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David Brown

5 Ways to Increase Your Jewelry Store’s Profit Margin

It doesn’t happen by chance.

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Despite some positive business data coming out over the last two or three months, the economy is showing some signs of headwinds on the back of the tariff war being conducted by the government and some overseas economies. The uncertainty is beginning to show up in storewide figures across our sample data.

Sales showed a decline of 0.45 percent in rolling 12-month data for May, the fourth such month of declines in sales figures.

Individual monthly numbers reflect that decline.

Gross sales for May dropped 5.5 percent from last year’s monthly result. Sales units sold showed a similar trend, being down 32 units or 8.5 percent on last year’s numbers with an increase in average sale from $311 to $318, or 2.2 percent. Margin stayed on track compared to last year. This resulted in gross profit declining by $3,786, or 6.1 percent.

In these articles we’ve often spoken about the decline in gross profit margin being achieved. Preserving or growing your storewide margin doesn’t happen by chance – it is a strategy that must be followed in order to achieve results.

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Here are some of the best proven ways to increase your storewide margin

1. Reduce discounting. Easier said than done, right? Reducing discount is about choosing what you are discounting and when you should offer it. Not all inventory items are equal. As we’ve mentioned on many occasions, as little as 10-20 percent of your product is giving you 80 percent of your sales. That means offering this item at full price is conducive to a substantial lift on the margin you will achieve. Rather than crumbling every time a customer asks for a reduction on any item, choose the ones you can do it on. Say “no.” Haven’t you had a situation where you’ve been told that’s the price and bought it anyway? Advise your customer, “Unfortunately, that’s the best price we can do on that item; however, if you’re looking for a deal, I can suggest this as an alternative.” This can have your customers choosing between a profitable sale for you or a reduction on a lesser item you want to move anyway.

2. Incentivize staff based on gross profit, not sales. Staff will focus on what is in their own best interests. If you’re more focused on gross profit than sales, your staff will become so as well, especially if you incentivize them from this perspective.

3. Put your prices up. What do others sell this item for? If you access our KPI data, you will be able to see this sort of information. If another store somewhere else is successfully selling that diamond for $200 more, why shouldn’t you?

4. Re-price fast sellers. Not only should you avoid offering discounts on your best-selling items, you should also be looking to sell them for more if they have proven they can handle the price. Again a small percentage of your products will provide most of your sales – you need to make the most from these opportunities where you can.

5. Reduce clearances. A few items on special are perfectly normal, but living constantly on sale is sending the wrong message to your customers. They will assume all prices are permanently negotiable, and this is not a position you want to put yourself in.

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Managing your margin is an important part of your business and can yield huge returns on your bottom line. Don’t forget – every additional dollar of profit you can massage from each item will stay in your profit column without any additional costs being accrued.

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Gene the Jeweler

Gene the Jeweler Explains How to Fire People

In this episode of Jimmy DeGroot’s "Gene the Jeweler", Gene talks about how to fire people when necessary. He admits that confrontation is not his strong suit. His suggestion: Maybe being passive-aggressive for years on end will work?

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David Brown

Five Steps To Make Your Business More Salable

Build net profit and control your inventory tightly.

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AFTER YEARS OF hard work building up an asset that they hoped would provide for them in retirement, many business owners are finding there is nothing left at the end of the day when they come to cash in their chips. And we’re not just talking businesses that struggle — I’m talking about businesses that are making a very healthy profit each year.

How many of you know a fellow store owner who has been in this situation? I had friends recently close down at the end of December in a store that had traded for over four decades and was making a large six-figure profit. They were in their 70s, had decided to quit but could not find a buyer interested in taking over their store. Sadly, this scenario is far too common.

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Here are five steps you can take to help this situation:

1. Drive every possible dollar of net profit. Most business owners generally try to minimize their net profit to reduce tax, but this ends up costing them as they approach retirement. Jewelry stores are bought and sold nowadays based on a multiplier of net profit, so every dollar could be worth $4-6 to them when they sell … not to mention they can use that net profit to retire debt or create retirement wealth while they still own the business.

2. Establish and achieve an optimum inventory level … one that delivers maximum GMROI while still satisfying your customers. Most stores are heavily over-inventoried, and the store is not an asset unless it generates turn and margin. Many are emotionally invested in their inventory, but no prospective buyer is going to want their old stock at any price. Nor do customers. Guess what is left after a successful GOB? The old stuff!

If Business A has $100,000 of profit on $400,000 of inventory, and Business B has $100,000 on $700,000, then both would sell for the same multiplier of profit. Store B may well be left with either an inflated value that would put a buyer off because they have inventory to clear, or be forced to find a way of disposing of the surplus product.

3. Transition the owners’ personal skills and responsibilities from “business operator” to “business owner.” No one wants to buy a business (or certainly not at full price) where the current owner is the No. 1 asset in the business (i.e., does a lot of personal sales, buys all of the inventory, does the marketing, is the main bench jeweler, etc.). There is too much uncertainty about what will happen to the performance of the business the day after the highly involved owner departs.

4. Build a strong team. Sometimes this involves outsourcing such things as repairs, custom design, marketing, social media, bookkeeping, etc. to effectively handle all day-to-day responsibilities. Note: this takes time, patience and perseverance.

5. Be visible online and on social media … it’s one of the first places prospective buyers will look.

In a market where supply exceeds demand, you need to give yourself a competitive advantage if you want to cash in that nest egg. It can happen, but it requires a strong level of grooming and preparation. The return, however, is well worth it.

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David Brown

How to Make The Most of Your Department Reports

Allocating the appropriate time, money and space to each department is critical to success.

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DEPENDING ON THE TYPE of business you run, chances are your sales will be coming from perhaps 30 or 40 different departments across your store. Some, such as bridal, are more obvious. Others, such as silver earrings, may not make a big difference — yet it’s important to understand the contribution from each department and where it fits into the overall performance of your store.

A department report in order of sales will reveal the biggest contributors, and it should come as no surprise to know that the top 5 or 6 departments might be contributing 50 percent or more of your storewide sales. What might surprise you is which departments make up the top 5 or 6. Take a guess now and then compare it to your actual results; chances are you’ll see at least one department that wasn’t in your estimate.

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Knowing this will enable you to allocate your resources towards these areas. These resources are, in no order of importance:

1. Time
2. Money
3. Space

Time refers to the energy you and your staff devote, both physically and mentally, to this area of your business. You might have a love of watches and enjoy spending time checking out the latest models available, but if watches represent 3 percent of your sales, this category doesn’t warrant a lot of effort.

Money will predominantly be spent on two fronts: one is your inventory, while the other is marketing. Is the inventory you carry in each department relevant to that department’s contribution to your sales and profitability? If not, consider reallocating it. Are you running ads for an area of your business that is neither a significant contributor to sales or profit? Do you allocate your marketing spend by area based on what product you are advertising? It’s not unusual to find a business spending 90 percent of its marketing on diamonds when that category represents only 30 percent of sales.

Space refers to how you allocate the merchandise within your store. Are your best sellers front and center? If your store is 50 percent bridal, does your merchandising say this when your customers walk into your store?

Review your departmental contribution and determine how you are allocating your resources of time, money and space across each area. Make a decision to rebalance each area as required so it more closely aligns to your store’s performance. The exception to this is if you are hoping to grow a particular area, in which case your resources should align with your anticipated results and performance.

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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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