When a client asks a store to match an online price, the owner and salesperson butt heads.
Gina Scotto had been with Cliff Fine Jewelers for over 15 years, and store owners Kyle and Lisa Elias considered Gina a major part of their success. Both were surprised by Gina’s recent reaction to what was a problematic — though typical — customer situation.
It was a busy Saturday afternoon when Nancy Booth came into Cliff in search of a diamond engagement ring for her longtime partner. She asked to look at a diamond she had seen on the store’s website.
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Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.
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Gina explained that the specific diamond Nancy had found online was not currently in the store, but that she would be happy to bring it in. In the meantime, she showed Nancy several in-stock diamonds that seemed to fit within her parameters, but none were quite right. Gina knew that with a little time, she and Kyle could bring in Nancy’s original choice, along with other options.
Kyle was on the job first thing Monday morning, contacting his regular suppliers. By noon, he handed Gina a list of four diamonds that fit Nancy’s specifications. Nancy was still most interested in the first diamond she’d seen on the store’s website: a 1.51-carat, F, SI1 with a GIA report and an excellent cut grade. She was most impressed with the diamond’s appearance in the photos and video posted on the site. Cliff’s retail price for the diamond in a platinum solitaire mounting was $15,650 plus tax. The problem arose when Nancy said that based on the GIA report number, the diamond seemed to be the same one she had found on another website for $14,046 in a platinum solitaire mounting with free shipping and no sales tax. She told Gina that she understood the diamond was really owned by an upstream supplier. She preferred to buy it locally, but if Cliff wanted the business, they would have to be more competitive on the price.
Gina went to Kyle to see what he could do to make the price on the diamond more attractive. In Gina’s view, this was Cliff’s one opportunity to win Nancy as a customer, and she didn’t understand why he wouldn’t sell the diamond for the same price as another retailer.
Kyle checked the numbers and said that there was no room for him to move. His cost on the diamond was $13,200. Gina’s frustration rose to the surface as she began to argue with Kyle about the importance of the investment in customer loyalty.
Lisa listened to the escalating tempers, wondering if there was really a “right” answer to the situation. She was angry with Gina for refusing to recognize that if they matched the other retailer’s price, Cliff would be losing money by selling the diamond. (She clearly heard Gina’s furious retort when Kyle asked if she would be willing to give up her commission on the sale!). She was even angry with the supplier for making an easily recognizable diamond available to a retailer willing to practically give it away.
Mostly, though, she felt tired of working so hard for so little and of watching her business slip into areas that were beyond her control.
- Is there a point where winning a customer makes it worth giving up reasonable margins?
- Is it a mistake for Cliff to post diamonds on their website that are readily accessible to customers on other sites?
- How can Kyle and Lisa maintain the motivation of a salesperson when occurrences like this one are happening more frequently?
Expanded Retailer Responses
There is no loyalty anymore with customers. You can’t buy the business if there’s no profit in it for the store. Once a customer starts setting rules for the sale, show them the door. They either respect the store owner and salesperson or they don’t.
We had the exact same thing happen to us with a loose 1.90 oval diamond at Christmas; I let the guy buy it online rather than sell a stone with almost no margin. I did, however, sell the customer a platinum semi-mount from Overnight Mountings with 0.30 carats of tapered baguettes for a 2.5-time markup and set his diamond. I also told him that resizings and refinishings on the mounting would be at his expense and would have been free had he bought everything from us, which he said was OK. Guess what? The ring didn’t fit and I charged him to resize it and tighten up the baguettes that were loosened by sizing it down two sizes.
Reasonable margins? How much does it cost in advertising to bring in an affluent, new customer? I would negotiate a lower rate of commission for the sale with the understanding that the initial sale is just going to be the first of many. Assume that the initial low-profit sale will be a great way to open the door to better profit sales in the future, and work hard to make that happen by motivating the sales staff with offers of better commissions on the next sales of less “commodified” pieces! Also, discuss this strategy with staff before this happens, so that there are no hurt feelings about commissions being lower on this kind of deal.
They wouldn’t be gaining a customer. She has made it clear the price is her prime motivator. She can say how she wants to buy locally all she wants, but if so, then why was she on the Internet? And no, the store should not show diamonds that are readily found elsewhere on the Internet. It just invites price comparisons and deadly discounting.
