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Laurie Owen: Gross Margin Target

Stats to know for your store.

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51.5

What is it? Gross margin is the portion left of each sales dollar after you pay for merchandise sold, direct labor for craftsmen and repair people, as well as freight in and freight out. When stated in dollars, it’s known as gross profit. For the “high profit” group in our 2004 Jewelers Financial Benchmarking Study, the average gross margin was 51.5%. The rest of the companies only took home 47.2% of each sales dollar. For a $2.5 million dollar company, every 1% more in gross margin means $25,000 straight to the bottom line – assuming, of course, that they keep all other costs in line.

Strategy: The trick? Buy better, price better, lose less merchandise to five-finger discounts, and sell more of before it goes out of style. Simple? Yep. Easy? No. Know your target gross margin, and track it overall and by depart-ment all year long.

This story is from the March 2006 edition of INSTORE.

David Squires is the Group Editorial Director of SmartWork Media. He believes that the first role of business media is to inspire readers.

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