IF 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.
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.
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.
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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.
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.
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.
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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.
Brainstorms
New Ideas For Your Store
- 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.
This story is from the June 2004 edition of INSTORE.
