Daily Jewelry Retail Tips from Jewelers of America

Think like a Businessperson, not a Jeweler

Do you think of yourself as a retailer who likes jewelry or as a businessperson who sells jewelry? If you answered the former, then you’re in line with the 54.1% of Jewelers of America members who identified themselves this way in the 2008 Jewelers of America Cost of Doing Business Report. Just 12% called themselves business people.

While the survey doesn’t delve into how a retailer’s self-proclaimed identity relates to (or hinders) their success, Ken Gassman of the Jewelry Industry Research Institute notes that too many jewelers are in the jewelry business, but not in the business of selling jewelry. In today’s challenging environment, a retailer has to operate their business on a professional level to succeed.

Gassman provides the following tips to help you think like a business person and sell more jewelry your store:

More Space Doesn’t Mean More Profits

Bigger doesn’t always mean better. That’s one of the more interesting figures highlighted in the 2008 Jewelers of America Cost of Doing Business Report, which found that high-profit retail jewelers on average had smaller stores than their low-profit counterparts -- 1,775 sq. ft. compared to 2,200 sq. ft.
Ken Gassman, of the Jewelry Industry Research Institute, analyzed the survey for Jewelers of America and noted how high-profit stores do many things just a little better than their low-profit competition. So size doesn’t matter, but efficiency does.

To improve efficiency in your store, make sure you are aware of the following points:

Keep an Eye on Inventory

Inventory turn is a key differentiation point between high-profit and low-profit jewelers. In fact, the most recent Jewelers of America Cost of Doing Business Report found high-profit stores had a 20 % greater inventory turnover than their low-profit counterparts. That translates to better sales growth too. With that in mind, it’s essential that you know what inventory’s moving, and what’s collecting dust.

Jewelers of America’s resident education and management expert David Peters offers simple tips for keeping an eye on inventory:

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 2009 Cost of Doing Business survey, make sure you participate to benefit from the benchmarking analysis it reveals (click here for more information).

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:

Inventory Turn: A Key to Profitability

Jewelers of America will soon conduct its annual Cost of Doing Business survey – which, starting this year, will be combined with National Jeweler’s America’s Best Jewelers survey -- but you can still gain valuable insight by looking back at last year’s numbers.

In anticipation of the new survey, we’ll be reviewing some of the key data points that help you run your business better. For instance, last year’s 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:

Learn Sales Strategies That Work for 2009

Like many retailers, your store traffic has probably experienced a downturn in this tough economy. But retail expert Harry J. Friedman says you can still grow your sales. He’ll be presenting this and other topics in “How to Thrive in a Threatening Economy,” a free webinar scheduled for Friday, March 31.
 
Friedman says retailers need to make 2009 the year of the individual salesperson who can meet and exceed his or her goals.

He offers tips on how you can achieve this:

Effectively Cut Expenses

You have to be lean in order to survive. But there’s a big difference between smart cuts that won’t hurt your business in the long-term, and a crash diet approach that leaves your store starving.

At National Jeweler Network’s America’s Best Jewelers (ABJ) Retail Benchmarking Symposium -- held in January – jewelers, like William J. Curry, of Curry Fine Jewelry, shared ideas on how to smartly reduce expenses:

Decrease Average Inventory Dollars

One of the best ways to manage your costs during these challenging financial times is through better inventory control. During a recent presentation at the National Jeweler Network’s America’s Best Jewelers (ABJ) Retail Benchmarking Symposium, jewelers discussed ideas on decreasing average inventory dollars.

William J. Curry, president of Curry Fine Jewelry, and other jewelers shared the following inventory management tips:

Reduce Discounting for Increased ROI

In these challenging economic times it’s easy to get caught up in “discount fever.” But by holding the line and cutting back on your cutbacks -- even just a little -- you can increase your return on investment.

That was the message delivered by William J. Curry, president of Curry Fine Jewelry, during a presentation at the National Jeweler Network’s America’s Best Jewelers (ABJ) Retail Benchmarking Symposium.

