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David Geller

David Geller: Memo Random

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To fight Internet competitors, start by reconsidering your approach to memo, says David Geller.

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[h3]Memo Random[/h3]

[dropcap cap=I]f you haven’t had a couple come into your store yet with printouts of diamond prices from the Internet, then you must have moved to Mars with the Rover. No longer do you have to worry about competing against the bigger retailers or even the so called “diamond importers.” Now you’re competing against the large and invisible Internet.[/dropcap]

[inset side=right]Amazon.com is now selling diamonds! Yep, buy Oprah’s book and throw in a princess cut while you’re at it.[/inset]Had lunch yet? Don’t. I wouldn’t want to upset your tummy.

Amazon.com is now selling diamonds! Yep, buy Oprah’s book and throw in a princess cut while you’re at it. You should go to Amazon.com and see the main page. Here they tell the public the “ugly truth”: that most jewelers have margins of 40-50 percent, while Amazon only has a 15 percent margin. Peruse the site; they are selling everything in jewelry. No matter how much you romance the sale, many folks use price as the final decision maker. After all, a “cert” levels most playing fields.

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So you can add Amazon.com to your existing list of Internet competitors, including the likes of Bluenile.com, Pricescope.com and an army of other diamond dealers selling to the public. Margins are shrinking and competing just got tougher.

One way to fight back is to consider buying more diamonds, and relying less on memo. The fact is, memo is an expensive and also painfully slow way to sell. Those who buy right and own their own diamonds are having greater success than many folks doing memo. (Of course, those who buy wrong can make their store’s problems worse … in a hurry. But that’s a subject for another column.) In general, however, if you’re a memo retailer of diamonds, the “good old days” are rapidly disappearing.

I visited a store two years ago that was doing a very good job with engagement ring sales — selling about a million a year with a memo inventory of $400,000. The store’s owned inventory was only about $190,000.

I told him that memo was expensive and his response was “No, David, I get as good a price on memo as others buy.” Fine, I wasn’t going to argue. But I did turn him on to a buying group with a diamond vendor that is very close to a sightholder. Diamond prices were substantially lower … but he had to buy them. Well, he started stocking these in November and during the Christmas season sold 17 of these diamond solitaires with an initial investment of only about five diamonds from the supplier. He did great turn. And at a 40 percent margin.

He called me and happily told me that he was now selling 1-carat diamonds at the same price he used to pay for them. Sales were much easier to make and his margin was 40 percent, with great turn and a very high closing ratio. Difficult to do that with memo.

[inset side=left]The Missouri jeweler told me that when he has a diamond in stock and can pull it out, they have an 80 percent closing ratio on that day.[/inset]If you can afford to buy and buy right, it will be the only way to compete. The people who are making the most money in diamonds overall are also those buying stones from the public. A small classified ad in your local newspaper can bring you loads of sellers of diamonds at prices that will lower your costs. (Do check your local laws for any restrictions that might apply.) You can’t get everything you’ll need, but this can dramatically improve your bottom line. Make 25 percent here, keystone there; it all adds up.

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This past week I spoke to two jewelers. One was in a very small town and she said she couldn’t sell a diamond to save her life. People were coming in with Internet quotes at prices she wouldn’t want to match and some had bought from Blue Nile and wanted a second opinion. She was trying for mark-ups in the range of 75 percent to full keystone.

Then the same day I spoke to a jeweler in Missouri who consistently got keystone on 1-carat stones. The difference? The small town jeweler owned maybe six to eight diamonds, and had to memo in any other requests, while the Missouri jeweler had a nice size wallet. The Missouri jeweler told me that when he has a diamond in stock and can pull it out, they have an 80 percent closing ratio on that day. When they memo in, their closing ratio drops by half. Ah, the joys of ownership.

By the way, the small-town jeweler who owned a few diamonds boasted that she bought only diamonds that she would want to wear herself. She commented on what “crap” her customers bought at the mall stores. I told her to buy for her customer, not herself. And to either lower her price points for diamonds … or raise the quality of her customers.

If you’re going to compete against the guy down the street or the World Wide Web, you had better get sharper pencils, tweezers, loupes and vendors. The ride is getting rockier.

[componentheading]BRAINSTORMS[/componentheading]

[contentheading]New Ideas For Your Store[/contentheading]

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Women 65 and older spent $14.7 billion on apparel in 1999, alomost as much 25-to-34 year olds. But where did a gigantic majority of marketing dollars and research and development dollars go? To getting those 25-to-34 year-olds. Here’s some advice to separate your store from the pack:

Go for the Old!

Think targeted advertising. Think appropriate styling(classy, not frumpy). Think larger clasps that can be fixed with less-than-nimble fingers. And, best of all, think higher price points to match the extra disposable income older jewelry buyers have.

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 June 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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