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David Brown

Jewelers See Unit Sales Decline — Here’s a Way to Fix the Problem

It’s the seventh straight month of declining monthly sales data.

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August sales data showed a small drop in our rolling 12-month sales results of 0.08 percent compared to July, converting to an annualized decline of 9.6 percent should the trend line continue.

August’s monthly sales figure of $117,275 across our store average comparison data is down from August 2017’s total of $118,542. This is reflected in a drop in unit sales from 276 units in August last year to 261 units sold this year. Average sale showed an increase from $382 last year for the month of August to $384 this year. Gross profit of $52,710 was down from August 2017’s monthly result of $53,612, a reduction of $902, or 1.6 percent.

This is the seventh straight month of declining monthly sales data, a sequence we have not seen since the Great Recession. Since January this year, sales have dropped from an average annualized sales figure of $1,629,755 per store to $1,588,204. This is a decline of 2.5 percent, or approximately $41,000 so far this year.

It might not sound like much but for an average business doing keystone (and we can now see that most businesses are not achieving keystone), that represents $21,000 off the bottom-line profit after paying for the inventory sold.

Looking at the last three years of data, margin has maintained its level of 45 percent with average retail sale making small increases from $375 to $384 (2.4 percent) while unit sales dropped from 286 to 261 units (a decline of 8.7 percent over the three-year period). Monthly figures represent an isolated snapshot, but the overall trend is continuing.Unit sales are no longer decreasing as quickly as they have, and average retail sale achieved is no longer climbing as quickly as it was, however the rate of decline in units sold continues to outpace the offsetting increase in average retail sale achieved. This has resuled in a drop in August sales figures in the last two years from $119,481 to $117,275, a drop of 1.8 percent. Although the speed of change has slowed, its consistency in trending downward appears to have become a greater concern.

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Let’s look at unit sales from a longer term perspective. In August 2014 the average store was making unit sales of 5,391 items per year. Fast forward to August 2018 and that total has declined to 3,970 items.

That’s a drop in just four years of 1,421 items, or 26 percent of items sold. As most of you know, “sales” equals the number of units sold times the average selling price. That’s a big increase required in average retail selling price in order to compensate for this drop.

How do your numbers compare? Take a look at your total annual units sold from four years ago and compare that number to now. Has it declined? If so, how much? What about your average retail sale achieved? Has it increased? If so, how much? Has it been enough to compensate for this drop in units sold?

Sooner or later, the decline in unit sales must be addressed.

Increasing unit sales can start with one simple strategy that, once executed consistently, can be supplemented by others. My recommendation is to look for the add-on sale. The easiest customer to sell to is not the one who is at home looking at your marketing material, nor is it the one who is browsing in your store. It’s the one who has just bought from you – yet these are the customers we neglect to sell to because the “job is already done.”

You don’t need more customers to make more unit sales – just do more with the ones you have already won over.

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David Brown is president of the Edge Retail Academy, a force in jewelry industry business consulting, sell-through data and vendor solutions. David and his team are dedicated to providing business owners with information and strategies to improve sales and profits. Reach him at david@edgeretailacademy.com

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David Brown

How Eating Right Is Like Managing Your Inventory

The right items and advance planning can make your business fit.

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KEEPING YOUR INVENTORY in order is a little like painting the Eiffel Tower … you no sooner get to one end than you feel you have to repeat the process all over again!

Inventory is a dynamic part of your business. It is constantly in flux, and as such, difficult to manage. However, having a good system will go a long way toward helping you keep your inventory under control.

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There are two aspects to your inventory: what you buy and what you keep. It’s the buying part that contributes most to what is left after the customers don’t want it, so let’s start with that first.

Food dieting consists of what you eat and how much of it you consume. Buying inventory is the same. There is what you buy, and then there is how much you are spending. If your diet consists of eating healthy greens, vegetables and fresh fruits, then part of your food diet will take care of itself. The same is true of ordering fast sellers — make these the mainstay of your inventory diet, and you will take care of a good 70-80 percent of the inventory you will need to consume. That leaves the remainder — the combination of poor choices and overconsumption that can cause the most problems (I’m still talking inventory here!).

In the same way that meal planning can reduce overeating or making poor food choices, planning your purchasing will work the same way. We recommend an open-to-buy budget as the most effective way to do this. An open-to-buy will balance what you are selling with what you are buying. Think of it like a calorie checker that enables you to eat once you have burned enough fat. The open-to-buy will track the money released from outgoing inventory that is then freed up to spend on new product and let you know how much this is so you don’t over-buy. This will help you to keep your inventory situation from becoming any more bloated.