Curry and other jewelers offered the following tips to thrive while decreasing discounts:

Watch Your Numbers

Keep track of your financials in a downturn could be the difference between your survival and a liquidation sale. Tom Shay of Profits Plus says your financials offer the tools you need to make informed decisions about your business.

Shay offers the following ideas on effectively watching the numbers:

Common Sense Strategies

It’s too soon to know whether or not Zale CEO Neal Goldberg can turn his company around. But at least in terms of attitude and outlook, the relative newcomer says the right things. In “Zale’s Strategies Are Common Sense” for IDEX Online, industry analyst Ken Gassman broke down some of the CEO’s key strategies:

Hold Tight to Top Performers

Having competent and reliable staff is essential to steering your business through these challenging economic times. As you consider or enact cost-savings measures like hiring freezes, don’t forget to hold onto those employees who have supported your business through the good and bad times.

David Peters, Jewelers of America’s education and management expert, notes that retaining well-performing staff is good business since:

What Not to Cut

As you reflect on the recent holiday season and look to the months ahead, it’s easy to lose your bearings. Cutting costs is without a doubt one of the best ways for your business to make it through these challenging times, but a slash-and-burn approach could do more harm than good.

In Entrepreneur.com’s “Recession Cost-Cutting No-Nos”, experts discuss the measures to avoid.

Perfect Pricing

Putting the right price on product can be a delicate balance, especially during challenging economic times. Over at the Small Business Trends blog, Ivana Taylor shares ideas from The Art of Pricing by Rafi Mohammed.

Consider these strategies when pricing goods:

• The Nine and Zero Effect. People associate the number nine with value and zero with quality. Decide what you want to communicate and price accordingly.

Plan for the Future

Despite a flurry of negative news, especially in fourth quarter, don’t forget that what you do -- offering treasured, memorable and lasting gifts for individuals to give their loved ones—is relevant in both good and bad times. Looking ahead to 2009, industry analyst Ken Gassman, who contributes to IDEX Magazine, says retailers should plan for a “down” but not “dramatically down” year.

As you look to the New Year, keep in mind these industry stats from Gassman:

• It’s not the end of the world. Gassman reminds us that we’ve had worse economic challenges. He also reminds us that jewelry is no fad. People have been wearing it for 50,000 years or more.

Close Add-On Sales

Retail experts insist that the biggest missed opportunity -- especially during the holiday season when you may just focus on getting the sale -- is the add-on sale. In good times, these provide a nice boost to your regular profits. In a challenging economy, like the one we’re dealing with now, they’re essential.

Some simple ideas for thriving with add-ons:

• Ask For Them: During JCK magazine's webinar, “Surviving Holiday 2008,” Brad Huisken, president of IAS Training, noted that it's common for jewelers to be so happy to close the sale that they sprint off to the register. He suggests taking a moment to inquire: “Who else is on your holiday gift giving list?”

Plan Your Marketing Success this Holiday

Of all the things that you can do this season to bring customers to your store, the one thing you can’t afford to do is NOTHING. In “Holiday Branding”, a special feature in the September issue of Instore magazine, Eileen McClelland gathered advice from industry experts on how to “do something” this holiday season.

Here we break down the highlights for you:

• Target Direct Mail: James Porte, president of Porte Marketing Group, advises retailers to use targeted direct mail to customers who’ve bought an engagement ring or mounting from your store in the last six months. He notes that it’s important to personalize the message, highlighting the specific product details and how your store can help now -- for instance, offer an inspection of the prongs.

Let Go of Profitless Customers

It’s clear that you need to focus a good portion of your holiday selling season efforts on your most loyal customers, and let go of clients who have proven profitless.

Jewelers of America Director of Education David Peters cites research showing the 20% of customers that account for a jeweler’s “loyal” base produce 80% of the profit, while the 25% of customers identified as “scavengers” produce just 5% of profit. Another 5% of customers -- the “crooks” -- contribute no profits at all and can actually cost money.

