That aging inventory isn’t lovable.
It’s costing you money.
Here’s how — and when — to get rid of it.
Don’t get the wrong
idea.
We at INSTORE
love your dogs.
At least, we love the adorable pets you like to employ as store greeters.
But our affection does not extend to the dogs (aka aged inventory) you likely harbor in your kennels (er … cases). They stunt your business growth, choke your cash flow and eat up space that could be used for displaying fresh inventory and proven fast sellers, experts say.
Outdated inventory inspires strong feelings in the jewelry industry.
Karen Fonger, owner of 58 Facets Jewelry in Alhambra, CA, refers to them as rodents, rather than dogs, because she likes dogs. “I have a bin full of ratty rats,” she says. “ I have no idea what to do with them. I’m thinking of giving them to a charity auction.”
David Brown, president of the Edge Retail Academy, calls the problem the plague of the jewelry industry. “As soon as you turn your back on it, it sneaks up on you again,” he says.
The Edge’s research indicates that the average stock turn in the industry is 0.7, which means it’s taking about 17 months to sell through the product, a rate he characterizes as “pretty horrible.”
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“The aim should be to get to at least 1 stock turn, selling through in 12 months,” Brown says. “Best practice would be more like 1.1, which would mean about 10 months.”
Some advisers say if stock isn’t turning, you’ve got too much inventory. But that’s not always the case, Brown says.
The problem is that you have too few sales in relation to the inventory you’ve got. “Maybe it’s too old, which means customers have nothing fresh to see, and that leads to lack of confidence among the sales staff,” he says.
So, you may not have too much stuff; it may just not be the right stuff, especially if it’s dated. And if you have old inventory, it’s costly to maintain — from insurance to staff time spent cleaning and moving it around. And, more important, you should be making a profit on everything you bought every year. If you’re not, that’s costing you your income.
David Geller of Jeweler Profit says do everything in your power to unload any and all items in your store that are over 1 year old.
"And by everything in your power, I mean everything,” Geller says. “At almost any cost. The thing that kills more jewelry stores than any other is the fact that they have on hand more items than they can physically sell in one calendar year. I call it arteriosclerosis of the inventory. Correct that problem and your store will have a long, healthy life.”
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On average, 68 to 75 percent of products are sold within the first six months. If you buy something that doesn’t sell the first year, not only is it unlikely to sell, but it has cost you money that first year with no return on your investment.
Geller compares it to being promised an income of $200,000, but not getting that amount till the fourth year, meaning your real annual income is $50,000. It’s the same thing if you have to wait four years for your jewelry to move. “Can you wait year after year after year to get paid in your job?” Geller says.
Even so, the concept of dumping dogs is a bone of contention at Hannoush Jewelers, admits manager Mary Jo Chanski.
“Some feel inventory is money, and others feel that if it’s not selling and we’ve had it for years, discount it and get rid of it,” she says.
Can you wait year after year after year to get paid in your job?”
david Geller
Matthew Clark, inventory manager for Spath Jewelers in Bartow, FL, is in the latter camp. “So many people think ‘I will not make less than keystone on something,’” Clark says. “But you have to look at every item on a case-by-case basis, which is a lot of work. You might have something in the showcase and you know that item should sell for $4,000. But if I can sell it for $3,000, and if I can buy another one and sell it for $3,000 and then maybe sell the next one after that for $4,000, I’m happier with that. I’m still going to make the margins I want to make.”
It’s natural to hope for the best after you’ve made a financial and emotional investment in your inventory.
Still, Sally Furrer, merchandising expert for the Edge Retail Academy, cautions against relying on hope as your main strategy. She advocates a multi-pronged approach instead.
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The three pillars of that approach include sales, spiffs and stock balancing, which should all be done simultaneously and consistently.
Other strategies retailers employ include reinventing, donating and consigning.
Furrer says if you can’t outrun your dogs using these strategies, you should take a hard look at how you’re buying and reordering jewelry. When you introduce a new line, pay attention to the analytics. If you’re seeing fast turn initially that begins to die off, you may not be reordering fast sellers quickly enough.
Brown says if a piece has not sold in 39 days, consider that an early warning sign.
“People are staggered by the shortness of that period,” he admits. “At that point, it’s not so much that the customers have rejected it; it’s that the sales staff has rejected it. They get beat up over it and they stop showing it.”
What should you do at 39 days?
