I had someone email me about not wanting to deeply discount old
stuff to get rid of it but rather wait until it sells for a profit.
They’d sell for a slight discount but not at or near cost. I wanted
to share the “numbers” of holding out.
The names have been changed to protect the innocent
By waiting it out to sell to someone at a good profit what you LOSE
on old inventory is PROFIT OVER THE YEARS IT’S BEEN THERE.
Look at this:
You buy a ring for $1000 and retail it at $2200 January 2000. It
sits and sells in December 2000. Your gross profit? $1200.00.
What do you do with the $2200 check? Take $1000 of it and buy
another! That leaves you with $1200 in profit to pay bills. Got it?
The first year (2000) YOU bought the $1000 item with YOUR money. In
year January 2001 you buy the next one with the CUSTOMER’S money!
Now it’s January 2001, you bought it, tagged it, and wait.
It sells in December 2001 (cool-a turn of “1”) and makes a gross
profit of $1200.00. Very cool.
How much has your initial investment in January 2000 (a year ago)
brought to you in total? $2400! Yes two years profit of $1200 each.
Do it again in 2003 and make now in 3 years you’ve made $3600.00 in
total profits. Not bad for a $1000.00 investment.
That’s the way it should be. Doesn’t always work out perfectly but
that’s your goal.
Now let’s use the bosses theory: “I ain’t selling it unless I make a
Well how much profit should a three year old piece of jewelry make?
Simple, $3600, right? $1200.00 per year over 3 years equals
So if you wait three years and discount it 20% in year three it will
sell for $1760.00, gross profit is $760.00. You didn’t make $760.00,
YOU LOST $2840.00!
Why? Because it should have made $3600 in gross profit in 3 years
but only made you $760.00. The difference is $2840.00 in lost
You need to cut your loses WAY before 3 years. Start getting rid of
bad stuff at 12 months and be diligent after that.
Why? Because if it didn’t sell in year one and you sold it even at
40% off ($1320.00) you’d make $320.00 in gross profit. The $320.00 in
gross profit goes to pay bills and you take the $1000 and put it
something that WOULD TURN, in the next two years you COULD possible
make the $1200 per YEAR gross profit for year 2 and 3.
So here’s what you could make discounting heavily after 12 months
Total profit in 3 years by dumping and re-investing $2760.00.
If you held OUT for 3 years and sold at full retail of $2200 your
profit in 3 years would be $1200.00. You’re still $1560.00 short in
total 3 year profits.
Waiting for someone to buy it at YOUR price can’t compete with
turning it, dumping old no profit generating items.
The way to make holding out over three years compete with my
suggestion is this:
Remember you want $3600 in profits in 3 years?
If you hold the $1000 cost ring for three years, you’d have to SELL
it in year 3 for $4600.00! That would be the 3 years of profits plus
the cost of goods. It only was tagged at $2200.00 originally.
In addition you have the situation that the excess inventory you
PAID FOR or OWE is not bringing in the profit required each year but
you have to pay for the product in year one even though it returned
no money back to you in year one. Therefore you OWE a lot of money,
either to the bank, credit cards, accounts payables or the owner
doesn’t take out much money. Or all of the above.
If you get keystone and run a store that has overhead at 40% there’s
no way you make enough money to PAY for inventory you WILL sell in
year one and inventory you won’t sell in year one. Think of it this
way. Can you pay during the year the inventory you’ll need THIS year?
Can you pay THIS year for the inventory you’ll need over the next
THREE years? I doubt it. Besides you might not need that much
inventory anyway. Selling it off could be sued to pay bills and not
owe so much. The amount of inventory you should have is NO MORE than
the amount you wills ell from the case in ONE YEAR.
You’re married and sleep with your spouse. You’re not married to
your jewelry. It’s just a love affair or a lust affair. A money
lust/love affair. And just like an affair, if you don’t PUT OUT then
Jewelry is not bought to make you a profit. Your BUSINESS makes you
a profit. Jewelry is just the tool you use to make the profit.