Peters says it’s key for retailers to clean up their customer base. Save your valuable time serving the scavengers and apply it to marketing to your loyal customers.

Conserve Cash

According to “Preparing for an Economic Storm,” a white paper released this summer by Deloitte, a leading professional services organization, many companies do not include performance metrics that look at cash flow in their management goals and incentives. Being “lazy” about these processes can mean missed opportunities during normal business cycles and can seriously threaten your business in the bad times.

In a downturn, Deloitte notes less demand causes most businesses to experience a combined cash and margin squeeze: inventory turns more slowly, causing a greater need for price reductions, which affects working capital and margin.

To help you avoid the cash and margin "squeeze," Deloitte suggests retailers:

Fight the Retail Forecast: Inventory

To have your store experience better than the National Retail Federation’s (NRF) holiday retail sales prediction of 2.2% growth, Daniel Butler, NRF vice-president for retail operations, recommends that retailers focus on small inventories.

Butler, quoted in “How Small Stores Can Lure Holiday Shoppers,” by John Tozzi of BusinessWeek, offers these tips to keep inventory lean:

• Refuse late orders
• Watch for over shipments to avoid having product you can’t sell.
• Retailers should also keep as much inventory upfront as possible, so that it’s out there where customers can see it (and buy it).

Fight the Retail Forecast: Customer Focus

Don't let the National Retail Federation’s (NRF) less-than-rosy predictions (2.2% growth) for holiday retail sales, deflate your confidence. Now is the time to think about how you can buck the trends. Don't focus on price, instead as we’ve noted again and again, your customers will be the key.

In “How Small Stores Can Lure Holiday Shoppers,” John Tozzi of BusinessWeek.com explains that since independent retailers can’t win on price, they must leverage their biggest advantage: personal relationships with customers and the ability to deliver superior service.

Take Small Steps to Independent Revival

Thriving during the upcoming holiday season doesn’t require that you make major changes to the way you do business. In fact, a lot of little changes can go along way.

In “10 Ways to Revitalize the Independent Jeweler,” JCK Magazine’s Rob Bates shares suggestions from several industry experts, including Jewelers of America Director of Public Affairs Peggy Jo Donahue.

Some simple steps to start thriving, offered by Donahue and others:

• Make the best use of your employees. “Jewelers have to become more businesslike in their decisions. Look at the productivity of each employee. If your sales per employee are low, you may be too people-heavy or just need to work to generate more volume from existing staff.” -Peggy Jo Donahue

Give Considerate Compensation to Employees

How you compensate your employees for their work -- especially during the holiday season when the right incentives could make a big difference in your store’s sales -- is a crucial element of your overall business strategy.

Jewelers of America’s Director of Education David Peters says that for most independent retail jewelers, salary in the form of an hourly rate plus small commission rates based on established schedules is the most popular compensation strategy for sales associates. In the coming weeks, we’ll look into specific strategies you can use to compensate your staff.

Peters details how to establish a compensation strategy:

Avoid Managerial Mistakes

We’ve written a lot about how you can make the most of your store’s employees and improve their performance. Now it’s time to look in the mirror.

Whether you oversee a handful of employees or hundreds, your skills at leading your team are essential to your success. It’s important to be aware of traps or bad habits managers can fall into. Suze Bragg shares the “13 Biggest Mistakes Managers Make” at the website, Expert Business Source.

In order for your store to thrive, here are five mistakes you don't want to make:

Manage Margins!

Challenging economic times require a different style of management, according to Timothy Malone, associate professor at the Gemological Institute of America’s School of Business. Malone spoke to JCK Magazine’s William George Shuster for the article, “Start Managing Margins."

“You must find your most vulnerable points immediately and stop the bleeding,” he said.