Cedar Rapids, IA
If the owner meets the lower price, nets it for sales tax, absorbs shipping (if the supplier charges it) and pays 5-10 percent commission of any profit, and if after all that the sale is in the black, then, shucks, do it since the store has no investment! Try to negotiate the cost with your supplier. Make sure the customer pays by check or cash, not a credit card or extended payment plan. Pay the supplier with the store owner’s credit card to get miles or other card rewards. Make sure the buyer sees and understands that the owner is working for nothing.
Bel Air, MD
The issue of memo diamonds to online dealers is a growing problem ( Blue Nile, Ect ) in the industry. Add to this the tax free internet and the problem grows larger. With all stores, sometimes a long time employee has overstayed their time. Gina thinks that Kyle should pay her her salary plus her commission on a sale that he would be losing money on new customers, how long will he stay in business if they sell at a loss ? I would have Cliff take over the sale and show Nancy what the stone cost him as well as the platinum mounting , and explain to Nancy that he had to make a profit to keep the doors open. He should further explain the benefits of purchasing from Cliff Fine Jewelry, appraisal, sizing, stone tightening, all as part of the sale. I would then start to find a replacement for Gina. She seems to have become a me-player not a team player.
Sherwood Park, Alberta, Canada
Kyle should have matched the net price, plus 10%, plus his local taxes. No sense not addressing the more than obvious tax issue not hobbling the internet and while 10% is far below the margins we need to survive, this deal is all about brokering a sale rather than purchasing inventory. I would be more worried about losing his dynamite sales associate, Gina. But a valuable lesson here is to not support diamond wholesalers that allow their traceable GIA certs to be used against the brick and mortar retailers they purport to support. We are sometimes guilty of reviewing situations such as this, as though they are the everyday norm. They are not! Yes they pop up more often now but great sales folks warm to a challenge like this and making it work. This customer went a long way to purchase from Gina and she should have left the store happy and confident in choosing the right jeweller. It would have more than paid off in the long run!
1. No profit is not unreasonable margin — it is no profit.
2. Yes, try to list stones from diamond dealers that don't sell to online outlets (read Blue Nile).
3. We (as a business) can only stay in business and pay the staff if we make a profit not take a loss on a sale.
4. If you want lost leaders; use inexpensive merchandise.
5. This case; let the customer walk.
San Carlos, CA
Retail Jewelers will have to get used to this. As more and more direct manufacturers/site holders of diamonds are posting their diamonds online, it is becoming very difficult to keep margins for the store and manage the sales tax issue. Sometimes, it is better to let go the client than try to please them.
This is an ever-growing problem. It seems to occur weekly, and not getting any better. Diamond dealers that allow their lists to be downloaded off of Rapnet, to anyone's site and sold at any price are more interested in turning their inventory, than building long-term, lasting relationships. We won't do business with dealers that allow their lists to be downloaded. Before we bring in a stone that we don't own, we check to see if it is available on line and at what price. If it is available, we block that dealer. We simply find another stone that fits the parameters, and there are always stones available. Some clients want an internet price with a bricks and mortar experience, and it's difficult to deliver the price with an overhead of a physical store. Many internet sites list a particular color and clarity, graded by GIA, same cut, etc. at different prices. It's up to us to educate our clients on the differences, and sometimes we win, and sometimes we lose.
I do not think it is good to promote goods you do not have. Next, selling a big ticket for so little markup doesn't make sense. Then, what good is customer loyalty when you have to lose money to make the sale? Then you have an employee representing you, who doesn't care if you lose money but still wants her commission. I would be okay with losing the sale, and seriously question who my sales person is working for.
Santa Fe, NM
Firstly, don't publish diamond details online, especially when they are not in the store; obviously people are going to shop around. Secondly, making this sort of mark up is not going to keep you in business long enough to reap the repeat business! This is why so many jewelry businesses are going out of business. I suspect that the staffer is purely after the commission; she will make more than the owner! Suggest some added value, free check-ups, a year's insurance. Finally point out who is in charge.
Congratulate her on finding a good deal and tell her to buy it. In this city, you pay business license based on your gross. So a sale of this nature would only cost more as someone has to pay the sales tax. Sometime good will and loyalty will come from making them feel good.
