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David Geller

David Geller: Fair Incentive

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Getting your jeweler on a commission plan makes sense, writes David Geller … if you make it profitable for both parties.

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[h3]Fair Incentive[/h3]

[dropcap cap=S]o, you want to put your jewelers on commission? The purpose of placing your jewelers on commission is not punishment. It’s to improve your shop profits, and to allow a skilled, motivated jeweler to earn a better living. When you first mention the idea of working on commission to a bench jeweler, they’ll inevitably assume they will be making “sweatshop wages”. Nothing could be further from the truth.[/dropcap]

The storeowner must offer a commission system that is fair for the jeweler. If it’s not, you could very easily lose a valuable employee. Here’s how to make it work for both of you:

[dropcap cap=1.] There must be more than enough work to keep the jeweler busy. If there is a lack of work, it is not fair to pay commission, as there would be no pay when it’s slow.[/dropcap]

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[dropcap cap=2.] The jeweler shouldn’t be interrupted. Okay, while we can’t entirely avoid having the jeweler being asked questions — his expertise is an important asset to your store — your other staff should be trained to minimize interruptions. And jewelers should not have to wait on customers, call vendors for parts, etc. If you can reduce or eliminate these “pay robbers”, then your jeweler should do well on commission.[/dropcap]

[dropcap cap=3.] You must charge the correct prices. You’re going to give the jeweler a percentage of the retail labor charge. If that percentage doesn’t pay well, you’re under-charging. Stop that now![/dropcap]

[inset side=right]If your jeweler does the work plus polishing, you should pay 26 percent of the labor price.[/inset]In our store, we developed our jewelers’ commission system with the help of an accountant who had been a watchmaker (and still is today). This was the first accountant I had ever hired that could help me with pricing. The breakthrough came when he asked me, “What percentage of store sales goes to salaries?” I didn’t know and he told me the typical range for a jewelry store was 20 to 25 percent. So we chose a number in the middle and we paid 22 percent of every labor dollar to the bench jeweler. Our commission system was off and running.

We have always had a separate polisher so our jewelers don’t do the polishing. If your jeweler does the work plus polishing, you should pay 26 percent of the labor price. So if you charged $10 to do something, the jeweler gets $2.60.

Why 26 percent? Simple — once you add in matching FICA, Medicare, workers comp, health insurance, etc. — you will have paid a total of 33 percent. And you are looking for a three-time markup on repairs, aren’t you?

Once we started the system, our profits from the shop soared, as did productivity. Before commission, we kept 350 jobs in the shop. It took eight weeks to make a ring and four weeks to size it. After? We had 450 jobs in the shop, took six weeks to make a ring and two weeks to size it.

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But many of our jewelers complained that certain jobs didn’t pay well. Why? We used “comparative pricing”. You know, calling the store down the street to see what they charged. We decided that was crazy because repairs aren’t price-sensitive, they are trust-sensitive.

So we bought each jeweler a time clock and did a time study. And we found that our jewelers were right — for some procedures, we weren’t paying them enough. For certain procedures, we were charging $10 and paying the jeweler $2.60. But the time study showed they should have been making $3.50.  

So if we should be paying the jeweler $3.50, what should we charge the customer? Simple. Divide $3.50 by .26 (to ensure the jeweler gets 26 percent of the total price) and you get $13.50.

[inset side=left]And we found that our jewelers were right — for some procedures, we weren’t paying them enough.[/inset]In our book, we carried this further as we didn’t want to pay the jeweler a percentage of the finding. For example, we charged $47 for a 2mm round 14k barrel clasp furnished and soldered to the customer’s chain. It takes two solders to install it and that’s what we pay the jeweler’s commission on. To solder a jump ring closed, we charge $12 per solder. Therefore the installation of the clasp is 2 x $12 = $24. The jeweler gets 26 percent of the $24 soldering fee, or $6.24. With matching taxes, our cost for labor is approximately $7.80, or one-third of the $24. So in our price book we laid out the retail for the clasp and a coded column for the jeweler’s commission.

