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David Geller

David Geller: $100,000 Question

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If you’re not recording values when taking in a customer’s jewelry, you could be in for an expensive lesson, says David Geller.

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[h3]$100,000 Question[/h3]

[dropcap cap=C]ould you afford to write a check for $100,000? Yep, a check for $100,000 … right now, direct from your pocket, for no return.[/dropcap]

If you’re not, then read this column.

In my business, there are only a few things I always tussle with when speaking to store owners — and one of them concerns putting values on customers’ jewelry while it’s in your store in a job envelope.

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[inset side=right]Now’s the part where I jump into your head and tell you what you’re thinking.[/inset]I’d say over 75% of you do not give the customer a receipt with a stated value and description. You think it’s too much work and you don’t want to give out “free appraisals.” Many of you think you’re saving yourself by writing on the receipt “yellow metal, white stone” and either “no value” or “value is $75 or less”. And then you forget about it, thinking “Hey, they signed it!.” Dumb move!

Now’s the part where I jump into your head and tell you what you’re thinking. Look here, David. We can’t be expected to know what every customer’s jewelry is, whether it’s real or not. We’re busy. Funny, you wouldn’t let a supplier sell you goods that you didn’t inspect first, would you? You’re supposed to be an expert in the jewelry business … so be one.

The reason I asked if you could write a check for $100,000 for no return is that I just spoke to a jeweler who did exactly that.

He was burglarized. Despite the fact that he had a dial-up burglar alarm, a backup cellular phone, TL-30 safe and insurance. They came in from the roof, cut a hole, disarmed the phone lines and cellular backup. In addition, they destroyed the alarm bell so that when it did go off, it didn’t make any noise.

Obviously, these guys were professionals.

Then, without any fear of getting caught, they used a laser torch and opened the safe. Removed $325,000 in inventory from his safe. And took all 100 job envelopes — jewelry from the store’s customers that had been sent in for repair.

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After the investigation, the jeweler was reimbursed for the stolen inventory — every cent. That’s because he had a point-of-sale program which had each piece listed.

But he was was under-covered for his customers’ jewelry. Why? Because he never asked his customers the value of their jewelry.

That mistake ended up costing him 100,000 hard-earned dollars.

In his words: “Thank goodness we are a strong company, otherwise it would have put me out of business.”

Here’s how this jeweler handled take-ins in the past. (See if this sounds like you.) He used the coin envelopes with the numbered stub on top that is given to the customer. No description at all, and of course, no value. Phew! That approach makes take-in a breeze, doesn’t it? Sure, it does … but watch out, it might cost you $100,000.

And guess what? He was lucky … lucky it was only 100 job envelopes.

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Now he does exactly what I have been preaching for years.

[dropcap cap=1.] He bought three-part job envelopes from Impact Specialties (call 800-543-4264 or go to www.isiprint.com).[/dropcap]
[dropcap cap=2.] He fills in the description of every item in the envelope.[/dropcap]
[dropcap cap=3.] He gets a value from the customer, or corrects the one the customer states if it’s too crazy, or he tells the customer what it’s worth.[/dropcap]
[dropcap cap=4.] The customer gets one copy.[/dropcap]
[dropcap cap=5.] The second copy is removed for safe-keeping at an outside location.[/dropcap]
[dropcap cap=6.] That leaves the envelope, with the third copy and jewelry inside.[/dropcap]

Now he knows the values of all items in his store, periodically adding them up to tell the insurance company how much insurance he needs to cover his customers’ jewelry while it’s in his possession.

That’s the safe approach. So start training your staff to start getting values. Do it now… please, don’t wait until it’s too late.

Here’s how. After writing up a take-in form, ask: “What value shall I put on your jewelry while we have it in our store?”

Notice I didn’t ask the customer what their jewelry was worth. (The inevitable comeback from the customer would be “I don’t know, what do you think?”) If they answer that they don’t know, then ask if it’s covered under their homeowner’s policy or if they have an appraisal. Or ask if they remember what they paid for it.

If there’s still no answer, and they persist in trying to get you to tell them what you think, just say: “We’re not trying to do an appraisal, just having appropriate values for our insurance coverage.”  

Finally, if all else fails and no input is forthcoming, say “Well, in our store, this type of item is tagged for around $900. I’ll put that down if it’s OK.” Most times it will be.

