The JA Report: News, Tips & Trends from Jewelers of America

Ignore Management Details and Lose Profits

We continue our in-depth coverage of the recently released 2011 Jewelers of America Cost of Doing Business Report with a spotlight on high- and low-profit income statement measures. Last week, we excerpted a section on the benefits of comparing your business’ operating ratios to high- and low-profit jewelry firms. This week, we look at how a high- and low-profit income statement comparison can reveal key performance areas jewelry business owners should review in their stores to improve profitability.

The following excerpt is another example of how the 2011 Cost of Doing Business Report -- with its comprehensive data tables on a cross section of jewelry firms -- is an invaluable benchmarking tool to help you find areas to cut costs or strategize how to improve performance.

High- or Low-Profit: Where Does Your Jewelry Business Stand?

Jewelers of America recently released our 2011 Cost of Doing Business Report, an invaluable benchmarking tool for retail jewelers. Jewelers can use it as a benchmarking tool to find areas to cut costs or as a reference tool when seeking favorable business financing options.

With 45 pages of comprehensive data tables on a cross section of jewelry firms, many jewelers wonder where to begin to analyze their data. So in the coming weeks, we’ll be excerpting some informative sections of the Report to illustrate its benchmarking benefits. You’ll see that unlike complex finance reports, the Jewelers of America Cost of Doing Business Report is designed for business owners, not financial experts.

This week, we look at the benefits of comparing your business’ operating ratios to high- and low-profit jewelry firms:

Understand Your Numbers

Jewelers of America is conducting its annual Cost of Doing Business survey, which helps retail jewelers gain valuable insight by looking back at their previous year's numbers for key performance measures.

The survey reveals key data points that help you run your business better:

• For instance, the 2009 survey indicated that the most profitable jewelers turn their inventory 1.2 times per year, versus low profit jewelers who only turn inventory once. If your numbers are closer to low profits, brainstorm with your team on ways to improve your inventory turn – our survey shows even a slight improvement could improve your bottom line.

Tips for improving inventory turn in your store:

Increase Profitability Through Benchmarking

Comparing your store’s financial performance to industry averages and/or standards can have a profound impact on your business. Jewelers of America’s Cost of Doing Business Report, published each summer, helps you find out where your store measures up across multiple operating-performance areas. That knowledge is a powerful tool, since even small adjustments can lead to better profits.

Jewelers of America is currently conducting its 2011 Cost of Doing Business survey, make sure you participate to benefit from the benchmarking analysis it reveals (Take the survey now! or learn about its benefits).

When you take the survey online, you’ll get an immediate calculation of your financial data and operating ratios. David Peters, Jewelers of America’s resident education and management expert, says that once you have this information you can increase profitability by:

What’s Your Cost of Doing Business? Series

Jewelers of America released its 2010 Jewelers of America Cost of Doing Business Report, which analyzes jewelry retailers’ financial data from 2009. The Report, which has been published annually for two decades, represents the most complete and historical comparative financial information available to specialty jewelers in the U.S.

Do you know your cost of doing business? Or how your profitability, or lack thereof, compares to your jewelry competitor down the street? Jewelers of America developed the Cost of Doing Business Report to help independent jewelers benchmark their performance based on key financial indicators and effect positive change in their business profits. In JA’s “What’s Your Cost of Doing Business?” Series, we’ll reveal just how vital the Report is to your business management, and how it assists you in improving profitability.

You can use data tables in the 103-page Report to take control of your business management and improve profitability in the following ways:

Protect Yourself When Shipping

Whether you’re shipping something worth $500 or $50,000, be sure to protect yourself against theft. You don’t want to realize the importance of theft prevention after it’s too late.

Matthew Focht, president of Tru®, a consulting company that negotiates credit card processing rates for jewelers, recommends following these basic steps to protect shipments:

Check Your Business Temperature

Attitudes, including those of consumers, have definitely improved since the start of 2010. But while things appear to be improving, but there are also indicators (like the jobs and housing markets) that we’re not quite out of the woods yet. That’s why it’s important to check the temperature of your business, especially as you look ahead to the second half of the year and the critical holiday season.

Some things to keep in mind as you look at your business today:

Take Advantage of Tax Credits

Back in March, the nearly $18 billion Hiring Incentives to Restore Employment (HIRE) Act was signed into law. At the time, Jewelers of America notified members of two key provisions in the bill related to qualified new employees:

• A payroll tax exemption that offers an employer exemption from Social Security payroll taxes for every worker hired after Feb. 3, 2010 and before Jan. 1, 2011, who had previously been unemployed for at least 60 days.
• An additional $1,000 income tax credit for every new employee retained for 52 weeks to be taken on the employer's income tax return.

