WE HAVE NO WAY of knowing what kind of instructions Warren Buffett hands down to his jewelry division, but we’d hazard a guess there’s not a lot of sentimentality attached to his view of the inventory.
As beautiful as some of the pieces may be, it all still adds up to stock that can be measured for markup, turn and return. Most jewelers would probably claim to be as dry-eyed about their inventory as Buffett, but the figures tell a different story. As shown in the chart above, stock turn basically flat-lines at a pretty modest level for the typical independent jeweler, with an annual life-preserving spike in December. Despite being a jeweler’s largest investment, there is often little or no accountability expected of this asset. An average store achieves a return (GMROI) of about $70 gross profit for every $100 invested in inventory. Yet at the top end, there are stores generating twice as much with only little more effort on the part of the owner. Here’s what they do:
1. They set high GMROI targets for every piece.
2. Cull those that don’t deliver on those targets.
3. Re-order fast sellers.
4. Have “exit strategies” for the statement pieces they buy.
This story is from the August 2010 edition of INSTORE.