David Geller: Are You High?

MOST JEWELERS “STOCK UP” for Christmas and this is when almost all of us get into trouble. January is not the time to be in debt — it’s the time to have buckets of cash left over, even after paying off your bills.

Most jewelers that I visit get into trouble because they either:

A. Buy more than they need for the season, or:

B.They buy higher-priced goods than they usually do, thinking that all their male customers will decide that this is the year they will go to the local jeweler, throw wads of cash on the table, and buy their honey the perfect gift.

But, as the song goes “It ain’t necessarily so.”

Thank goodness you have been using your Point-of-Sale software. You have, haven’t you? If you’re still in the dark ages, go to the back of this magazine and call any of these folks and get one. Sheesh!

You don’t know how many jewelers have told me how they buy higher-priced goods for December because “we sell a higher-ticket item during Christmas”. Well, let’s find out.

From your POS system, run a report from January, 2003 through October 31, 2003 and have it summarize by department (i.e.: earrings, engagement rings, colored gemstone rings). Then run another report for November 1, 2003 through December 24, 2003.

It might look like this:

Divide the total sales of each line by the units sold to get your average sale. You want to do this for the Jan-Oct report and the same thing for the Nov-Dec report. You want to see if it’s actually true that people are buying higher-ticket items during Christmas or if you just have more humans in the store, still buying the same old stuff — just more units.

At one store I visited, I ran the owner’s report and discovered that he sold the same average-price per item during Christmas, but at three times the average monthly volume — more units sold. He was always having a tough time paying bills in January. Know why? He was left with the very expensive, higher-end inventory that he had just purchased and now owed money on for January.

Running this report will let you know if you should stock higher-end items or just order more units. Getting an average price per sale is a good place to start … but you must take your findings with a grain of salt. Let’s use the example above of the gold earrings, selling 181 units for $45,250. That gives us an average sale of $250. If you run an itemized report, you’ll see pages and pages of individual sales for all 181 items. You’ll see prices ranging from, let’s say, $39 to $750. It all averages out. But it wouldn’t hurt to skim the detailed report in search of anomalies. For instance, imagine you had three sales for high-end, special-order earrings at prices of $1,450; $2,350 and $1,950. These three out of the 181 skewed the numbers higher. Since these are special orders, we’d take those three sales out, they are a fluke.

Now we have left 178 units sold and our average sale is $221. Not a gigantic change but I hope you see the point. By viewing the detailed report you can see you sold three high-end pieces — so there’s no need to buy 15 now, is there? Of course, your study might show a different phenomenon: your overall number of sales flat, but ticket-price per sale way up. In that case, you definitely do need to stock up on the pricey stuff.

For those of you without a POS program, you can make a list of the sales from last year from your hand-written receipts into Excel and get your lists and averages that way.

Now how about the number of units you need? This gets into your “Open to Buy” plan. This plan tells you how many units you will expect to sell and thus how many units you’ll need to keep in stock to sell them from. If you have 31 and you sold 39 in November and December last year, you’ll need at least eight more. But that would leave you with zero for January. If you normally have on hand 12 for January (there are birthdays the first two weeks of January you know), then you’ll need to have 39 on hand for the season and then another 12 to get you into January … for a total of 51.

While there are many more detailed and more powerful methods of determining what to buy, that’s the quick-and-easy method: run reports by department and see how many units you have going into October. Subtract what you sold during last year’s Christmas selling season. Then subtract your desired inventory to start off with in January. Boom! That’s the number of units you’re open to buy.

Here’s to a great holiday season, smart buying, skillful selling, and lots of profit.

This story is from the October 2004 edition of INSTORE.