“Make sure it doesn’t look old,” Brown says. “Give it a sparkly, new ticket. Make sure it’s not relegated to a corner of your store. It needs to be identified internally so salespeople can bring it out, and not stuck away in a cabinet with other dogs. Make sure it’s being presented with enthusiasm.”
Michelle Shetler of Shetler-Wade Jewelers in San Antonio says she takes a very aggressive stand with inventory, considering it in the aging danger zone at just four months.
The store’s annual January sale targets such inventory, allowing her to refresh merchandise. “Our customers expect to see something new and fresh every time they visit,” she says. The January 2014 sale was their best ever, enabling them to clear out 75 percent of what they had wanted to move. The rest they stock balanced with vendors against significant spring orders, or put in a special case, which they maintain for price shoppers.
The three-day event was given a “detox” theme and featured a juice bar, chair massages and daily live drawings for spa treatments. The theme subtly referenced their need to move out old inventory, while also tying in the focus on health and well-being resolutions in the new year.
Five years ago, when the store began focusing on aged inventory, it wasn’t unusual to have 3-year old inventory in the sale; these days little stock is more than six months old.
The strategy shift has led to improved revenues all year. By mid-November 2014, revenues had already equaled 2013’s total.
Read on to find out some of the best ways to move slow sellers … and, if all else fails, to dump those dogs!
SPIFF IT
Offer your staff incentives before your customers.
“If there is any discussion about discounts with a customer, say, ‘I can’t give you a discount on this piece, but if price is really important to you then I can give you a discount on this piece here,” Brown says. “You should not ever negotiate on fast sellers or on new product, and salespeople should be given tight controls on how to sell aged product, if need be. Also, introduce aggressive spiffs.” For example, if a salesperson sells it at full price, they can earn 10 percent of that as commission.
Have the sales staff show every customer the old stuff during any presentation, Geller says. Incentivize staff to add on old items to any sales of new items, especially during holiday seasons.
Geller recommends doubling or even tripling the salesperson’s commission on old stuff. “This will help the staff to pull that ‘doggie’ out of the case and re-romance it all over again. If you usually pay 5 percent commission, it would cost you $5 to sell a $100 dog,” Geller says. “But wouldn’t it be worth it to pay $10 or even $15 to make sure that dog goes away?”
When Clark took over inventory management at Spath Jewelers, five years ago, he was convinced some of the stock had been around since the store opened in 1986. He couldn’t prove it, though, because their retail management software went back only a decade. So the oldest stuff had had its “record expunged,” he says.
One strategy he now employs to fight the problem is awarding $50 once a month to the staff member who sells the oldest piece.
“Everything is new to a new employee and they will try to sell everything,” Clark says. “But if they’ve been here a while, and they’ve seen a piece for two years, they tend not to be excited for it. But now they hunt for those old pieces.”
“When we started it, the item was upward of 2,000 days old, and now, after doing that for about 12 months, the average age of the old inventory has gone from 2,000 to 750 days,” he says.
To make the contest more fun, he makes Old West style wanted posters, with a picture of the winning piece and the words, “Spath Jewelers’ Least Wanted — This ugly piece of jewelry was brought to justice by sales associate (insert winner’s name). “It’s fun to see something like that go,” Clark says.
Clark wants sales staff to have leeway on negotiating prices, but he wants price reductions to make sense to the customer so pricing doesn’t seem arbitrary. “We might have something that costs $1,000 and everyone hates it, and once it is priced at $700 it’s the best thing since sliced bread. So why not sell it for $700? But discount it so it makes some sense. Sell it without the chain for $700 and it makes more sense to the customer. Otherwise, it looks like your prices aren’t real.”
TRADE IT IN
If it’s not selling, it’s doing you no good and it’s doing your vendors no good, Brown says. But if you are aggressively reordering fast sellers, your vendors would probably be happy to stock-balance, whether or not you have a prior agreement to do so. When Fonger is working with vendors now, finding those who will stock-balance one for one is a big priority.
Furrer says it’s important to try stock-balancing as soon as possible, preferably during the first year of the jewelry’s life, because after that the vendor will consider it dead inventory and won’t be able to sell it, either, and will most likely have to resort to melting it down. Although returning one slow seller for one or two new items is ideal, even a one-to-three stock-balance ratio can help sometimes.
Geller says every retailer should ideally have a signed receipt stating that if it doesn’t sell within 12 months it can be returned to the vendor. “Many vendors will say if you return $20,000 worth you have to buy $20,000,” he says. “Others say you have to buy twice as much as you return. But if you’re looking to get rid of these people because the jewelry isn’t selling for you, you can’t just return it to them.”
