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2018 Opened with a Slight Shift in Sales for These Jewelers

Is this the beginning of stabilization in average sale/units sold?

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January got off to a positive start for most stores in our data pool, with same-store sales for the month averaging $88,735, up from last January’s $84,901, an increase of 4.5 percent. Average sales increased to $365 from $349, an increase of 4.6 percent. Quantity of sales showed a slight drop from 222 to 217 units. Gross profit increased from $37,757 to $39,165 on a continuing margin of 44 percent.

The increase has lifted rolling 12-month sales from $1,625,921 to $1,629,755 on an average sale up just $1 to $388. Sales units are down just five items to 4,196 for the 12 months. Gross profit is up from $741,609 to $743,017.

January represents one of the lowest fluctuations in the average sale/units sold dynamics with the recent trend of dropping units/increasing average sale slowing considerably. Is this the beginning of stabilization in average sale/units sold increases or decreases? The graph below sheds some light.

The chart shows the average sale over the last 10 years of data collected. The blue Series 1 line represents the rolling 12-month figure in average retail achieved with the red Series 2 line showing the monthly fluctuation. As the data shows, over the long term there has been a relatively steady increase in average retail achieved up until 2013 with a leveling off in average sale achieved between 2013 and 2015. Since 2015 there has again been an upward swing in the rolling 12-month average retail achieved, but what is noticeable is the leveling off in the monthly average retail price achieved since around the middle of last year. As this data begins to impact the 12-month rolling average retail, we will begin to see a flattening out of this figure showing that growth in average retail may be coming to a close.

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There are only two components of sales: the average retail price and the quantity that you sell. If one is not growing, then growth has to come from the other. A leveling-off in average retail selling prices will mean a need for a compensating increase in units sold – a tough ask in a market where there has been a rapid rate of decline in unit sales.

The graph below shows the trend in unit sales over the last few years. Unfortunately, we don’t have the monthly unit fluctuation as an indication of long-term trend, but the data does demonstrate that there has been no reversal in unit sales that would help to compensate.

So what action does an individual store need to take to overcome these numbers? Either a continuation of the trend in increasing average sale needs to happen or a reversal of the trend in declining units sold (or ideally a happy combination of both).

Changing a trend in unit sales will require an analysis of how unit sales are being made up relative to your traffic. Every sale is part of a funnel – for an item to be sold a customer has to exist, for a customer to exist a prospect must enter your store, for someone to enter your store something must prompt traffic to be aware of you. Let’s look at a typical scenario:

  • Customers pass your store/see your ad/search for product – 10,000.
  • Customers enter your store/click on your website – 100.
  • Customers purchase – 10.
  • Customers buy more than one item – 1

If you want to improve the trend of units sold you must make a difference in the ratio of one of these areas. Do more to attract interest in your store, persuade more customers to enter your store or website, have them purchase, or encourage them to make a second, third or fourth purchase. Where you focus your marketing on this will depend on your strengths and where you feel you can get the best return on your investment.

David Brown is president of the Edge Retail Academy, a force in jewelry industry business consulting, sell-through data and vendor solutions. David and his team are dedicated to providing business owners with information and strategies to improve sales and profits. Reach him at david@edgeretailacademy.com

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David Brown

What Business Owners Can Learn from Abraham Lincoln’s Failures

He would never have been in position to succeed if he hadn’t failed first.

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WE ARE CONDITIONED BY society to fear failure. Our education system defines performance as “getting the answer correct.” This result-based measurement is an effective method for assessing a level of knowledge, but it doesn’t encourage the hands-on learning process so necessary to develop true understanding and retaining of information — nor encourage the discovery of new knowledge.

Sadly, this aversion to getting things wrong starts at an early age and continues our whole life. Despite the copious number of successful people who have failed spectacularly before achieving success, we still attempt to follow a path that has more to do with avoiding ignominy than with enjoying the benefits of stretching ourselves into uncharted territory.

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Abraham Lincoln never feared failure — he could little afford to. His list of unsuccessful endeavors in both business and politics would have forced a lesser man to give up. Here are just some of his “failures.”

1831: Failed in business.
1832: Ran for state legislature — lost.
1832: Also lost his job — wanted to go to law school but couldn’t get in.
1833: Borrowed some money from a friend to begin a business, and by the end of the year was bankrupt. He spent the next 17 years paying off this debt.
1838: Sought to become speaker of the state legislature — defeated.
1840: Sought to become elector — defeated.
1843: Ran for Congress — lost.
1846: Ran for Congress again — this time he won — went to Washington and did a good job.
1848: Ran for re-election to Congress — lost.
1849: Sought the job of land officer in his home state — rejected.
1854: Ran for Senate of the United States — lost.
1856: Sought the vice-presidential nomination at his party’s national convention — got less than 100 votes.
1858: Ran for U.S. Senate again — again he lost.
1860: Elected president of the United States.

