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Ask INSTORE: January 2007

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A breakdown of business expenses, getting customers to come back after the holidays, and wall covering ideas for very small stores.

Benchmarks for areas of business

[dropcap cap=Q.][h4][b]For an average jewelry store, what percentage of sales should go toward each area of the business each year?[/b][/h4][/dropcap]

[dropcap cap=A.]Joseph Romano, president of consultants Scull & Group, suggests these figures as benchmarks:
Total manpower: 20 percent of sales not including owner compensation.
Marketing: 6 percent and plant/equipment = 6 percent for a total of 12 percent, which can also be considered as cost of exposure.
Communications: 1 percent
Supplies: 1 percent
Others: 1 percent

This leaves 15 percent assuming a gross profit of 50 percent for the owner, capital expansion, working capital and debt service.

“We recommend to our clients that they pay themselves 5 percent of sales just to be the CEO,” says Romano. “If they are multitasking then they should take that salary as well since they are performing the function.”[/dropcap]

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SERVICE

[contentheading]Take a Letter[/contentheading]

[h4][b]We are already getting lots of new customers in the store. Any suggestions on how to get them back when the holiday season is over?[/b][/h4]

It’s never too late to “reach out and touch” your customers, but the best time to do it is shortly after they’ve made a purchase. This January, your staff should spend time writing and mailing letters to all of your new customers. “Every new customer should receive a ‘welcome to our family’ type letter,” says Ellen Fruchtman of Fruchtman Marketing. “If you’re keeping great information on each customer, it wouldn’t hurt to mention what they purchased and invite them back in for a cleaning, or to check on the piece, etc. It also isn’t a bad idea to offer them some sort of gift certificate in the hopes that you will see them again.”

[componentheading]MANAGEMENT[/componentheading]

[contentheading]Brace Yourself[/contentheading]

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[h4][b]Help! A major chain is setting up shop in my neighborhood. What do I do?[/b][/h4]

Breath deep, you’re probably in for some big changes, especially if the chain’s target customers are your target customers. First thing, look in the mirror and tell yourself: “This is good. It’s going to make me a better jeweler with a more distinct personality.” (If you’re not committed to getting better, you’re going to struggle. That’s business.)

While it’s true that chains — along with the Internet and big-box retailers — are gobbling up market share at the expense of independents, it doesn’t mean you can’t compete. Remember, independents have advantages over chains in their unique personality, familiar staff, and the freedom to adapt to the local environment. The No. 1 edge an independent has is quality. Whether it’s food or jewelry, chains can’t afford to offer a premium product or service. They aim for consistency not greatness. More things to do:  

Make sure you are in tune with your employees and that a great team spirit exists in your store. Modern customers are tired of dealing with “cookie-cutter employees.”  
• Review your market, and get to truly know the local demographics.
• Realize you are going to have to be different to stand out, but not to an extreme. Says business author Ric Segel: “Most of the independents that thrive sell better merchandise. They won’t be the cheapest in town but they will do things well. They are considered specialists in their area of expertise.”  
• Study the big boys. Know what they do, which customers they are going after, and what merchandise they stock. Keep an eye on their promotions. Adapt and innovate.

[componentheading]INVENTORY[/componentheading]

[contentheading]Trace Your Steps[/contentheading]

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[h4][b]Is the time right yet to hop on the RFID bandwagon?[/b][/h4]

The manufacturers’ promises are certainly tempting. Wireless automatic data-collection systems such as RFID, they claim, can decrease put-away and location errors for small businesses by up to 90 percent, increase productivity by 12 percent to 15 percent, and cut inventory-counting time by 35 percent. Makers of RFID systems designed specifically for the jewelry industry add that their tags are tamper-proof and they guarantee accurate traceability, whether the jewelry is in the supply chain or in the store. Put an RFID tag on a piece of jewelry and, in theory, you should be able to find it immediately — something that is obviously ideal for the shop or the store front.

Now the downside: RFID is still an emerging technology, and it’s not inexpensive. A reader typically sells for about $1,000, and passive tags can cost up to $1 each in small quantities and 20 cents in larger quantities. And that doesn’t include the software. There is also a substantial investment in your time to learn how to use the technology and for testing. The bottom line then: Be patient. If your business partners aren’t demanding RFID and your competition is not getting an edge by deploying it, you are probably still better waiting and watching as RFID technology and standards evolve further.

[componentheading]DECOR[/componentheading]

[contentheading]Color Your World[/contentheading]

[h4][b]Our store is pretty small. Are there any guidelines for using color in a limited retail space?[/b][/h4]

Just because you’re small doesn’t mean you need to limit your use of color, says Leatrice Eismann in her guide “The Color Answer Book.” The conventional wisdom, she says, is that you should opt for neutral colors so as not to overshadow your merchandise.

However that doesn’t mean there is no alternative to light, bland walls.

Deeper shades of neutrals like moss gray, woodsmoke, rose taupe and pewter can add a stylish drama to your store while also providing a subtle background to your merchandise, Eismann says. Touches of complementary color will add more life. Bright colors or attractive color contrasts are particularly useful in dead zones, bringing what are normally lightly trafficked areas to the customer’s attention.

[span class=note]This story is from the January 2007 edition of INSTORE[/span]

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