[inset side=right]Notice I didn’t ask the customer what their jewelry was worth.[/inset]But what if the customer has a 3/4-carat round, J, SI2 and tells you the value is $15,000? No, don’t laugh into your fist and try to disguise it as a cough. Instead, briefly educate the customer as to what such an item would sell for in your store. If the customer won’t accept your value, you might have to (politely) tell them: “We are responsible for theft while in our possession but that amount is way beyond what we deem necessary. We’ll have to decline working on your ring. I’m so sorry.” That usually solves it.

Back in the day, my store did almost 9,000 jobs a year. And we never more than a half-dozen problems a year using this method.

So start now: get descriptions and values, keep receipts separate from job envelopes, and add values four times a year. And while you do it, repeat the mantra, “This will save me $100,000 … This will save me …”

David Geller is an author and consultant to jewelry-store owners on store management and profitability. E-mail him at dgeller@bellsouth.net.

[span class=note]This story is from the January 2005 edition of INSTORE[/span]

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David Geller

What You Can Learn About Turn from Clothing and Furniture Stores

Hint: Turn more, earn more.

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THERE ARE REALLY only three important numbers in a retail store: gross profit dollars, inventory on hand, and inventory turn. So who’s better at managing money among these three retailers?

Store                         Gross Profit %
Jewelry                      42.6%
Furniture                  45.0%
Clothing                    46.5%

Darn close, aren’t they? The grass isn’t so green on the other side after all. Or is it?

Let’s look at inventory turn, which means how many times a year an item sells. (These numbers are from stores doing “pretty well.”)

Store                            Turn            Days in the Store
Jewelry                   1.4                       260
Furniture               3.5                       104
Clothing                 4.3                       84

A clothing store won’t keep a shirt/suit/jacket/blouse in the store more than three to four months. They will heavily discount it at that point to get it out the door; they don’t just “squash” merchandise closer together to show more like jewelers do.

Furniture stores work the same way. They have a natural problem: available floor space. The biggest reason for high turn in a furniture store was told to me by a furniture store owner: “Where am I going to store an extra 100 mattresses?”

Clothing stores get rid of their merchandise every quarter. Furniture stores get rid of their inventory every four months, and a good jeweler turns their merchandise a little over once a year. But most jewelers I meet have had their total merchandise for two-and-a-half to four years! This causes terrible cash flow and piles of debt.

If you buy jewelry in January, it should sell at least once by Christmas; that would be a turn of 1.0. If it stays until after Christmas, discount it or give a spiff to the sales staff to unload it, or even return it to your vendor and exchange it.

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If it is still there in 18 months, scrap it. That’s what clothing and furniture stores do.

Let me show you the money-making power of turn. All three stores are going to buy an item for $200. For a jeweler, this might be earrings; for a clothing store, a nice jacket; and for a furniture store, it might be a chair. In the table below you can see the cost, profit margin in dollars, and what that brings in for total product dollars in a year.

Keeping an item long-term is a detriment. Even if someone buys it three years from now, you should have had that $207 in profit for each of the three years, totaling $621 brought into the store (not the measly $163.35 you would make by holding it three years).

When it’s over a year old, most things need to be disposed of and replaced. Maybe your customers just aren’t buying what you have in stock. Change that!

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David Geller

Here Are a Few Tips You Haven’t Seen to Make the Most of Your Bridal Custom Designs

They’re simple yet brilliant.

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IT’S 2019, AND it’s not your daddy’s jewelry store anymore. No more high margins on diamonds. Where’s the money now? The mounting.

Keystone is the goal, and many get it on the mounting, but comparison shopping can make it difficult. That said, the really big problem with selling from the showcase is the amount of inventory you must carry.

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On the other hand, custom designing an engagement ring has many advantages:

  • Higher profit margins
  • You pay for the item after you’ve collected money from the customer.
  • The customer feels like they are directing the process rather than being “sold.”
  • If you share the process of designing their ring with the customer, they will likely share with their friends and family. It’ll be on social media, texts and emails.
  • You can adjust which components go into the ring to more fit their budget.
  • Selling from the showcase has a closing ratio of 30 percent in most stores, but custom design has a closing ratio of 70-80 percent.

