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David Brown

By The Numbers: All That Glitters Isn’t Gold

Now that the dust has settled, the storms have cleared and the residual sales have been calculated, we can offer our official view of the holiday season (and 2009 as a whole): Not bad, and a whole lot better than 2008.

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THE LAST FEW months have seen a rebound in the trading environment for most jewelry retailers. The make or break time for jewelry stores, however, is always the December trading season. Whether the year is a success or failure can often come down to little more than 20 days of trading out of a whole year – a sobering thought for any retailer!

Last December’s trading saw a significant improvement on a very gloomy December 2008 as the figures below show:

These results represent the average single store performance for those stores covered in our data pool. As can clearly be seen, the average store enjoyed an increase in sales for the month of $31,132, an increase of 17 percent on the same month in 2008. Gross profit also reflected a similar increase, showing that mark-ups were maintained across both periods. The most noticeable factor was the significant reduction in average ticket value of 22 percent that was more than offset by a large-scale increase in the quantity sold in the same month in 2008. Quantities have shown a 51 percent increase month-on-month and this demonstrates the impact the bead market has had over the last 12 months – an amazing situation given how tight spending has been. We can only be grateful for its impact and wonder how much further this market can grow now that consumer confidence is starting to return.

So if silver jewelry has had such a positive impact, what has the performance been like in other categories?

The above sales information from the sample data shows the December monthly trading for the calendar years 2008 and 2009. Diamonds have had a positive impact this year with a 20 percent increase in sales for the average store in December to $95,056, up from $78,920 in 2008. Conversely, gold has dropped by 28 percent, showing that if clients saw gold as a hedge during 2009 it wasn’t in the form of jewelry! Increasing prices saw demand fall as customers tried to maintain or reduce their spending power in other areas. Watches largely maintained the status quo.

Although silver sales increased, interestingly the average ticket value saw a significant drop between December 2008 and December 2009 with last year’s silver average of $72 falling to only $49 – the share volume of cheap beads serving to bring this amount down. Across the silver departments, December comparative trading looked like this:

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No prizes for working out the biggest area of growth! The bead market has seen this department now become more than 50 percent of total silver sales. Most other silver areas have also shown strong growth showing that silver doesn’t just owe the bead market for its strong growth this year. The increase in gold prices and the overall affordability of silver during a recession has seen other silver departments posting some good numbers too. Silver bracelets have had the double impact of benefiting from silver’s growth and the selling of bracelets to be adorned with beads. Generally, this overall increase in silver sales has come about from an increase in volume with average sale values being largely maintained in most areas except silver rings, which has seen its average fall. Given this department has traditionally had the highest average sale value of silver jewelry this drop is a reflection of the switch to cheaper silver product.

So where to for 2010? It seems the public’s interest in bead product is not ending any time soon and if this growth can continue along with an improvement in diamond rings and other areas, then we will continue to see an improvement in trading conditions. Gold’s performance will be closely tied to its price (or the media’s preoccupation with its price) and will struggle to see growth in volume unless its price falls or the attention currently focused on it disappears and the public accepts its new found pricing level as the status quo. We will watch for this development with interest.

This story is from the January 2010 edition of INSTORE

David Brown is the President of The Edge Retail Academy (sister company of The Edge), who provide expert consulting services to help with all facets of your business including inventory management, staffing, sales techniques, financial growth and retirement planning...All custom-tailored to your store’s needs. By utilizing the power of The Edge, we analyze major Key Performance Indicators that point to your store’s current challenges and future opportunities. Edge Pulse is the ideal add-on to the Edge, to better understand critical sales and inventory data to improve business profitability. It benchmarks your store against 1100+ other Edge Users and ensures you stay on top of market trends. 877-569-8657, Ext. 001 or [email protected] or www.EdgeRetailAcademy.com

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