Are You Starving Your Diamond Department?

Are You Starving Your Diamond Department?

With sales figures for January fresh in, results continue to trend well for the average U.S. jeweler. Annual 12-month sales rose by another 0.71 percent from December to January. This converts to average store sales of $81,650 compared to $72,078 for January 2012, an increase of just under $10,000 per store, or an improvement of 13 percent.

This month we turn our attention to diamond sales and compare the performance of the smaller and larger stores in our sample group.

Diamond sales continue to grow on the back of a healthy increase in the average value of diamond product, with the average ticket rising from a low of $1,400 to more than $1,900 in the last three years.

When we compare the larger and smaller stores in our sample we notice some interesting differences.

Stores doing over $1 million in annual sales seem to achieve over three times the level of diamond sales of stores doing under $1 million, even though the difference in overall annual sales for these two groups is around 280% (the under $1million group averages $735,000 per annum in sales while the over $1 million is achieving $2.07 million on average). This shows that larger stores are achieving a greater percentage of their sales proportionately from diamond jewelry. When we delve into the numbers it appears the typical store over $1 million is achieving 45.8 percent of their sales from diamonds versus 41.4 percent for a smaller store.

Now the obvious reason for this would seem to be selection. Larger stores are carrying $801,993 of diamond inventory against a figure of $292,346 for the smaller stores. This is 274 percent more inventory than the smaller stores. Interestingly though, when we look at units sold the larger stores are only achieving 210 percent more in diamond units sold – they aren’t getting a proportionately higher number of customers because of their increased diamond investment.

What is interesting though is that they have a significantly higher average sale – with stores over $1 million achieving an average of $2,305 against the smaller stores with $1,554. This is a 48 percent more. Is the size of the store and its level of inventory a factor in deciding how much a customer will spend? I’m not sure there is necessarily a correlation between the store size, its inventory levels, and the amount a customer chooses to pay for an item. This would tend to suggest there are some other variables coming into play.

The bigger stores carry a higher average retail value. These figures may assume that the bigger stores are chasing larger sales and have the confidence to carry a much higher retail value of diamond product. That said, carrying it is no guarantee of sales but it is a factor that will make a difference. Unfortunately, we have no details as to the difference in average retail value carried if diamond inventory between the two groups.

The bigger stores are investing more heavily in their staff and their training. Larger stores are training their staff in closing large sales because they feel there is a greater opportunity to achieve them and it is worth the time and investment.

Customers spending higher values go to stores with larger selections. Again this could be the case but does the amount you want to spend dictate how much selection you want to see first? If selection was the most important factor in unit sales would we not see the units sold for the larger stores being closer to 300 percent higher than the units sold for smaller stores? This would be more in line with the difference in dollars sold and inventory held between the two types of stores.

There may be another factor in the equation that can’t be measured but could have the single biggest impact on this difference in average retail price achieved: that the larger stores are better prepared and make the most of the larger-sale opportunities that come along. This isn’t dependent on any other variable except the expectations of the owners and the staff involved in the business. If you believe your average sale will be $1,500 then that’s what it will be. If you don’t feel you can sell a ring for more than $10,000 then you probably won’t.

This may seem a little subjective in a column that’s all about facts and figures but I have seen too many examples of store owners who don’t believe in themselves or their business to think it’s not a factor. If you want to increase your diamond sales start by asking what you believe is possible – and remove the glass ceiling that may be holding you back.

David Brown is president of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact inquiries@edgeretailacademy.com or Phone toll free (877) 5698657