Connect with us

David Geller

David Geller: Make Big Money in Bridal With Custom

mm

Published

on

Margins are falling everywhere except here.


This article originally appeared in the September 2015 edition of INSTORE.

David Geller bench shop advice

For sure it’s a different world today in our business. About 20 percent of all jewelry is sold online. The price of gold has wiped out most $500 to $700 impulse buys, with silver picking up the slack but at half the average sale.

Bridal continues to be a mainstay for many jewelers. The typical thought is, “We’ll make smaller margins on the center diamond and make it up on the mounting.” This is true, but prices for many branded bridal lines can be shopped on the Internet (meaning lower margins for you).

Shoppers will come into the store with reams of notes from the Web on a diamond they want to buy and may have an idea of the type of mounting to put it in. Here’s your chance, by promising to make a ring unlike any that her friends might own, while you enjoy a better-than-keystone markup.

Advertisement

“Custom” can mean having an outside vendor make the ring for you or creating it in house. With today’s technology for designing and making jewelry you can razzle-dazzle your customer right there in the showroom. Once you get them interested in the “made just for you” design, it’s smooth sailing. And it’s a lot easier than you’d think. Here’s how:

Guide for pricing an engagement ring design

Pricing and selling the design:

Typical bridal sales today are about $5,400 or more. But don’t underestimate the buying power of people in their late 20s; they know of credit cards to get cheap rates for the first year. I suggest breaking down the pricing of the custom bridal sale into three groupings:

The diamond itself

The custom ring-labor to make/create/set stones

Advertisement

The custom ring-materials: metal and side stones

We’ll assume you have nailed down the price on the center stone. When pricing the custom ring, draw up two columns: one for labor and one for material and then total them up separately. Now draw an arrow down to the total price (see graphic). Why do it this way? In case you have to negotiate to get to a price to suit the young man’s budget.

If you need to discount the ring mounting you wouldn’t give a price break on the whole $2,925 ring. Instead you’d say:

“As you know, we can’t discount labor but I can help you some on the materials.” If you gave 15 percent off the $2,950 ring that would be surrendering $438.75. But a 15 percent discount on only the $1,150 of materials is $172.50.

Also, the chart allows us to see the power of turn. If you bought a ring for the case that cost you $500 and it sold for $1,150 at Christmas (the same price as the material in “Mary’s ring”), it means you’ve made $650 in profit in 12 months.

But with custom’s faster turn, if you buy the material to make the ring on Jan. 5 and deliver the ring on Jan. 31, you have generated $650 of profit in one month. And if you can do that every month, it means $7,800 of profit a year from the same original investment.

Advertisement

Also, because of the power of turn you can give a discount on material. But you can’t increase turn on labor unless you lower the jeweler’s pay or make the jeweler work twice as fast.

It’ll never happen.

So advertise custom bridal to your market.

There’s big money in bridal again!

 


.


David Geller is a consultant to jewelers on store management. Email him at dgellerbellsouth.net.

 

 

Advertisement

SPONSORED VIDEO

Les Georgettes

It’s All About Choices

With beautiful jewelry from Les Georgettes, choice is everything. Choose a design. Change colors. With 30 styles, 3 finishes and 48 stunning leather colors, you’ll never be at a loss for a unique piece of jewelry. Create, mix, stack and collect Les Georgettes by Altesse. Made in France.

Promoted Headlines

David Geller

Can You Make Money at 12 Percent Margin? Yes, But Here’s What It Takes

As one factor decreases, another must increase.

mm

Published

on

CAN YOU MAKE a living on a profit margin of just 12 percent? Did the word no come to mind? You’re wrong.

For coin or bullion dealers, 8-12 percent gross profit margin is the norm, and they make a lot of money with little debt.

The “magic triangle” includes profit margin, inventory turn and inventory level. The combination of all three tells your future in a store, how much money will be left over to pay all bills and have money in the bank.

Let’s take a simple store math example for a year using keystone. A typical jewelry store would have a net profit of 5 percent. Here’s how a P&L would look:

Total Product Sales: $500,000
Cost of Goods: -$250,000
Gross Profit: $250,000
Expenses (45%): -$225,000
Net Profit (5%): $25,000

Are you making money? Absolutely. Do you have any money left over after paying expenses? Depends.

Imagine if last year, you sold everything at Christmas, not a stitch of inventory left. January 2nd, you fly to New York with three suitcases and buy the $250,000 of inventory that the cost of sales above pays for. You’ll have no debt. If something sells within six months, you have the money to reorder the replacement for the case, thus always having a stocked showcase.

Divide $250,000 in cost of goods by inventory of $250,000 and you get one turn a year.

Advertisement

Now assume the same figures above, but instead of three suitcases costing $250,000, you bring five suitcases and bring back $600,000 of inventory for the store. Same sales and profit numbers as before. Did you make a profit, make money? Yessiree Bob! Do you have money? No! You bought $100,000 more inventory than the sales you took in. So how do you pay for it?

  • Owe vendors way past the due date
  • Put it on credit cards
  • Go to bank and take out a line of credit
  • Personally skip paychecks
  • Take money from your personal checking accounts

In this scenario, your inventory is $350,000 higher than the cost of goods sold. Divide cost of goods by inventory level, and it shows you have a 0.41 turn. A turn of 0.41 means this store has more inventory than needed for two years.

So, what’s the secret to having money?

Advertisement

The long and short of it is, if you’ll keep your inventory levels approximately equal to the gross profit dollars you’ll make over a year, you’ll both make money and have money.

The lower the profit margin, keep inventory lower, or if you must have a higher inventory level at lower margins, then turn it faster. Instead of taking 12 months to sell it, sell within nine.

It takes all three for The Magic Triangle to work magic in your store!

Continue Reading

David Geller

What You Can Learn About Turn from Clothing and Furniture Stores

Hint: Turn more, earn more.

mm

Published

on

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.

Advertisement

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!

Continue Reading

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.

mm

Published

on

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.

Video: How to Ask for Referrals Without Being Too Pushy
Jimmy Degroot

Video: How to Ask for Referrals Without Being Too Pushy

Video: How to Get People to Buy Jewelry From You Now Instead of ‘Someday’
Headlines

Video: How to Get People to Buy Jewelry From You Now Instead of ‘Someday’

Webinar: Sell Silver Like an Expert: Tips and Marketing Tricks for Making This Your Best Silver Selling Season
Sponsored Webinars

Webinar: Sell Silver Like an Expert: Tips and Marketing Tricks for Making This Your Best Silver Selling Season

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?

Continue Reading

Most Popular