If you’re not charging for checking and tightening stones, you’re losing cash.
[dropcap cap=I]n the old days, when it was common to make triple key on diamonds (even keystone), you could afford to overbuy inventory and give away repairs for free. No longer. [/dropcap]
When you take in a 10-diamond wedding band or fashion ring for sizing smaller, do you charge the same as if it had no diamonds or just a few?
If it takes 15 minutes to size and polish a ring smaller, how much longer would it take if half of the channel stones got loose and you had to:
[dropcap cap=1] Tighten them with a tool.[/dropcap]
[dropcap cap=2] Smooth the roughed-up area where we tightened them.[/dropcap]
[dropcap cap=3] Repolish that area.[/dropcap]
It could take just as much time to tighten the stones as it did to size the ring, so we should get about the same amount of money to tighten as we did to size the ring.
In our pricing guide, we don’t charge extra to check, tighten and warranty for a year for the first four stones. But when a ring has more than five stones we charge an additional $25 on top of the sizing for checking, tightening and warranting stone loss for a year. Even if the stones aren’t loose, we charge.
Look at it this way: An 8-point diamond falls out and your replacement cost is $52 ($650 a carat). The issue now isn’t how much does the stone cost to buy, it is: How much in sales will I have to do to have $52 left over and be able to buy a $52 diamond?
The typical jewelry store makes a net profit of 6 percent of sales, so you’ll have to sell an additional $866.66 to have $52 left over after expenses.
So how do you get $866 in additional income if you don’t charge enough for the repair? By charging almost everyone an additional $25 to check/tighten/warranty their ring. Here are the numbers if you take in an average of 15 jobs a day (3,900 jobs a year):
[dropcap cap=1] At most stores, 65 percent of the jobs have five or more stones in them.[/dropcap]
[dropcap cap=2] That’s 2,535 jobs that you will offer the $25 to check/tighten and guarantee stone loss.[/dropcap]
[dropcap cap=3] When offered, 30 percent of customers typically say “no thank you” and you write on the job envelope “No guarantee on stone loss.”[/dropcap]
[dropcap cap=4] Seventy percent will gladly pay. Seventy percent of 2,535 jobs means 1,775 people will say yes.[/dropcap]
[dropcap cap=5] 1,775 pay $25 each, and you receive $44,375! That will pay for:
A. The cost of lost stones, including an occasional big stone.
B. The labor to install it.
C. You’ll even make a profit on lost stones.[/dropcap]
[dropcap cap=6] The typical jewelry store spends $5,000 a year replacing lost stones. I just gave you $44,375.[/dropcap]
How should you explain this service and its pricing? Let’s assume you charge $30 to size a ring smaller and $25 to check & tighten.
You: “Mrs. Jones. We will size your ring smaller to fit your finger perfectly. In addition our jeweler will check and tighten each and every stone and make sure they’re tight when they leave our store. If they get loose within the year, we’ll tighten them at no charge and if any fall out we’ll replace them at no charge. In addition we’ll refinish the ring like brand new; it’ll look like the day your husband gave it to you. It’s only $55 to do all of this and we’ll do it right here in our store. It’ll be ready on the 24th and if you’ll be so kind as to fill in your contact information on the job envelope, I’ll give you your receipt and take it from here.”
When offered, 70 percent of customers will say yes.
David Geller is a 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 June 2010 edition of INSTORE[/span]