Under our commission system, our jewelers earned $30,000 to $60,000 the last year I owned the company. In most stores I’ve helped implement this, the store’s jewelers get more money, and the store’s profits go up. There are a few situations where a jeweler’s pay might decrease. Assuming the jeweler isn’t bothered a lot and the prices charged are correct, this probably means you have a slow jeweler. In this case, you have several options:

[dropcap cap=1.] Raise your prices so the amount of money the jeweler earns through commission increases. Your gross profit will also increase.[/dropcap]

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[dropcap cap=2.] Increase the percentage the jeweler receives. At 26 percent, your cost is about 33 percent. If you paid the jeweler 33 percent, your cost (with benefits) would be approximately 42 percent, a little less than a 2.5 markup. I’m not in favor of this. Shop work needs more profits to pay for mistakes.[/dropcap]

[dropcap cap=3.] Train the jeweler to be more productive. Send your jeweler to a five-day course to brush up on advanced setting and repair techniques. This will quickly be repaid in increased profits.[/dropcap]

[dropcap cap=4.] Replace the jeweler. A last resort … but hey, would you keep an underperforming salesperson?[/dropcap]

It took me more than two years just to put our pay and sales formulas in book form to be used by the staff. Once we started the program, some jewelers left. But the ones who stayed increased their incomes by 50 percent in six months.  
It made my company profitable almost immediately.  

Yes, we did have to keep a closer eye on quality … as some of our jewelers liked to rush. But I’ll take more inspections while being profitable over unprofitable “perfect work” any day of the week.

It should be a win/win situation for the store and the bench jeweler.

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 July 2003 edition of INSTORE[/span]

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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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David Geller

Here’s How To Calculate How Much Your Jewelry Salespeople Should Earn

But that also requires that you let them make sales.

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A JEWELER EMAILED ME this question: “I have always heard that a jewelry sales associate should sell 10 times what they make as a gross wage. Do you think it is still true today? What about associates with other responsibilities who aren’t always on the sales floor?”

Here’s your answer: 10 times sales as salary (or being paid 10 percent of what you sell) is “sort of correct.”

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The number is actually between 8 to 13 times their pay. If they sell 8 times (or cost you 8 percent of their sales), they are very efficient. If their cost is closer to 13 percent, they are inefficient.

So if a salesperson is paid $35,000 a year, they should sell between $270,000 to $437,000.

But here’s the question: How much do you personally sell out of total sales of the store? That includes product sales, appraisals, repair and custom.

If the store does $700,000 in sales and you only wait on diamond customers and your sales are $500,000, then that leaves a remaining $200,000 available for sales staff to sell. So the salesperson is physically unable to sell even the minimum of $270,000, much less the higher end.

Take your sales away from the total and see what’s left for staff to sell.

Don’t tell me what they could do to bring in more sales. That’s an excuse. Why? Because you have to be the sales trainer.

You’d have to train them to:

  • Increase their average dollar sale.
  • Try to add on to what is sold to each customer. Goal would be add on to 25 percent of their sales.
  • Keep a client book of some type, keeping track of birthdays and anniversaries and contacting customers to remind them to buy something for these events. This starts with sending thank-you cards after every single sale.

If you’re too busy to be a sales manager, then don’t complain that they don’t sell enough.

What about employees who have other duties? That makes it impossible to sell 10 times their pay if they are only on the floor 15 hours a week out of 40. They would be considered “fill in.” Just pay a salary or wage and be done with it.

But if you wanted to pay them some type of bonus or commission plan, you’d figure out what percent of the week they are on the floor. So in this example, if the employee is on the floor 15 hours out of 40, then 38 percent of his workweek is selling. If he makes $35,000 a year, 38 percent of it is equal to $13,000 of his pay to be on the floor selling. Divide $13,000 by 0.08 and 0.13, and his sales should be $100,000 to $162,000.

There are many ways to compensate for excellence in selling. When I was a store owner, I paid straight percent of sales. You can pay a percentage of the gross profit, which ensures that the more they discount, the lower the percent of profit you pay. There are spiffs: sell these things over here and I’ll give you a set amount of money. There is share: if we all reach a goal amount this month, I will give everyone an amount of money. Or you can give things: sell so much or a particular item, and I’ll give you tickets to a show/fancy dinner out/day off/spa day.

All salespeople come to work with their car radio set to WIIFM: “What’s In It For Me.”

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