Malone discussed how jewelers can make their margins thrive during tough times:

Think like a Businessperson, not a Jeweler

Do you think of yourself as a retailer who likes jewelry or as a businessperson who sells jewelry? If you answered the former, then you’re in line with the 54.1% of Jewelers of America members who identified themselves this way on the JA 2008 Cost of Doing Business Survey. Just 12% called themselves business people.

While the survey doesn’t delve into how a retailer’s self-proclaimed identity relates to (or hinders) their success, Ken Gassman of the Jewelry Industry Research Institute notes that too many jewelers are in the jewelry business, but not in the business of selling jewelry. In today’s highly competitive environment, a retailer has to operate their business on a professional level to succeed.

Gassman suggests the following ideas to help you re-program the way you think about yourself, and your store:

Keep Moving Forward

Despite the shaky economy, jewelers can still achieve success. That’s what Jewelers of America’s Director of Education David Peters told JCK Magazine in the interview “Define Your Turf,” published in the June issue.

“Most independent jewelers have done a good job in the past and will continue to grow their businesses, given the right tools, information, and resources,” Peters said.

He shared his “Principles for Economically Troubled Times” with the magazine:

• Don’t cut investments in branding, marketing, and advertising.
• Develop partnerships with vendors, non-competing retailers and your community.
• Understand financial aspects of running a store. Review key measurements regularly.

Sell Repairs

As we wrote in the recent “Pricing Repairs for Profitability” tip, accurately pricing repairs can have a big impact on your bottom-line. The Jewelers of America 2008 Cost of Doing Business Survey reinforces the increasing importance of repairs, which accounted for 11 percent of sales in 2007.

It’s crucial that as a jeweler you and your sales staff can communicate with your customers about the most common jewelry repair processes. In a Counter Points series featured in Jewelers of America's newsletter, The J Report, entitled “Understanding and Communicating Jewelry Repairs," JA Director of Education David Peters detailed how retailers can communicate repairs and close more sales.

Some tips from Peters on how thrive in selling repair services:

• Educate Sales Staff. Research shows a large percentage of customers seeking out a new jewelry store are doing so because they are in need of some type of repair service, so be sure that your sales associates are prepared to discuss the repair processes in an easy-to-understand and comprehensive manner.
• Have the right attitude about selling repairs. Sure it’s not as sexy as selling a diamond, but taking care of your customers is about providing them with the products and services they need (and when they need them). Making a repair customer happy will most likely lead to many future merchandise sales.

Beat the Big Box

While there’s no magic formula when it comes to competing with big-box retailers, there are ways you can survive (and thrive). According to the Jewelers of America 2008 Cost of Doing Business Survey, smart independent retailers have not only resisted the competitive surge, but in some sectors the tide has begun to turn.

For instance, the recently released 2008 Survey shows sales growth for independent high-end retailers (3.5%) is outpacing chain store growth of 2.5%. Retailers that identify themselves as custom/designer jewelers are doing even better, with a 6.1% sales increase over 2006.

To compete with the "big guys," retailers must:

• Look at product mix. Are you offering the same exact pieces as the Wal-Mart down the road? The more you can customize and offer unique items, the better.
• Focus on value and not on price. Trying to out-bargain the bargainers is a lose lose proposition. Your margins will shrink and chances are you can’t compete on price anyway.

Efficiency Matters

Bigger doesn’t always mean better. That’s one of the more inter esting figures to come out of the Jewelers of America 2008 Cost of Doing Business Survey, which found that high-profit jewelers on average had smaller stores than their low-profit counterparts -- 1,775 square feet compared to 2,200 square feet.

This year, Jewelers of America commissioned an analysis of the survey by Ken Gassman of the Jewelry Industry Research Institute, who noted how high-profit stores do many things just a little better than their low-profit competition. So size doesn’t matter, but efficiency does.

To improve efficiency in your store, make sure you are aware of the following points:

• The business is about profits, not sales, says Gassman. This year high-profit store sales were 3% lower than those for low-profit firms, but they were able to get more from their inventory, turning it faster and selling it at higher margins.