TAG IT
Brown says try the spiff route for 30 days and then identify the slow mover and put a special tag on it — but don’t isolate it. When people come in looking for a ring, they want to see all the rings together, Brown says.
Furrer says sale signs work best if they list the old and new prices, or even just the new price, rather than a percentage off. Shoppers seem to have become immune to percentage signage, since it’s used so frequently in department stores.
Geller says, “If you’re one of those people who doesn’t like big “Sale!” or “50% Off!” signs all over the place, simply lower the prices of your old items. Take a $1,400 item, retag it at $899 and maybe put a small tag on it that reads “Special Price!”
If that doesn’t work, then do put it in a sales case at 30 to 50 percent off. “If it gets past six months and it hasn’t sold, the likelihood of it selling goes way down,” Brown says.
Bridal should not be obviously on sale, since bridal is the prime reason customers are willing to splurge. There’s a stigma attached to clearance bridal jewelry. So, if you mark it down, do it subtly, by simply retagging it at a reduced price and not calling attention to it.
PACKAGE IT
Group old and new things together, says Geller. Take a 3-year-old emerald diamond ring and place it next to that brand new emerald bracelet with a sign, “Buy the emerald bracelet, get the matching emerald ring at 50 percent off.” You’ll only get your cost back on the ring, but you just used it as bait to sell a $395 bracelet. And your total sale is now $640, rather than the $395 you would have gotten for the bracelet alone.
Or package old things together for holiday gift-giving, Geller says. Fill a basket with a half-dozen or so old items in their boxes. Add a sign: “Christmas Treasure Basket.
Shop now for your daughters, nieces, secretary, everyone. Basket contains: gold chain, Seiko leather strap watch, silver necklace with amethyst, 14K hoop earrings.
Separately: $487; Basket price: $388.” Use old items exclusively, or mix old items with newer merchandise.
DISCOUNT IT ONCE
If you have sales too often, shoppers will ignore them. But if, like Nordstrom you discount once or twice a year, the sale will be more credible.
Valerie Naifeh of Naifeh Fine Jewelry in Oklahoma City, OK, holds two sales a year and two sales only. One is a 2½-week-long storewide sale every August when “super old” items are deeply discounted, some as much as 75 to 80 percent. It features a sneak peak party for clients before it’s announced to the public. They also ask their top suppliers to send additional merchandise for the August sale. The other inventory reduction sale takes place the third week of January to move out items that didn’t sell over Christmas.
If you have inventory left after your sale, take it apart, Geller says. Keep melee for repairs and send the gold to a refiner. Ask them to hold the credit for you. Then, for the next several months, use the credit to buy your findings from them to improve your cash flow.
MAKE IT SPECIAL
Many retailers isolate inventory they have singled out for price shoppers. Goldstein’s Richard Frank in Mobile, AL, keeps it in a display case that is also easily accessible.
“Then, when that one special customer comes in who has to have a discount, these items are available and special,” he says.
Julie Brashier of Julie’s Jewels & Gifts does something similar, waiting to see if customers are style- or price-shopping before bringing out something she’d really like to get rid of. “If they are price-shopping, I say this is a discontinued or a one-of-a-kind piece and I can price it lower than other things in my case.”
REDESIGN IT
Clark of Spath Jewelers often has the store’s dogs remade. “We always try to reinvent the item. Can a bridal piece change into a colored-stone fashion item? Can earrings turn into two pendants? Can a pendant turn into a ring? We have three jewelers on site, so we also try to get creative to either get our money back on a dog or make a profit in a new way on the item. We avoid scrapping it at all costs. It feels like giving up and failing.”
For bridal, Clark has discovered that putting a CZ in a semi mount can speed up the selling process greatly because customers have a tough time figuring out what a semi mount will look like without a center stone.
“It’s amazing how hard it is to visualize,” he says. In addition, he’s sold many gold mountings with CZs in them. Some bridal customers are more interested in the setting style than the stone, don’t necessarily want a solitaire, and may even be happy with the CZ if the ring has the right look. Or they may put a diamond on lay-away and wear the engagement ring with the CZ until the wedding day.
“We mounted a CZ in a mounting, just to show what it would look like with a stone. It had been here five years and it sold within five days,” Clark says.