So what about the surplus inventory that is aged and isn’t going anywhere now? This is the same as the few extra pounds that might be sitting around your hips — it’s one thing to stop the increase, but it’s another thing entirely to get rid of that unwanted fat.

Much like systemizing your buying with an open-to-buy program, you can systemize the aged inventory with a series of means to move it on. This can consist of a variety of options that work well for you on a regular basis to keep that aged inventory from clogging up your store arteries. I’ll talk more about these options in the next article.

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David Brown

6 Solutions to Short-Term Cash Flow Problems

Problems can arise if you aren’t vigilant about how your receipts and payments are tracking.

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MANAGING CASH FLOW can be an urgent issue for any business. Problems can arise if you aren’t vigilant to how your receipts and payments are tracking. Sometimes, you need a solution that can give you quick and easy cash to keep you going. Here are some of the best options you should consider.

1. Get short-term financing. If you feel the situation can’t be resolved without external help, then short-term financing, such as a line of credit, can see you through. It has the added advantage of being able to be repaid when the funds are no longer needed, keeping costs to a minimum.

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2. Long-term financing. This can be a longer process and will generally involve putting up assets as security for a more permanent arrangement. Although this may result in a larger sum of funding, be careful: your assets and debt should match in terms of time frame. Using long-term debt for short-term cash flow needs can be a recipe for disaster (as can short-term debt for long-term asset purchasing). Long-term debt should be used primarily to purchase assets that provide long-term returns to the business, not as a means of “tiding you over” until things get better. You need cash flow every day, but you only have so many assets you can draw against.

3. Speed up recovery of receivables. Although retail is normally a cash business, there may be some areas in which you run an account (e.g., insurance companies) or other parties with whom you have a good relationship. In these circumstances, it’s important to manage the repayment process. A discount can be an effective incentive for this.

4. Get a larger deposit. Your customers are often your best means of short-term funding. Increasing your deposit on custom jobs from 20 percent to 50 percent can add several thousand dollars permanently to your bank float.

5. Manage your repairs. Follow up consistently with repairs that aren’t collected. This is dead money sitting that is easily forgotten about because the items don’t belong to the store. You have an investment in those items you need to recoup.

6. Sell surplus assets. Inventory is often the first choice for doing this, but is there other equipment or assets you no longer need? If you’ve ever run a garage sale, you’ll know how much cash you can round up from extra stuff you have — the same may be true of business assets such as old desks, tools and display cabinets you no longer use. Don’t assume they are worthless just because you will recoup much less than what you paid for them.

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David Brown

4 Ideas to Liquidate Your Extra Post-Holiday Inventory

Extra inventory left over from December could hurt your 2019 sales.

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THE BUSY DECEMBER SEASON is now behind you — it’s time to relax a little and recover from the most hectic time of the year … or is it?
The start of a new financial year can still carry something of a hangover from the December festivities you’ve just enjoyed, and foremost in this is the issue of your surplus inventory.

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Unfortunately, this product can be a blockage to your ability to refresh with new purchases as it ties up cash flow that can be reinvested. Here are a few steps to follow in order to keep these items moving:

1. Determine how much of it there is. You can do this in two ways. First, print a stock list of items that you have more than one of. Second, print a stock list of all items over 6-9 months old. These two reports will show you the total dollar value of what is blocking your reorders.

2. Complete a physical stock take. Are these reports correct? Chances are that during the busy December period, there have been some errors in inputting, so you need to reconcile the value of the report with what you have on hand. In particular, check spare drawers for double-ups of your fast sellers.

3. Determine how you will liquidate this product. Is it time for a storewide sale? Can you offer a selection of these items in a “specials” showcase? What about your mailing list — could you make an offer to your best customers of an exclusive January deal on some of these items? Could you incentivize staff to move it on? There are a myriad of ways to promote shifting these items to your customers.

4. Don’t forget vendors and other store owners. Check with vendors in case they may want to replenish their own inventory. Often, they may be closed for manufacturing or receiving their overseas shipments during the early January window and may be happy to take back some items to fulfill other orders. Also, many of your fellow group members may be looking to re-stock some of these items, especially if they were part of a group promotion. Why not be their vendor for your own surplus product?

Fortunately, jewelry isn’t perishable, and you still have many opportunities to sell these items, but don’t allow them to sit around unattended. It can take a conscious effort to move these slower items on, so the sooner you start, the sooner you can get this money back into the bank.

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