
they start doing deep discounts to reduce stock? They understand
turn. Clothing has a turn of “4” times a year because there are 4
seasons.
Why don’t the clothing retailers just seal the old shirts, slacks,
shorts and swimwear in zip lock bags and bring them out next season?
If it cost them $5 for shorts that’s ell for $10, can’t they sell
them for $10 next summer? Maybe, but here’s what they look at: There
might be a new style or “in” look next year. Who’ll buy this then?
Unlike jewelers clothing retailers have to pay their bills in 30
days. Getting rid of old helps to pay the bills for the next
shipment.
You can’t keep swimsuits on the rack with leather warm coats. No
room. Of course jewelers can pack showcases with more jewelry, just
add another ring tray!
Merchandise has an obligation to give your store the profits you
expected every year it sits in the store, not just the year it
sells.
If an item costs $100 and gives you a profit of $100 (keystone) then
it should do it every year it sits in the case. If its been there 3
years it should give you $300 when it sells, not just $100. That’s
what successful retailers understand: TURN can be more important
than profits.
If you buy it in January for $100mand sell it at Christmas for $200
and make $100 in profit, you’re happy. But would you be happy
selling it for $160 instead and make only $60? I would if we sold it
first in June and made $60, reorder it in July and sold it for $160
at Christmas. Now in a year we made $120 in profits rather than
$100. A turn of 2, less profit and more total profits, which is all
that really matters.
This is the reason retailers discount towards the end of the season.
You may not think diamond jewelry goes out of style, but it does go
out of money. Want to have money when it comes to inventory, follow
successful jewelers: Stock the store by price point ranges that have
sold in the past. Yes experiment with some higher priced item but
don’t go overboard.
If it sells within 6 months of its arrival, reorder and continue to
do so until it doesn’t sell within 6 months.
Sell for “Top dollar” for 9 months. Discount a small amount if need
be.
After 9 months, get worried, discount 25% to help move it out of the
store.
12-15 months be proactive about either returning to vendor for
exchanging for other items or give the staff big bucks to move it
for you.
Don’t have it in the store its 18 months or older. If it stays it
has an 80% chance it will still be there 5 years later.
Find the dollar amount of inventory over 1 year old your POS
program. It adds this up quickly and leave out memo and consignment.
Now multiply that number by 80% and then go into your QuickBooks or
accounting software and look at your accounts payables and credit
card debt. You’ll see that about 80% of old inventory equals the
store debt. Eliminate old inventory and you lower debt dramatically,
give you more cash and availability to now stock items that will
move!
After seeing the books of hundreds of jewelers the numbers are
almost the same. Whether you’re proactive about inventory or not if
you have a GMROI report in your POS program you can see these
numbers for yourself.
c In one full year easily 60-80% of all sales made are those from
inventory that is less then 6 months old when it sold. But the
amount of inventory on hand is less than 40% because reorders/turn
in the first 6 months of being in the case.
c Items that sell after its 6 months old, all the way to 12 months
of age comprise less than 10 % of total sales. look at the drop!
Why? No one likes it anymore. Sales staff yawn when they see it now,
customers aren’t interested and it just sits there not selling.
c Sales of items that are 1 year old or older when it sold can be
20% of total sales but to sell that 20% of total sales the inventory
required is an astonishing 57% of inventory.
A GMROI report shows sales by price point; category and age. Clearly
the golden age of inventory is the first 6 months of being adopted
by you. After 6 months it becomes the red headed stepchild. After 12
months its like a 40 year old who never leaves home just draining
mommy and daddy’s checking account.
Inventory is like a block of ice at 5am. Worth its weight in gold
(or ice). After 6 months its like ice at noon. At 9 months its 3pm
and you need to start worrying and get rid of it at almost any price
as no one is willing to pay a premium for water and you won’t have
enough scheckles to buy new ice and feed the family the next day.
- They have ongoing sales training on a regular basis to take “just
OK” staff and make them all STARS.
Training the staff makes them stars and great at their game. What is
your job description of a sales person?
c Make sales
c Give good customers service
c Bring in business
Sounds good but I learned from Harry Friedman what a sales’ person
job description should be:
Turn shoppers into buyers while increase the stores average dollar
sale and their own closing ratio.
This only happens with weekly or bi-weekly sales meetings, personal
coaching and training
- There are a host of other things successful retailers do, too
many to mention. But just a taste of some:
c Spend a budgeted amount on consistent ongoing advertising.
Spending 6-10% of sales on advertising. Their advertising is “good”.
Its not boring.
c Have several events a year knowing collectively this enhances
store sales.
c Send thank you notes to customers.
c Have the staff personally contact customers all year long by notes
or phone.
c Pay the sales staff a commission/bonus system that makes a
difference in their paycheck.
c Renovating the store from time to time so it doesn’t get stale.
c Hire support staff to allow the owner to do what they do best.
c Take regular vacations.
c Have hours open that make it convenient for the customers.
c And a host of 100 other things.
David Geller
JewelerProfit.com