Building custom-design business can super-size your profits, says David Geller. And it's not as hard as you think.
[dropcap cap=H]ere's one way to steal some "Internet dollars" back to your store. Even better, it's in a field where Internet sellers can't compete and, best of all, you can still make 66% gross profit margins.[/dropcap]
[inset side=right]The field of your dreams? Custom designing.[/inset]The field of your dreams? Custom designing. Hey, hey, don't leave ... even if you've never carved a wax in your life! Please read on. Why do I suggest custom designing? Well, one reason is that I made a lot of money with it in my former store. But here's the biggest reason I suggest you get into it now or expand what you're doing:
I estimate that there should be ... oh, only about a billion pieces of old and ugly jewelry sitting in drawers and safe deposit boxes across America right now. Give or take a few hundred thousand.
Baby boomers bought tons of jewelry over the years and it's sitting. The Bob Hope generation (our parents) have either handed down these items already, are handing them over now, or will do so in the near future. Most of it is not worn, but because customers don't throw out anything they perceive to have value, they hold onto it. Don't believe that people hold onto stuff that they'll never ever use? Look at your own basement and count the number of old computer monitors and printers you have piled up. See?
There are four areas you have to master to make money from this:
[dropcap cap=1.]Price it correctly. I've discussed this before and it's all laid out for you in our pricing guide.[/dropcap]
[dropcap cap=2.]Know how to design it. It's not as hard as it sounds. Really, offering design ideas to customers requires only a decent sense of fashion along with some rudimentary jewelry-making knowledge.[/dropcap]
[dropcap cap=3.]Be able to get it made. This is where things get technical. But it's not necessary for you to make the jewelry yourself. You can also either send the jewelry out, or buy re-made castings or mountings and all you do is set it.[/dropcap]
[dropcap cap=4.]Advertise it. This is where the bulk of retailers who want to offer custom design fall short. Most people have no clue that this type of service is available. To change that, you must tell them — constantly.[/dropcap]
Here's how it works. Advertise that you can take customers' outdated jewelry — "Mom's old pieces" or broken jewelry — and re-make them into beautiful new designer fashions at a fraction of the cost.
Customers come in with their old items, and you show them stock waxes, hand-made waxes, pictures from fashion magazines, catalogues from mounting houses, or even mountings you have in your own case that will accept a variety of different types of stones.
Charge the customer for manufacturing jewelry using a pre-made wax (and charge even more for a custom-made wax), including finishing. Then, charge for gold and setting of stones. You're resetting their stones. In my former store, we would actually cast a wax with their gold. It took us a while but we finally were able to do it with a small rate of porosity. But some jewelers won't use customers' gold — so they would buy the customer's gold at a low price and sell them new gold. But the wax manufacturing charge was still the same.
For the most part, in my experience, the customers were thrilled. I'd tell them "We can make you a new ring worth thousands for only hundreds." It's true.
In our price book, the labor for casting with a stock wax was $195 (whether it was the customer's gold or ours.) I figured the cost to cast the $195 wax is $35. Good profits. Then add on setting, heads, bezels, etc. To hand-make a ring from a wax starts at $530.
Then add gold. Again, I'd use their gold.
If you have mountings in the case, you can sell the mounting and then charge for heads and setting, buying the customer's old metal and using it as credit against the total job.
[inset side=right]I'd tell them "We can make you a new ring worth thousands for only hundreds." It's true.[/inset]Markup is typical at three times for everything. You're looking at a 65% margin. And guess what the turn is? If you make the ring, your turn is 52! Look at it: no inventory other than labor and findings.
In 1999 at my former store, our average product sale from the case was $350. But our average custom design (using the customer's gold) was over $750. If the customer had no gold and we custom-made a piece and furnished the gold, it was over $1,500.
And remember, moving that average $350 jewelry item required you to have hundreds of thousands of dollars of inventory to be in the case. But making that $750 custom sale only required you to have $25,000 of findings and gold. In fact, many jewelers with thriving custom businesses keep less than $5,000 in stock.
You'll make a lot of money, please a lot of people and once they are a customer you can now "woo them" so they come back and shop with you for other things. Loyal customers who have a relationship with a store will return. Custom designing and repairs builds loyalty, relationships and your bank balance.
But you've got to get the word out that you offer this service. We did direct mail, advertised on cable and, for many years, in the newspaper. (See a sample ad Geller used on Page 82.) During that time, we ran the same newspaper ad each Saturday. Notice that there's no discounting even though pricing is mentioned. This is not an area where price drives sales. We only advertised discounted repairs twice a year.
[contentheading]Companies Geller Recommends[/contentheading]
For $4, this company offers a catalog of4,000 stock waxes.
Phone: (913) 268-6359
THE WAX DEPARTMENT
Offers hand carved waxes — usually, all you have to do is just fax a picture. (Warning: do not infringe on others' copyright material.)
Phone: (270) 689-1200
[span class=note]This story is from the March 2006 edition of INSTORE[/span]