The downside? Someone must know how to design the ring, how it comes together and pricing. Training is essential, or having someone specific to sell the ring and lead the customer through the process. Figuring out how to price the item requires particular skills.

Here are some additional tips to make the most of your custom design process:

  • While designing the ring, if you use CAD/CAM, take a snapshot of the model on the screen and send it to the customer, saying something like, “Well, Jim has gotten started on your beautiful design.” If you hand-carve the wax or mill it, take a picture and send by text or email. Same goes for the casting process and another of the jeweler finishing up the ring.
  • When appropriate, send out a handwritten thank-you note.
  • Go to Office Depot and buy a pack of 100 sheets of do-it-yourself business cards. Make yourself a master blank company business card with no logo, just everything else about your store. Take a good picture of their new ring and paste it on the card, then print a sheet of 10 and have it in the envelope when you deliver the ring.

After they “ooh and aah” over the ring, tell them, “I’m glad you love it. You know, we have more customers come in from referrals than anything else and would love for you to refer family and friends. Here are some of our cards.”

Then plop them down on the showcase face up.

They will be so excited that they will not only place one on their refrigerator door, they’ll give them out to friends and show everyone how their ring is on “my jeweler’s business card.”

Isn’t this a fun business?

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David Geller

Close More Sales, Courtesy of David Geller’s Uncle Irv

These four “tricks” from an old sales pro will help you make more money in your store.

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MY UNCLE IRV WAS the No. 1 car salesperson for every single dealership he ever worked for. When he retired in 1987, he was the No. 1 Jaguar salesman in the United States. Here are some tips I learned from Uncle Irv that will help you make more sales today.

TRICK 1

My Uncle Irv had a Rolodex, and while the salesmen on the floor waited for a “hot one,” Uncle Irv was calling his previous customers to see if:

  • They had friends looking for a car.
  • Their lease was up and it was time to buy.
  • They were getting tired of the older model he sold them years ago.

He made appointments while the rest sat around and waited.

Tip from Uncle Irv: Call your customers twice a year to just say “hi.” Contact them or their spouse about milestone dates for gift ideas.

TRICK 2

Uncle Irv fought in the Philippines, and at age 26, he was considered an “old soldier.” He told me they were preparing to go to battle and a 19 year-old started to cry. The sergeant came to the private and asked, “What’s wrong?”

“I’m scared, Sarge. I don’t want to go.”

The sergeant replied, “You don’t have to go, son. You just can’t stay here!”

In the 80s, I almost went bankrupt. Uncle Irv told me this story and said, “David, you just can’t stay here where you are now.” So, I got up enough gumption, fired half of my 16 employees, started over, developed the price book, and a year later, started to make it back.

Tip from Uncle Irv: You can’t keep doing things the way you have been. Times are changing and you must change, too.

TRICK 3

When Uncle Irv was the sales manager of a big Chevy dealership here, he had to motivate and train the sales staff, but also give them confidence when times were tough. You’ve had the same feeling: it’s getting close to having to make payroll, funds are low and you’ll take any price to get money into the bank account. Uncle Irv didn’t want to have the salesmen look at a walk-in customer as their last meal ticket and give away the farm.

Out of his own pocket, he gave each salesman three $100 bills to carry around at all times. He wanted them to feel like they didn’t need the sale, so that they wouldn’t discount so much.

Tip from Uncle Irv: In one way or another, throw money and jewels at your sales staff. Make them feel and look richer, and they will sell better. I used to let my staff buy or custom-make any piece of jewelry at 10 percent above our cost and take it out of their paycheck over six payroll periods.

TRICK 4

Uncle Irv told me that many salespeople are afraid of silence. He said, “Tell the customer the price and then shut the hell up!”

Scenario: You tell the customer $1,495 for the ring, and then there’s silence. Twenty seconds go by and you’re thinking “OMG, they aren’t saying anything. They are going to bolt or go online. Maybe I should give them a discount; I need this sale.”

Meanwhile, the customer is thinking, “Hmm, let me see — rent is due Friday, car note next week, summer camp dues in three weeks. No — I’m OK, I can do this.”

The first person who breaks the silence will give up their money to the person on the other side of the showcase.

Uncle Irv also brought his lunch every day. He told me, “I can’t afford a $500 hamburger.” (You’ll get it.)

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