If you’re trying to get your business to run most effectively, it’s natural to look at spending. When weighing what to cut, look to make the biggest impact with the smallest disruption, says Kate Peterson of Performance Concepts. Examine benefits first — limit health care costs, put a cap on vacation time and revisit compensation strategies.
Steel yourself to make some tough decisions. “Yes, you love your people and they have been with you for a long time, but you are not running the United Way,” Peterson says. “No profit means no business, and loyalty doesn’t pay the rent. If you’re not getting a return on your payroll investment, put a structure in place that better shares the risk (i.e., heavier incentive basis), set clear standards for productivity and provide the support to get the job done.”
Also, re-examine scheduling. “If your store is open from 10 a.m. till 6 p.m., and you have four full time people on staff, do you really need all four of them there from open to close? Doesn’t it make sense to stagger schedules to cover peak hours but run lean at the beginning and end of the day? Effective use of payroll hours can be a huge cost savings for owners who have the stomach to tell people when they need to work rather than asking them when they are available.”
On the other end of the impact spectrum, keeping the lights off while setting up the store doesn’t save more than a few dollars per year, while seriously dampening the mood every morning and risking less-than-ideal case appearance.
Here are three examples of jewelry retailers working to tighten up spending:
NELSON COLEMAN JEWELERS FOCUSES ON STRENGTHS
➜ Amanda Coleman-Phelps says Nelson Coleman Jewelers in Towson, MD, has made a concerted effort to focus on what the business does well and eliminate things it doesn’t do as well, a strategy that has saved hundreds of thousands of dollars. Here are three areas in which the company has saved big:
1. Buying Smarter
They created budgets in three areas — diamond, fashion and engagement — and the team meets at least monthly to make sure they’re sticking to those budgets.
Managers must research what customers are buying and stay up to date on trends. Membership in Leading Jewelers Guild and Independent Jewelers Organization ensures member discounts.
“We are able to rein in all of our expenses, have a good cash flow and pay our vendors on time,” Coleman-Phelps says. “We have gone from being a late-pay company to an on-time pay company and our JBT rating went from a 2 or a 3 to a 1. So we’re now able to use vendor discounts that we weren’t able to use before.”
The gross profit margin is at 52 percent, which she characterizes as amazing. “We grew 23 percent last year, and we want to stay between 5 and 8 percent minimum.”
2. Embracing Digital Marketing
They also jumped into digital marketing, cutting down on direct mail and eliminating radio and TV. “We now pay less than $100 to gain a new customer. It was ridiculous what we were paying years ago, $500 or $600.” That change has saved $100,000 in annual radio spots alone. They’ve found digital, for which they pay less than $30,000 a year, to be more effective, too. “The way you can track your customer now, and cater the message to them specifically, using cookies, has been really good,” she says.
3. Tightening Staff
They also eliminated the job of administrator and divided up the duties, saving $35,000 annually. They were in the process of hiring for that open position when they decided to ax it. “The team realized we are trying to preserve what we have,” Coleman-Phelps says. “It was a struggle for them to have to recalibrate their daily routine, but I broke it out so it became part of their schedule.”
Because staff is paid with a combination of base pay and commission, the extra administrative duties haven’t negatively affected sales staff’s pay, she says. “Paying commission helps them to take control and helps protect our bottom line.”
F.A.O. JEWELERS REALIZES IMMEDIATE RESULTS
➜ John Okoniewski of F.A.O. Jewelers in Brighton, MI, joined the Edge Retail Academy and within six months of fine-tuning, he was at least $20,000 ahead of where he started.
1. Insurance Savings
After his Edge Retail Academy adviser reviewed the store’s insurance policy and advised him to shop around, he was able to save $10,000 annually.
2. Battery Profits
Although raising the price of a repair isn’t technically cutting an expense, it can optimize staff time and turn an onerous task into a profit center. F.A.O. Jewelers had charged $7 for watch batteries for years, Okoniewski says. Edge adviser Sherry Smith “basically forced” Okoniewski to change it to $15. He tried to compromise with $10. “She insisted, ‘No, do $15, promise me you’ll do it for a month. I bet 99 percent of the people aren’t going to notice. And if they do, say ‘We haven’t raised our prices ever before now.’”
And she was right — except it was 100 percent of the people who didn’t say anything the first month. “Since then, some old customers have mentioned it, but once we talk to them about it, they don’t leave. That extra $8 is pure income and that has brought in $10,000.”
3. Inventory Management
Like many store owners, Okoniewski had always bought based on his “gut”. “Now, I figure out based on sales how many peridot pendants I really should have in stock. How many lockets should I have or diamond engagement rings? Every category has its own little formula. You don’t need 40 lockets if you sell 20 a year; you can have 15 in stock and reorder the ones that sell fast.”
BERGSTROM JEWELERS STREAMLINES OPERATIONS
➜ Bob Zagaros of Bergstrom Jewelers in St. Louis Park, MN, has saved about $70,000 trimming expenses, and has set a goal of trimming another $70,000 in the coming fiscal year. Sales are healthy, but he needs to find the most efficient ways to maximize profitability. “We’re trying to get leaner,” he says. “Like your physical body, your business has to be in shape. You have to be able to move and react to what’s going on without pulling a big weight behind you. So we’ve made everything lighter.”
“Extras like season tickets to local sporting events are good perks for employees and customers alike, but we may have to cut back on some of that.”
2. Inventory Management
“We’re not buying as deep as we used to. We’re trying to be more nimble in reacting to what the customers are looking for. We reduced the inventory we carry and we are moving it more often with quicker reorders. Most of our engagement cases are alloy. We’re not tying up a lot of money in that because we can order as we need it.” The business is also opening an estate department.
Zagaros cut one position and other staffers are working four days a week instead of five.
Bergstrom had a generous, 40-year tradition of assuming the entire burden of health insurance premiums for its staff. This year Zagaros asked his 14-member staff to contribute 25 percent toward the cost of premiums and stopped subsidizing health insurance for the families of employees. This change alone saved about $17,000 annually.