OFTEN THE UGLY sister to the more glamorous diamond and gold departments, many jewelers have a lot of reasons to be thankful for their repair business over the last couple of years. This slow and steady performer has been clocking up the dollars while some of the other areas of the business have been AWOL. This week we focus on repairs and why they are more than worth their weight in gold.
A quick look at the trend in repair statistics yields no surprises – the percentage of jewelers’ revenue coming from this area has been growing slowly but steadily, and never more so than in the last couple of months. Our graph below shows the 12-month rolling average from repairs for the typical US jewelry store.
The blue line shows the YTD rolling figure for 12 months. As can be seen, the trend line since August 2008 when the recession first hit has been climbing gradually from a little over 9.5 percent up to the present level of 13.6 percent of total annual store sales. The monthly percentage contributed by repairs obviously shows a greater fluctuation, but the interesting statistic is that for most months of the year the average tends to run ahead of the annual trend, indicating that in the majority of the months of the year repairs can be bringing in as much as $1 for every $7 in total business. It is only the low percentage that repairs contribute to December sales that is effectively lowering the 12-month average, and this is understandable given the large quantity of gift purchases at that time of the year.
So what benefits do repairs provide over the more exciting areas of jewelry sales?
- They generate foot traffic. Repairs are a good way to get customers into the store. Even when it’s quiet there is normally a steady stream of repair jobs flowing in, not necessarily big sales, but the ideal means to get money in the bank – and foot traffic creates opportunities. We have all had a customer make a purchase while waiting for a repair to be done. Watch sales, in particular, often stem from a repair that is too expensive to undertake.
- They offer a very good opportunity to clientele. The service call is the perfect, non-aggressive lead-in to get the customer back to see you. Once they are there for the clean or claw check it’s game on! You then have the chance to sell to the client or make suggestions they can pass on to their spouse. It’s easier to slip a suggestion to a customer when they have the chance to try things on. (Janice Mack Talcott covers this point in many of her Edge Retail Academy seminars.)
- They are a point of difference. It seems everybody wants to have a crack at selling jewelry these days – the traditional bastion of diamonds is fair game for the bulk discounters and online retailers. Repairs, however, require some degree of specialist knowledge and skill and have largely been left alone by other jewelry and watch sellers. Even the chain stores don’t focus too heavily on this area. It is very much the independent jeweler who is perceived by the public to be the expert in this field.
- There have great margins. Thanks largely to point 3 there can be the chance to charge a very healthy margin on jobbing work. Many retailers don’t take full advantage of this and tend to under-price themselves, normally because they don’t put sufficient value on their time. One jeweler I know charged very well for his repairs and seldom received complaints. On the odd occasion he received one he was more than quick to invite the customer into the workshop and let them have a go at sizing a ring or replacing a claw themselves. Not surprisingly there were few takers! Although a little confrontational it underlined the point that this was a specialist area and was definitely not the territory of the DIY handyman – and the greater the expertise required the higher the price that can be asked.
- There are few requests for a discount. The lower average ticket price, and high labor content tends to reduce the customer’s desire to shop around. With most stores averaging between $30-$50 per repair it’s hardly worth the shoe leather to hunt around for quotes. Even better-end repairs are viewed this way. It’s considered fair game to ask someone to reduce an item that has been bought in for resale, but expecting any service provider to lower their hourly rate is not seen as acceptable by the sympathetic customer, who often earns their own income by trading time for money.
- The need for capital is minimal. No large-scale investment in inventory required here! Repairs don’t tie up large sums of money – an investment in some equipment and working capital for findings, etc, is all that is needed. The stock turn is pretty good too. We may be frustrated by a repair that takes six months to be collected but let’s face it, if that was the longest we had to wait for an item of inventory to be sold, we’d be turning cartwheels!
Some days it seems you’re staff are spending all their time filling in repair dockets and fitting jump rings, It’s not the thick end of the wedge for sure, but if the wedge didn’t have a thin end as well then there would be nothing to help keep the doors open.