In the Businessweek.com article, “Don't Overlook the Jobs Bill's Tax Incentives,” Karen E. Klein writes that few companies have taken advantage of the incentives. In the article,  Brandon Edwards, president of The Tax Credit Company -- a Los Angeles-based consulting firm, estimates that 90% of small companies are unaware of the incentives.

Among Edwards’ key points:

Think Twice When Cutting Costs

When reviewing how to save money in your retail business, it’s important to carefully consider how each cost-cutting decision you make will impact your business. David Peters, Jewelers of America’s resident education and management expert, shares his insight on how to analyze cost-cutting decisions.

Use his tips to review your cost-cutting options to see how they will affect key areas of your business: 

Boost Your Jewelry Profits

As the economy starts its slow recovery, businesses still need to be cautious when it comes to spending. However, there are opportunities out there to grow.

David Peters, Jewelers of America’s resident education and management expert, offers the following action items to increase your profitability:

Use Creative Financing To Gain More Sales

In this tight credit marketplace, getting a potential customer to walk in the door is not always the biggest obstacle. Often, the main hurdle is actually getting the customer approved for a loan.

“Most jewelers do not even realize there is an incredibly easy way to offer short term financing, requiring no credit check, which has little or no cost to the jeweler and to the customer,” says Matthew Focht, president of tru.

Focht explains how modern check processing can achieve this short-term financing:

Cut Marketing, Advertising and Promotions Costs Creatively

Getting your brand “out there” is essential – but are you spending your marketing and advertising budget wisely, or watching dollars go down the drain? If you’ve been reaching the right demographics and seeing measurable results, you probably don’t need to alter much, if anything. On the other hand, if old promotions and ad buys have gone stale, it may be time to freshen up your marketing mix.

David Peters, Jewelers of America’s resident education and management expert, shares the following tips to cut your budget, while improving your marketing results:

Analyze Your Store From The Inside

In looking to where your business needs to go (and grow), outside factors like the economy can have an impact, but you also have to look within. As we've noted earlier, identifying your strengths and weaknesses is a critical component of success. David Peters, Jewelers of America’s resident education and management expert, says you must put your business under a microscope.

Peters recommends taking the following steps to analyze your business:

Anaylze Your Store's Strengths & Weaknesses

In order to ensure your business not only survives, but thrives today and tomorrow, it is important to take a close look at your S.W.O.T.S. (Strengths, Weaknesses, Opportunities and Threats). David Peters, Jewelers of America’s resident education and management expert, says that a thorough evaluation of all four positions should be done at least annually, or when a major shift (such as the current economy) occurs.

Peters offers the following guidelines for analyzing your business's SWOTS:

Lower Costs of Service Providers

A penny saved is a penny earned. In fact, it’s easier to save $1,000 a year on your credit card processing costs than it is to find a new customer. However, with so many companies offering payment processing services, changing companies can prove a daunting task.

According to Matthew Focht, President of Tru, a payment processing brokerage firm that negotiates for free on behalf of the businesses it represents, there are a few key steps to follow to improve your chances of securing a better rate when considering switching service providers:

Cut Personnel Costs Creatively

When it comes to cutting costs, personnel is one of the toughest areas to look at. One way to ease the pain is by taking a little bit off across the board, versus hacking off costs in one area or another.

David Peters, Jewelers of America’s resident education and management expert, shares some tips on how to effectively control personnel expenses.

Use this tips to thrive with creatively cutting the personnel costs of your business:

Price Merchandise Strategically

When it comes to pricing your merchandise, there are a number of factors to consider before reaching that final number. That’s why the price may seem right to you, but without careful consideration, you could end up being over -- or under.

David Peters, Jewelers of America’s resident education and management expert, offers the following advice to help you properly price jewelry product:

Cut Expenses On Your Retail Space

Use Simple Steps To Improve Inventory Management

Protect Yourself From Accepting Bad Money

Losing time and revenue to bad transactions is one of the most frustrating aspects of running a retail jewelry business. Thankfully, there are measures you can take to protect your business. For instance, have you ever been shopping and seen someone write a check only to have the cashier run it through a machine and hand it back to the customer? Have you wondered how exactly that works and what benefits it has to the business owner? Jewelers, large and small, can utilize check guarantee and conversion services and take other simple steps to avoid bad checks and fraud.