What sort of president would Lincoln have become if he had not had his failures? Had his life been a succession of unbridled achievements, would he have had the fortitude or fighting qualities to drag the country through its toughest challenge ever? Or would he have been ill-prepared for the physical and mental battle the presidency required? I believe his history of failing provided him with the steel and determination he needed to see the job through. Had he not “failed” so many times, he would not have become the man he was — and the history of the United States may have looked sharply different.

Learning to fail helps you overcome the fear of testing your boundaries and ultimately helps you grow and succeed. When it happens, embrace it for the lessons it can teach.

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David Brown

9 Ways to Unload Dead Inventory

When old inventory clogs the cash-flow arteries of your store, here’s how to clean it out.

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LAST MONTH, WE talked about the process of controlling what you buy and what you consume with your inventory. Much like dieting — where your buying and consumption dictate how many pounds you put on — the process of clearing extra inventory is much like shedding that extra weight that works its way onto your hips and stomach. You have to hit the exercise gear when the weight goes up, and the same is true with your surplus inventory. If you don’t move it on, that inventory will sit around your business waistline, clogging up your cash-flow arteries and damaging the health of your business.

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Here are some of our best suggestions for shedding those surplus items that are no longer helping your business health:

1. Run a sale. The obvious answer is to have a major clearance, but care needs to be shown here. Some businesses live constantly in sale mode to the extent that it harms the ability to generate sales at any other time. Use this sparingly and be creative in how you promote it.

2. Have a clearance area. Less harmful than a full-on sale to your bottom line, this can allow you to drip out items that are not going anywhere at full price.

3. Talk to your vendors. In some circumstances, vendors will be happy to exchange items that are not moving for you. This, however, will depend on the item and their ability to sell it elsewhere. Don’t expect this as a right. This needs to be done in a way that is a win/win for both parties involved.

4. Talk to your fellow retailers. As the old saying goes, “One man’s trash is another man’s treasure.” Product that may not sell in your store can be fast-selling items for other retailers.

5. Try online. Giving your product a different exposure via your web store may help it move.

6. Reposition the product. It may be good product that’s in a bad location. Have you rearranged your store displays so the product is in a more prominent place? It may be in a spot that customers don’t access easily.

7. Melt it down, make it back up and move it on.

8. Bundle it up. Often, those slow-moving items will benefit by being combined with other pieces. Maybe slow items could be put together as a special, or you could combine a slow item as a deal to go with a full-priced fast seller.

9. Use as a contest giveaway. Of course, if it’s particularly bad, it won’t encourage contest entries!

Managing dead inventory is a fact of business. You can never eliminate it completely, but regular “inventory exercise” is needed to make sure the fat in the system isn’t causing trouble to your business health.

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David Brown

How Eating Right Is Like Managing Your Inventory

The right items and advance planning can make your business fit.

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KEEPING YOUR INVENTORY in order is a little like painting the Eiffel Tower … you no sooner get to one end than you feel you have to repeat the process all over again!

Inventory is a dynamic part of your business. It is constantly in flux, and as such, difficult to manage. However, having a good system will go a long way toward helping you keep your inventory under control.

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There are two aspects to your inventory: what you buy and what you keep. It’s the buying part that contributes most to what is left after the customers don’t want it, so let’s start with that first.

Food dieting consists of what you eat and how much of it you consume. Buying inventory is the same. There is what you buy, and then there is how much you are spending. If your diet consists of eating healthy greens, vegetables and fresh fruits, then part of your food diet will take care of itself. The same is true of ordering fast sellers — make these the mainstay of your inventory diet, and you will take care of a good 70-80 percent of the inventory you will need to consume. That leaves the remainder — the combination of poor choices and overconsumption that can cause the most problems (I’m still talking inventory here!).

In the same way that meal planning can reduce overeating or making poor food choices, planning your purchasing will work the same way. We recommend an open-to-buy budget as the most effective way to do this. An open-to-buy will balance what you are selling with what you are buying. Think of it like a calorie checker that enables you to eat once you have burned enough fat. The open-to-buy will track the money released from outgoing inventory that is then freed up to spend on new product and let you know how much this is so you don’t over-buy. This will help you to keep your inventory situation from becoming any more bloated.

So what about the surplus inventory that is aged and isn’t going anywhere now? This is the same as the few extra pounds that might be sitting around your hips — it’s one thing to stop the increase, but it’s another thing entirely to get rid of that unwanted fat.

Much like systemizing your buying with an open-to-buy program, you can systemize the aged inventory with a series of means to move it on. This can consist of a variety of options that work well for you on a regular basis to keep that aged inventory from clogging up your store arteries. I’ll talk more about these options in the next article.

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