AFTER A TOUGH winter’s trading green shoots are starting to show in the jewelry industry.
The last eight months have represented some of the toughest trading periods faced by jewelers in the U.S. for several decades. The good news, however, is that although numbers are down we are now beginning to see a change in fortune with the decline having been arrested in April and the first increase in store sales starting to show. We still have a long way to go to return to last year’s numbers but the signs are we are starting to head in the right direction.
The data above shows the increase or decline in store sales as measured across more than 150 stores. The figures represent a rolling 12-month average. The 12 months ended December shows a decline in average store sales of 6 percent compared to the 12 months ended November – this clearly shows the steepest part of the economic fall. The rate of decline (although still a decline) has not been so sharp through January, February and March. April, for the first time in 8 months, showed an increase which indicates that a large number of stores have seen an increase in their April store sales versus the equivalent month last year.
Let’s look briefly at how this appears as store sales for a rolling 12 months, again in graph form:
Sales dropped noticeably from September through to December, with the rate of decline slowing in January and February, March flat lining, and April showing that small increase.
So where is the growth coming from? After several months of slowdown diamond rings are now bouncing back as these sales figures again show:
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December again was the heart of the drop with January, February and March bouncing along the bottom. April, however, has shown a very clear increase in both quantity of diamonds sold and overall sales dollars achieved. The average diamond sale is maintaining its value, as it has done during the last few months, but now there is renewed interest from customers in wanting to purchase.
Sales quantities overall increased noticeably in March and April. Prior to that they had been holding their own as customers continued to buy but what had been noticeable during this period was the sharp drop in average sales. The customers were there, they just wanted to spend less. This month we are seeing a halt in the fall in average price and with the pickup in quantity this has translated into more money coming back into the till.
What about profitability? The gross profit of stores has been in decline on a corresponding basis with store sales since the crisis began. We are again seeing this number starting to change with profitability now leveling out and April showing the slightest of increases.
What does this mean for your store? It is a little early to break out the champagne, and, even if this turnaround is sustainable, it will take time to rebuild store sales back to the same levels as they have been. But the last couple of months are showing some slightly more positive signs, in line with the general economy, that the bottom of the economic crisis may have been reached. Like a squirrel coming out of hibernation it is important that you now take steps to prepare yourself for a new season. If you continue to trade on your current assumptions you will continue to achieve the same results as you have for the last few months. You don’t want to be left behind when the rest of the forest starts hunting for food because you thought you needed to sleep some more!
What does this mean for your store? It is a little early to break out the champagne, and, even if this turnaround is sustainable, it will take time to rebuild store sales back to the same levels as they have been. But the last couple of months are showing some slightly more positive signs, in line with the general economy, that the bottom of the economic crisis may have been reached. Like a squirrel coming out of hibernation it is important that you now take steps to prepare yourself for a new season. If you continue to trade on your current assumptions you will continue to achieve the same results as you have for the last few months. You don’t want to be left behind when the rest of the forest starts hunting for food because you thought you needed to sleep some more!
- Review your aged inventory. With sales being slower many of your items will have aged quicker than normal and you will be left with a greater percentage of poor performing product. Now more than ever you need to clear these items so you have money to invest in new product to show returning customers. You need the right inventory to start rebuilding those sales.
- Have a spring clean. Clear out those old display stands, freshen up the look of the store and above all make sure everyone has a fresh attitude towards the store and the customers. If you continue to think no one will buy diamonds then no one will. Make sure you have the right staff level and attitude to start rebuilding those sales.
- Review your database. Make sure this area of your business is tidy and ready to be used again. Check contact details with customers again as they come in-store, eliminate duplicate records, and prepare yourself thoroughly for upcoming promotions. If you have trimmed your marketing budget it’s time to look at whether you should be restarting some promotions.
Above all be positive! There is good news coming through. Make sure you are ready and willing for the market to be buying.
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If you need help to clear old inventory and get your store back in order contact us here at the Edge Retail Academy.
This story is from the July 2009 edition of INSTORE.
