J.H. Mednikow & Co., Memphis, TN
Phone: (901) 767-2100
URL: mednikow.com
JAY MEDNIKOW is not your typical high-end jewelry retailer. For a start, he’s quite happy to take in “dogs” — those dated pieces traded in by customers, and even the discontinued lines and other dead inventory lying in the vaults of his vendors.
Secondly, he is passionate about the Internet as a business tool, especially the very un-chic eBay auction site.
THE IDEA
A Sideline Turned Huge
Put the two together — in the form of a sideline that is generating almost half a million dollars a year in sales — and you quickly get an understanding of the unlikely love affair between his family’s 115-year-old business, with its brass-and-polished-wood stores in Memphis, TN, and Atlanta, GA, and the low end of cyber-retailing.
“It used to be such a laborious process to find a buyer for trade-in, refurbished merchandise. It’s just not what people are looking for when they come into our store. But with eBay there is such a large audience, a buyer for just about everything,” the third-generation jeweler and president of J.H. Mednikow & Co. says.
Typically, Mednikow’s has 50 to 100 closeout items on offer at their eBay stall and from five to 20 refurbished trade-in items. The closeout pieces have a turn rate of about six months and the trade-in items — which are priced more aggressively — less than two weeks.
Not bad for inventory that was considered doornail dead.
“It’s found money,” enthuses Mednikow, a 41-year-old Memphis native, who studied economics at Harvard, earned an MBA from Duke, and admits to being a big fan of the eBay model.
THE EXECUTION
‘Everything’ Will Sell
For the last 18 months, that model has been helping Mednikow’s dispose of an average of $35,000 worth of dogs a month.
“It can vary wildly — between $15,000 and $80,000 in any given month,” Mednikow says. “A couple of high-grade wristwatches taken in trade during a given month can really skew the monthly sales figures upward.”
Before eBay, merchandise that survived the Mednikow stores’ once-a-year sales for closeout items remained on the shelves or in the vault year after year, becoming less and less likely to sell. Sometimes the trade-ins would just be melted down.
But as those who have sold fighter jets, a 50,000-year-old woolly mammoth, and even space on their foreheads have demonstrated, there’s virtually nothing that can’t be sold on the Internet’s biggest auction site.
“Everything will sell on eBay if you start it at a low enough price,” Mednikow says. “If an item hasn’t sold over a period of time eventually I’ll lower the starting price to $1 and then take whatever it brings, whether $40 or $100 or whatever.”
Still, once in a while, there are also occasions when the no-frills site will make even your best salesperson look like a hack. Mednikow recalls selling a pearl necklace with a jade clasp on eBay for $2,500. “I would have been happy with $300,” he says.
After more than five years of selling on eBay, Mednikow has gained a keen understanding of Internet buyers, whom he describes as very price-conscious self-purchasers, except around Christmas when more gift buyers come on to the site.
More significant than their shopping patterns though is their level of trust, he says. “To sell on eBay successfully, you have to be absolutely scrupulous in describing merchandise accurately, including any flaws or defects. There is very little room for ‘puffery’ as there is in traditional advertising.”
Because of this, brand-name items do especially well, even those that aren’t particularly well known. “A brand is like a third-party corroboration of quality, and the eBay customer places a little more trust in that,” he says.
Mednikow admits he had never thought the eBay clear-outs would be so successful when he started them in 2001.
The idea was simply to get rid of a little overstock.
That is still the main objective — although now it happens on a much larger scale.
“It’s not a profit centre. I look at it as a liquidation tool,” Mednikow says, adding that he makes no real money on the close-outs and only small amounts on the refurbished pieces. “Margins are too thin on eBay. For some refurbished gold pieces we get only 30% more than the value of the metal.”
There are also considerable labor costs in maintaining the site — from $60,000 to $70,000 a year, Mednikow estimates.
Still, as a way of turning “dead inventory into live dollars” it’s almost unbeatable and Mednikow continues to look for new ways it can help him clear old merchandise.
“I am now experimenting with a niche site under the user ID ‘oldweddingrings’. We’ll see if separating a specific category from the rest of our closeouts has an impact on sales for that category.”
There are other benefits too. Knowing he can liquidate goods on eBay allows Mednikow’s to offer higher trade-in values to his brick-and-mortar customers, which helps build goodwill and repeat business. Mednikow also uses the site to build goodwill with vendors — sometimes helping to dispose of their old inventory through his site.
Mednikow acknowledges that some jewelers hold their nose at the mention of eBay, whether they are in the retail, manufacturing or design parts of the business.
Designers object to having their goods on a “flea-market” venue because they fear it will hurt their image. Discounting worries both retailers and manufacturers for obvious reasons and then there is a third, even bigger worry — channel conflict.
Mednikow says he intitially shared many of these concerns and at first his family tried to put some distance between the eBay site and their bricks-and-mortar business.
“We didn’t try to hide the fact that it was Mednikow selling the item, but we just didn’t use the name Mednikow as part of the seller ID. We referred to ourselves as a family-owned 100-year-old jewelry store and gave a link to our regular website.”
He now believes such worries are misplaced. Rather than undermining traditional retail sales, he thinks sites like eBay are a distinct and separate channel and should be encouraged.
THE RESULTS
Giving Inventory New Life
“Selling closeouts on eBay has not hurt our image or reputation in any way … for the most part, customers who shop on eBay would never set foot in our store, and customers in our store don’t shop on eBay. These two channels aren’t in direct competition and they attract different types of customers.”
In a note to suppliers he has posted on the eBay site, Mednikow says: “We agree that discounting erodes the inherent value in fine jewelry, but the key here is that the items sold at a discount are items that should not be sold at the regular price for valid reasons.”
Mednikow argues that discount venues actually help the trade by bringing more buyers into the market and exposing them to the variety of jewelry that is out there.
In his eBay note, he adds: “These customers may very well become loyal to your brand and begin buying from their local distribution outlet. We don’t want jewelry sitting in our customers’ jewelry boxes. It does no one any good.”
Ultimately retailing is about moving stock, Mednikow says, and breathing life into dead inventory is the ultimate test of a retailer’s ability.