AUCTION IT
Geller recommends holding a silent auction for charity. Starting bid on each item is 5 percent below cost. A description card next to each piece lists the retail price. Let shoppers bid on the items for a week. At the end of the week, on a Saturday, people line up to see what they’ve won. If they win it and still want it, they buy it. Geller says he knows of a store that has moved 90 percent of its old stuff this way while also enjoying huge sales days. If it still doesn’t sell, scrap it, he says.
OTHER OUTLETS
We avoid scrapping it
at all costs.
It feels like giving up
and failing.”
matthew clark
Alisa and Jeff Unger conceived Retail Jewelers Overstock, (retailjewelersoverstock.com), as a channel for retailers to turn slow-moving stock into cash. They accept jewelry on consignment and travel to trade shows with it. Regional demand and taste can vary, so taking the show on the road or posting it on their new website often leads to quick sales.
➜ Worthy (worthy.com) offers a white-label auction service for retail jewelers, diamond traders and luxury watch collectors. If the firm approves a jeweler’s application, it will pick up the items, clean them, appraise them, and make them available on a live online auction to qualified buyers.
➜ White Pine Trading (whitepinediamonds.com) buys branded and designer goods, estate jewelry, watches, or entire collections. “If there’s a great deal of it and it’s diamond-intensive, we’ll certainly come visit the store,” says director of jewelry Michael Lebowitz.
➜ Wilkerson, (wilkersons.com) a national jewelry liquidator, can help you put together a major clearance sale, if you need to move out most or all of your inventory — such as if you’re moving.
➜ Brian McCall, owner of Midwest Jewelers and Estate Buyers in Zionsville, IN, is enthusiastic enough about selling jewelry on eBay that he has five staff members devoted to the pursuit full time. About 60 to 70 percent of his store’s inventory is bought over the counter. Certain items might go on eBay right away while other eBay candidates have been sitting in his showcase a while. McCall says eBay has worked well for him, in particular for moving name-brand and silver goods.
Want to Make a Lot of Money?
Give Away Dead Merchandise
By David Geller
This idea came from a jeweler I visited who’s a great marketer and understands what “dead merchandise” is. Anything over 1 year old is dead. Real dead is anything over 3 to 5 years old. Decomposing inventory is anything more than 7 years old.
You may be like this jeweler and me — raised on the bench and with a love of gemstones. We buy gemstones because they are beautiful and we hope we sell them for a great margin. We hope. We pray.
I’m betting you have boxes and trays of loose colored gems you’ve had for centuries. They don’t move. This is what this jeweler did, and he had a fantastic weekend:
by giving away dead merchandise, the store did over $88,000 in just four days.”
➜ He gathered all his old stones to give away, from $10 amethysts to $800 emeralds. Yes, even emeralds! (Sorry to break it to you, but a 5-year-old emerald is worthless. If it were to sell for $800 for a profit of $400, then selling it just once a year would bring in $2,000 over five years (5 x $400) in profit. Selling it for $800 today effectively loses you $1,200. So just give it away.)
➜ He put each gem in a small plastic foam case, tagged on the back with the gem’s name, weight and retail price.
➜ He went out and bought gift bags and gift paper to stuff inside the bags so they would stand up while also looking very colorful.
➜ He dropped one boxed gem in each bag (although you can’t see it, it’s lying at the bottom of the bag).
➜ He placed these bags with their gems on the showroom floor on the customer’s side right in front of the showcases. They looked like poinsettias at Christmas time.
➜ This jeweler had a lot of blank mountings and remounts that had had their center stones removed. He polished them and put them in the showcase along with a retail price.
➜ Then he sent out a mailer to his customer list, saying something like this:
“Because we love you as a customer we are giving away free gemstones this week, Wednesday through Saturday. No catches! They are all in grab bags.
Everything from $10 amethysts to $1,000 emeralds, rubies and sapphires. You get one chance to grab a bag and see what you’ve been given. Again, no purchase is necessary, we just love our customers. Only while supplies last.” (Of course, with Facebook/Twitter/email blasts today you could do even better.)
The placed was mobbed. Many people just grabbed a bag and left. Some took a bag, looked at the stone and said “Citrine just isn’t me.” And the store let them try just once more.
A whole bunch of people decided to sit down and have their free stones remounted. The store had some mountings in the case and also did some custom designing.
The result? By giving away dead merchandise, the store did over $88,000 in remounting and design jobs in just four days.
But of course you don’t have any old gems, do you?
