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Best of the Best: Best Credit Policy

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Stores that are doing things right: The Jewelry Center

Best of the Best LogoWith stores in Greenfield, WI and Southgate, MI, The Jewelry Center owners Pat Schaefer and Dean Murray take in about $40,000 a month in payments, due to their innovative credit policies. To find out more, call Michael Porzondek, (734) 284-1315.

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Dean MurrayPat Schaefer

[dropcap cap=M]ake buyers out of the nearly 50 percent of shoppers who are turned down for retail credit. The Jewelry Center’s two locations in Greenfield, WI, and Southgate, MI, do this by targeting customers who can’t get credit elsewhere. While it may sound risky, owners Pat Schaefer, left, and Dean Murray planned their business model after years of working for a national chain and having to turn away customers on the basis of their credit scores. “It used to be you could walk into a store, forge a relationship with the owner and work out a payment plan” Schaefer says. Not anymore, though: “They’re going to offer him a lay-away.” “It’s getting back to the mom-and-pop store; we’re going to get to know ‘Bob,’” Murray says. “Ninety to 95% of our customers are just great blue-collar working American people.”[/dropcap]

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Best of the Best: The Jewelry Center

1. Identify the potential customers;  
2. Send them a direct-mail piece that highlights the store’s credit policy;  
3. Get them into the store to determine how much credit the store can extend;  
4. Sell them what they want within their limits;  
5. Let the cash start trickling in on a monthly basis; and, once a customer’s balance is dwindling,  
6. Bring them back in to sell them the add-ons.  

Since they know the consumer is coming to the store to buy on credit, they start the sales process by establishing a credit plan. They then work with the customer in choosing select merchandise that is within his credit limit and that works with the store’s underwriting guidelines. Schaefer and Murray say they allow for a certain amount of bad debt and they make follow-up calls. “People sometimes pay us before they pay their mortgage,” Murray says. One key to the success is the merchandise. The store owns 90 percent of its stock, has no debt and does its buying from the source, from closeouts and from an understanding of its customers’ needs. “How we buy merchandise drives the margin,” Schaefer says. “They aren’t looking for a Tacori piece. They’re not looking for a Rolex. They’re looking for a nice little bridal set.”

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In 2006 the Wisconsin store did $1.1 million in sales, 45 percent on credit. The Michigan store, open since December 2005, does between 85 percent and 90 percent on credit. Their average sale is $1,000. The greatest advantage to doing so much credit business, the owners say, is the daily cash flow of payments. “How many jewelers can have $200 in sales in a day and take in $4,000?” Schaefer says. Each store takes in an average of $40,000 in account payments each month on top of normal daily business.

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Schaefer and Murray are considering franchising their business plan and for now are somewhat circumspect as to its details. A number of stores have have hired them on a consulting basis to learn more about their financing model. “Independent jewelers are not going after the credit business because they don’t know how to do it,” Schaefer says. In principle, the plan involves marketing to the right demographics, being your own underwriter, maintaining that personal touch with the customer and accepting that there will be a certain amount of loss.

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

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