WHETHER THEY AGREE or disagree on the exact markup, one thing jewelry store owners love to talk about is pricing merchandise. You’re comfortable with the subject. You understand it. But when the topic turns to repair pricing, the room turns ominously silent until someone meekly suggests it’s time to “take a break.”
The fact is, the repair department is an untapped source of profits in most stores. Shop sales have virtually no inventory to carry. Sure you might have $5,000 of gold and findings, but that’s nothing compared to your showroom inventory (which features, on average, between $500,000 and $1 million in product).
What this means is that the shop can’t make money from turn; all it can sell is labor. There’s only three ways the shop can increase its fortune:
- Do the job faster.
- Have a lower-paid jeweler do the work.
- Charge more.
You can yell and scream all you want, but no matter how many “motivational talks” you give your jeweler, about the biggest speed increase you can hope for is 15%. Of course, it’ll be nice that they’re more productive, but it won’t make a big difference in your overall revenue.
Lowering the jeweler’s hourly wage will work to lower your costs, but it will also increase the likelihood your jeweler will leave. And at lower wages, you’ll have a hard time replacing him or her. In fact, low wages are the biggest reason there aren’t enough jewelers around in the first place.
So, the easiest way to gain more income from the shop is to charge more. You might think that would run off customers, but over 5,000 jewelers across the USA who use my repairs pricing book say the opposite. What they’ve found is this:
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Raising prices brought in more money and the closing ratio was still about nine out of 10. (Not to mention, that the one in ten who did leave was probably not the type of customer you would want to do work for anyway.
Besides, with all that inventory clogging my cases (and cash flow), I’d be more concerned with my low closing ratio on product sales than anything else. For product, the average jewelry salesperson usually closes three out of 10 people. That means seven out of 10 people turn up their noses at your half a-million dollars in unsold inventory and walk out. That’s more worrisome than unsold repair jobs, isn’t it? Besides, as long as the jeweler always has work, why care?
I don’t mean you should immediately start overcharging for repairs. The truth is that most store owners haven’t a clue what their cost is to do a repair. I visited a jeweler once with multiple stores. Store “A” had a $50,000-a-year jeweler who was slow, and store “B” had a $40,000-a-year jeweler who was fast. The $50,000 jeweler probably was costing them near $60,000 because he was so slow. On the other hand, the $40,000 jeweler was probably so productive that his cost was closer to being that of a $35,000-a-year jeweler.
See the difference? Now here’s the kicker: both stores charged $18.50 to size a ring smaller. But, by using the right formula, you?d know that a $35,000 to $40,000 a year jeweler has to charge $22 minimum to make a ring smaller, while a $50,000+ jeweler should be charging $28.
What you think you should charge and your actual costs are usually miles apart.
You’ll find you’ll take in more money overall charging $28 rather than $22. Don’t you want more money? Or would you rather have this on your tombstone:
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“Here lies Johnny Jeweler.
He repaired more jewelry in this city than anyone.
He died poor, but satisfied.”
This story is from the October 2006 edition of INSTORE.
