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David Geller

David Geller: Pay Commission on Repair Sales

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Taking in repairs may be “part of the job” is part of their job,” but it’s still making you money and building relationships with future customers.

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[h3]Pay Commission on Repair Sales[/h3]

[dropcap cap=M]any jewelry stores will pay sales staff a commission for selling jewelry but won’t for selling jewelry repairs, watch repairs or custom design.[/dropcap]

Why?

And they wonder why the staff gives such short service to repair customers, why customers with repairs have to wait for someone to help them at times, and, more important, why there are so many mistakes in the shop.

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First, let’s look at what constitutes a sale. If you sell a $50 ring from the showcase there are three things involved in the sale: selling price ($50), cost of goods ($25) and gross profit. The salesperson made you $25 in gross profit.

If the ring fits, this might have taken 10 minutes to sell. 

Now let’s look at a $50 ring repair. There are three or more components involved. Let’s assume you don’t have a shop, and that you work with a trade shop.

[inset side=right]If you sell a $50 ring from the showcase there are three things involved in the sale: selling price ($50), cost of goods ($25) and gross profit. The salesperson made you $25 in gross profit.[/inset]The retail repair of this is $50.

You chose $50 because you know the trade shop will charge you $25. You want keystone or better on repairs.

You made a gross profit of $25.

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You made the same dollar sale, same profit, now why wouldn’t you want to pay the sales staff the same commission you pay when they sell product? If you pay 3 to 5 percent, why not reward them the same? A profit is a profit is a profit.

Many salespeople who don’t get commissions for repairs tell me: “Why should I wait on a silly repair when I could possibly be selling a $5,000 diamond?”

Here’s why:

Between 65 and 70 percent of all store traffic in most independent jewelry stores is service-related. It’s people coming in to drop off or pick up a repair, get a watch battery, have their prongs checked, have a stone tightened or a clasp adjusted.

That leaves only 30 to 35 percent of customers who walk in and say, “I’m looking to buy jewelry.”

Although the staff says, “Here’s a $5,000 diamond, ” the average sale in a typical store is about $500.

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The $50 repair sale is profitable. If you have an inhouse jeweler, the only real difference is you don’t see a bill as you do from a trade shop. Most stores make keystone or better when doing simple repairs. If you pay a jeweler $25 an hour and you happen to charge $25 to size a ring smaller, the jeweler can do four to five sizings an hour, thus producing $100 to $125 in income for the $25 you paid him. That is still a profit, but most jewelers discount the fact because they can’t print a report and see it. (Although there is a way in QuickBooks!).

[inset side=left]Although the staff says, “Here’s a $5,000 diamond, ” the average sale in a typical store is about $500.[/inset]The $50 repair, instead of taking 10 minutes (as the $50 ring sale did), might take 15 minutes or more, as the staff member must fill out a job envelope and spend a fair amount of time asking the jeweler or owner questions, getting a quote, and more. Whereas selling a $50 ring might involve just one staff member, taking in a $50 repair can require the attention of three to five people. That includes delivery, as you’ll see the customer twice.

You should pay the staff a commission so they’ll want to do their job better and save the company time and the cost of mistakes.

And now that you see a $50 repair could involve three to six people rather than one, you should understand that you need a higher profit margin on repairs just to pay for all of those hands.

Most stores find that most of their regular clients start out as repair customers, who after building up trust, buy jewelry. Every profitable transaction should be a pleasant one for the customer, and that includes repairs.

Start by paying the same commission on all repairs, even batteries. Set a goal: “The person with the highest repair sales this month gets a free dinner and movie for two!”

If you’ve never paid commissions and want to try it, go for repairs first and see how it goes. The average sale is smaller, so the staff won’t seem like vultures. After doing that for a while, expand the policy and pay commissions on product sales.

Start paying commission on repair sales. You just might see the numbers increase “for no reason at all!”

David Geller is an author and consultant to jewelry-store owners on store management and profitability. E-mail him at [email protected].

[span class=note]This story is from the July 2008 edition of INSTORE[/span]

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