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David Geller

David Geller: Fire Your Designs

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If a custom-design ‘model’ isn’t selling, it’s costing you, says David Geller.

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[h3]Fire Your Designs[/h3]

[dropcap cap=“B]ut I custom make a lot of jewelry from my designs in the case.” That was how one jeweler on the Polygon discussion forum justified the pile of old inventory sitting in his showroom. His store, he said, is a custom-design shop, has no debt and he pays himself and his employees well.[/dropcap]

[inset side=right]This makes one occasion when having old inventory is not a bad thing, if you do a lot of custom design. At the same time, it’s not a great thing either.[/inset]This makes one occasion when having old inventory is not a bad thing, if you do a lot of custom design. At the same time, it’s not a great thing either.

Old inventory affects people in different ways, just like being 230 pounds affects a short person differently from a tall one.

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That’s one reason why I divide up a store’s sales into two main income categories in QuickBooks so it is possible to see the profits from the shop separately from the earnings generated by product.

If product is a large majority of total sales, then gross margin return on investment (GMROI) is very important.

On the other hand, if shop sales are the majority of total sales then GMROI is not a major factor. It is a factor if you’d like to make even more money, but gross profit dollars from the shop are the most important thing.

Yet, like the writer on Polygon, many jewelers insist: “That old inventory is not a factor because we sell from it.”

Well, yes and no. In custom design you must track how much work stems from the pieces in the showcase. Stuller has brass rings for $1. But in your store it’s unlikely you have brass rings for a dollar; you have gold and platinum rings. That’s a lot of money tied up there.

If you have a line like Tacori and you own 12 rings and in one year you sell all 12 and reorder, you’ve sold 12; own 12 and because you sold all 12 in one year, have a turn of 1.0. If you got keystone on all, GMROI is $1.

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Now, what if you’re a shop-oriented store? You could use the same math. If you have 12 rings and never sell any of them but instead custom-make 12 rings that look like the ones in the case, then you could say you have a turn of 1 and GMROI is fine because they helped you sell 12 custom rings.

Same math. But a problem arises when you have 12 rings and you repeatedly custom make just four designs from the 12. Those four, you say, are “turning shop numbers.”

But the other eight are dead! They don’t contribute anything.

You say, “Yes they do. The customers now have a selection.”

Yeah, right. If a “selection” helps sales, go to a show right now and bring back the same amount of inventory you have in your case. Now your selection is double and sales will double! Yes?

It doesn’t work that way. Those eight rings don’t sell, don’t lead you to re-order, don’t get you to make more jewelry in your shop. They are deadweight.

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[inset side=left]Like many jewelers I wanted to sell more bridal. I stocked up on bridal styles. Virtually none sold and that’s where most of my accounts-payable debt lay.[/inset]You’d be better off looking over the custom styles you’ve made in the past and identifying those that sold and sold and sold again and then making them in metal with CZs and putting them on display. Have a selection that helps you make a wider variety of sales.

I had that problem in my store. Like many jewelers I wanted to sell more bridal. I stocked up on bridal styles. Virtually none sold and that’s where most of my accounts-payable debt lay. We were a large custom-design store, and guess where the majority of our custom sales came from? Trade magazine pictures and the picture books of things we had made in the past.

You don’t have to have touchable jewelry in the case, although I do agree, it does help a lot.

Don’t fool yourself that “stuff in the case” makes custom sales. Not all of it does. Analyze what you’re making versus what’s in the case, and then further analyze what individual pieces you’ve made from “what.”

I have seen many bench jewelers work their tails to the bone and make good shop profits. But then they take about 30-50 percent of every shop profit dollar and send it off to stock cases in the belief it will help sell their stuff from the bench. It never sells, and they are working 40 percent of their day to help support a vendor in New York.

You know how TV reports note that most of us work the first three to four months of the year for the government, and the rest of the year for ourselves, thanks to the taxes we pay.

If you’re stocking the showcase with things you think sell custom but really don’t, then it’s the same. So when you’re wife calls at 7:30 tonight and asks when you’re coming home, don’t tell her, “But I’m working late for you and the girls, Baby.”

In truth, you’re working late for a jewelry vendor. It’s time to work for yourself. If that design does not provide a viable sale in 12 months, fire it!

David Geller is an author and consultant to jewelry-store owners on store management and profitability. E-mail him at [email protected].

[span class=note]This story is from the March 2008 edition of INSTORE[/span]

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