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David Geller

David Geller: Magic Act

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Identifying your store’s key metrics, and working to raise them, is your ticket to success, says David Geller.

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[h3]Magic Act[/h3]

[dropcap cap=E]very store is made up of a lot of numbers. Cost, markups, salaries, numbers of sales, inventory levels. It gets confusing and many a store owner doesn’t know what to look at.[/dropcap]

But some numbers are more important than others. In fact, some are so important that we call them “magic numbers” — and by tracking them, and working to improve them, your business will automatically improve. Today, let’s chat about the three numbers you can track to improve your sales numbers:

[h4][b]Magic 1: Closing Ratio[/b][/h4]

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Closing ratio is how many people out of 10 purchase something. To get it, simply track the number of customers a salesperson talks to and then how many of those people actually bought something. I’d suggest dividing tracking into two or three groups. In my store, I tracked three: 

1. Product sales 
2. Repair sales 
3. Custom design sales

On the third one, you might combine custom design with repairs and call it “shop sales”. Or, if your store doesn’t have any custom design sales at all, you’d track only two types: Product Sales and Repair Sales.

Let’s say Mary waits on 10 people who are looking at product and she sells two. That’s a closing ratio of 20 percent. So look at the number. You might have a half-million dollars invested in inventory, and still have eight people walk out without buying a thing. Depressing.

Just think what would happen to product sales if you could get Mary to sell just one more person out of the 10. Do you realize that the third customer would mean a 50 percent increase in product sales without any additional advertising dollars?

If Mary sold $200,000 in a year with a closing ratio of 20 percent, going up to 30 percent would give Mary sales of more than $300,000.

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For the three categories we’re measuring, here’s some rough averages that I’ve found to be the closing ratios for most independent retailers: product sales — three out of 10; repair sales — nine out of 10; and custom design — eight out of 10.

[h4][b]Magic 2: Average Sale[/b][/h4]

To determine average sale, I’d again separate my calculations into the three groups, as repairs will lower average product sales. Calculation is easy: divide total product sales by the number of products sold. You want to look at two averages for sure, maybe three:

1. Average product sale 
2. Average repair sale 
3. Average custom design sale.
Keep track of these numbers monthly. It’s one of your key gauges of how well you are selling and serving your customers’ needs. But remember, your average sale could be capped by your location. I know one North Carolina jeweler who had a $75 average sale in his store on the “South Side” of town. Then he moved across town — now his average sale is over $500.

Average sales from what I’ve seen and read in trade journals: product sales —under $400; repair sales — $17 – $28 (mine was $65); custom design — $750 (mine was 50 percent higher).

A few years ago, we heard a surprising report — that the average sale at Tiffany & Co was a mere $250. You know what that means? A lot of silver jewelry sold in blue boxes.

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[h4][b]Magic 3: Walk-In Traffic[/b][/h4]

To start monitoring walk-in traffic, go to Radio Shack and get a simple door counter. Or go to Harry Friedman’s site at www.freidmangroup.com, which has one with calculators, closing ratios … the whole shebang. Tracking how many people walk through the door will help you determine if one advertising method does as well as another you used last time.

Combined with closing ratio and average sale, you now have three numbers which will without fail indicate how well your store is doing.

A wise man once told me: “If you have a closing ratio of only 30 percent, why advertise to bring in seven more people who won’t buy? Instead, train the people you have to close better and you’ll save advertising dollars.”

As store owner/manager, your job is to:

1. Find the store’s numbers as of today. 
2. Compare individuals’ personal numbers and compare them against store averages (we don’t recommend comparing these numbers directly against those of other associates) 
3. Increase the individual numbers — and the store’s averages will increase automatically along with it.

Can you imagine what would happen if you had a closing ratio of 30 percent with an average sale of $200 and you went to a closing ratio of 45 percent with an average sale of $300? (P.S. To keep you from staying up tonight, if a salesperson had an average sale of $200, closing ratio of 30 percent with yearly sales of $250,000 and did this increase it would mean a whopping sales spike of $249,800.)

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 February 2004 edition of INSTORE[/span]

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David Geller

What You Can Learn About Turn from Clothing and Furniture Stores

Hint: Turn more, earn more.

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THERE ARE REALLY only three important numbers in a retail store: gross profit dollars, inventory on hand, and inventory turn. So who’s better at managing money among these three retailers?

Store                         Gross Profit %
Jewelry                      42.6%
Furniture                  45.0%
Clothing                    46.5%

Darn close, aren’t they? The grass isn’t so green on the other side after all. Or is it?

Let’s look at inventory turn, which means how many times a year an item sells. (These numbers are from stores doing “pretty well.”)

Store                            Turn            Days in the Store
Jewelry                   1.4                       260
Furniture               3.5                       104
Clothing                 4.3                       84

A clothing store won’t keep a shirt/suit/jacket/blouse in the store more than three to four months. They will heavily discount it at that point to get it out the door; they don’t just “squash” merchandise closer together to show more like jewelers do.

Furniture stores work the same way. They have a natural problem: available floor space. The biggest reason for high turn in a furniture store was told to me by a furniture store owner: “Where am I going to store an extra 100 mattresses?”

Clothing stores get rid of their merchandise every quarter. Furniture stores get rid of their inventory every four months, and a good jeweler turns their merchandise a little over once a year. But most jewelers I meet have had their total merchandise for two-and-a-half to four years! This causes terrible cash flow and piles of debt.

If you buy jewelry in January, it should sell at least once by Christmas; that would be a turn of 1.0. If it stays until after Christmas, discount it or give a spiff to the sales staff to unload it, or even return it to your vendor and exchange it.

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If it is still there in 18 months, scrap it. That’s what clothing and furniture stores do.

Let me show you the money-making power of turn. All three stores are going to buy an item for $200. For a jeweler, this might be earrings; for a clothing store, a nice jacket; and for a furniture store, it might be a chair. In the table below you can see the cost, profit margin in dollars, and what that brings in for total product dollars in a year.

Keeping an item long-term is a detriment. Even if someone buys it three years from now, you should have had that $207 in profit for each of the three years, totaling $621 brought into the store (not the measly $163.35 you would make by holding it three years).

When it’s over a year old, most things need to be disposed of and replaced. Maybe your customers just aren’t buying what you have in stock. Change that!

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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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