I would never put a video and price of a diamond on my website that I did not own. It is too risky that another website or retailer will undermine the price. They may have little or no overhead, and since the consumer is getting more educated, they are willing to buy a GIA certified diamond sight unseen. I have made, in the past, little profit in matching a price with a web dealer. I would not want to compete with another retailer in my area in that manner. There is so much knowledge and research available these days on the Web, it's dangerous, and you easily can be backed into a corner! Keep the window in front of you clear and simple!
This is a growing issue. If you match the price then the issue of sales tax comes up, then service. The customer will expect the normal service for free. I think the mistake is showing a diamond that is not in your inventory allowing a sort of bidding war on the stone. I don't know how to motivate sales people in this instant online world.
Kyle should not fold and hold his position. And Gina should realize the situation and be smart enough to comprehend that it doesn't make sense to drop the price ... for anybody. This customer has been duped by a shady game in the diamond business but if she's unwilling to understand it then she's not worth it. Also, Kyle should never have put a diamond on his website that he didn't actually have in his hands. That's bad business and now it's going to cost him. Dealing with diamond dealers that allow multiple sources to put the same diamond on their websites is unethical and ludicrous. Hopefully Kyle learned his lesson, saved the sale by educating the customer and can get Gina back on his team. He also needs to change his business structure especially on his website to protect himself and his employees from situations like this. Hopefully that will appease Gina ... for now.
If all you sell is price you will never win. The staff needs to be retrained and reminded what the store has to offer. And the store has to offer more than a website ever could. Everyone has to deal with the "Price Match" customers. I have actually gotten customers to return "online" diamonds to buy from me...for more money. Because I don't sell diamonds, I sell the store. It is a luxury to come into our store and get your rings cleaned and polished for free whenever you like. It is an exclusive club to have your own personal jewelers who know your name and give back to the community. "Buying local" or "supporting local" has a price. It also has a value. When your diamond is loose, who is going to tighten it? How much will they charge you? When you want to upgrade your diamond, where are you going to go? Will you get your full purchase price toward your next diamond? What does your store offer?
Cliff should not put prices on diamonds that are not owned because if you do then you are bound to run into this type of situation. People who have no regard for GP, no regard for customer service and willing to broker a diamond for next to nothing. The big question is what will we lose if we don't match the price in these situations? We have the potential to lose that customer for life and for that customer to share her experience with others further jeopardizing future business with others who may never darken our doors because of them thinking our prices are too high. We need to get back to talking about the rarity and the beauty of a diamond and forget certificate numbers...take down prices on your website because someone will always be lower!
There are no loss leaders in this business and there is very little loyalty left among customers. Guaranteed if he sells this at a loss, the next time the customer comes in (if she comes back in!) she will have a quote from another place on line that she wants him to match. If he keeps doing this he's out of business in a year because all he'll do is lose money. Shame on the salesperson for not being able to sell on anything other than the price. I'd toss her out at this point. And this is the reason I sell a branded diamond because they can't truly compare prices on them.
Great Neck, NY
1Q: Is there a point where winning a customer makes it worth giving up reasonable margins?
A: For this particular customer Nancy who has done so much research on line by herself but willing to buy from a local jeweler (as per Nancy's claim), Cliff should give up margin to win customer's loyalty.
2Q: Is it a mistake for Cliff to post diamonds on their website that are readily accessible to customers on other sites?
A: Yes, Cliff has made a mistake posting so much details that are accessible for customers to view and compare, thus ends up losing protection of its own business secrets.
3Q: How can Kyle and Lisa maintain the motivation of a salesperson when occurrences like this one are happening more frequently?
A: Cliff should learn from this lesson so as to handle its online marketing more careful and skillful in the future; also never discourage your salespersons by throwing out harsh words onto those who have been loyal and good to your business.
This is an increasingly frequent, and frustrating, situation. Acquiring a customer's loyalty is vitally important — but not setting a standard for discounts is also necessary, and it's a very fine line. We will meet a price to win a customer, as long as we literally are not losing money. We also go the extra mile with all the services, and selling what comes with a purchase with us. That being said, we try to use diamond companies who do not post their diamonds and all the identifying info on internet only sales sites. Sales people on commission should also understand the value of earning a customer and that relationship. I've had a Realtor give up a listed "bonus" commission, to take more off the price of a house, to get me where I needed to be...they wanted that relationship. The first experience a customer has, is a make-it-or-break it one, more often than not. Do what you can within reason, to make it!
This article originally appeared in the April 2017 edition of INSTORE.
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