Matthew Focht, president of Tru, a consulting firm that specializes in payment processing, provides tips on using conversion services and protecting your business from bad checks:

Protect Your Business From Fraud

An unfortunate byproduct of these challenging economic times is the increase in reports of fraud. Over at Small Business Trends, Denise O’Berry shares data from a recent Association of Certified Fraud Examiner’s survey, which found more than half of respondents’ reported an increase in fraud over the last 12 months.

With that in mind, it has become more important than ever to protect your cash flow. O’Berry offers the following tips:

Use Analytics To Improve Business

For companies trying to get a handle on where their business is and where it’s going (everything from customer shifts to trends), analytics can be a powerful tool.

Rachel Ryan, director of finance for the National Retail Federation (NRF), shared ideas from a session on analytics held at NRF’s Annual Convention, which took place from January 10-13, in New York City. The session featured speakers Chris McCann, president of 1-800-Flowers.com, and analytics expert Tom Davenport, a professor of Information Technology and Management at Babson College.

Use the following tips from the NRF session to get started with analytics:

Put Money Back in Your Pocket

While many economists compared 2009 to the Great Depression, a more accurate name would probably be “The Great Humbling.” While some jewelers closed their doors, many used their downtime to find ways to cut costs, streamline processes and manage losses. For instance, some businesses innovated by switching to online systems for payment processing in their stores.

Matthew Focht, president and founder of Tru, a consulting firm specializing in payment processing, says that using online payment processing services can improve your efficiency and security while saving you money:

Be Smart About Sourcing Inventory

According to National Retail Federation’s “Challenges of the Future” report, building an inventory of “differentiated products in appropriate quantities, at competitive prices, is an increasing challenge for many small independent retailers.” According to the report, one solution is for smaller jewelers to source from up-and-coming designers, manufacturers and suppliers who are looking to establish themselves with new jewelry products.

The NRF report offers additional tips to stay competitive and build an effective inventory in 2010:

Take Advantage of Carryback Provision

Jewelers of America recently alerted members to carryback legislation that could be a bonus to business. The provision expands the ability for businesses to “carry back” net operating losses (NOLs) suffered during the current recession in order to claim a refund from taxes paid in previous years, reportedly giving retailers and other businesses more than $10 million in cash. 

The question is, how can your business take advantage of the provision? In “How to ‘Carry Back’ Your Losses,” Susan Berson offers the following tips:

Analyze From the Inside

In looking to where your business needs to go (and grow), outside factors like the economy can have an impact, but you also have to look within. As we've noted earlier, identifying your strengths and weaknesses is a critical component of success. David Peters, Jewelers of America’s resident education and management expert, says you must put your business under a microscope.

Peters recommends taking the following steps to analyze your business:

Stay Competitive with Credit

Promotional credit is still an attractive and effective tool to purchase higher ticket items. By offering promotional financing in lieu of a discount, you can protect the integrity of the brands you are selling. More importantly, today’s consumers want options. In the current economy they’re not as cash liquid as they once were. With a high-end item like jewelry, long-term financing can be more attractive than discounted prices.

Regina Leadem, Vice President of Sales for the Luxury portfolio at GE Money, shares simple tips to help make purchases more affordable for your customers:

Use a Consistent Pricing Strategy

While there are plenty of practical reasons people buy things, the emotional component is the every constant “x” factor. That’s why your pricing strategy is critical to your success, as it  sends subtle messages and psychology to reach potential customers.

Consider the time-tested price strategies, reviewed by Ivana Taylor at Small Business Trends, as you are creating your price points:

You’re Never Too Small to Strategize

For many small, independent businesses, thinking strategically about the future -- particularly during times when you’re caught up in the day-to-day -- can be tough. For those smaller business owners asking, “Do I really need to go through all the trouble of strategic planning?” Jewelers of America’s David Peters says it is imperative “if you want to keep your doors open and prosper.”

Peters’ says small business owners should consider the following factors, and start creating a business strategy now:

Benchmark to Success (and Survive)

Knowledge of your strengths and weaknesses is important in any economy, but in the current downturn it can be the difference between advertising your product or advertising your “going out of business” sale.

The 2009 Jewelers of America Cost of Doing Business Report proves this point. The Report found that despite the fact that jewelers of all size and type saw declines in 2008, those who controlled costs were able to lessen the impact of the downturn. On average, high-profit firms grew by 3.1%, while their low-profit counterparts were down -12.6%.

David Peters, Jewelers of America’s resident education and management expert, says using the Report can help jewelry retailers see how their business compares to industry averages, so you have the tools you need to shore up strengths and eliminate weaknesses.

Use the 2009 CODBS Report for strategic planning and benchmarking, and you will be able to: