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Real Deal

Real Deal: The Case of the Program Predicament

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BY KATE PETERSON

Editor’s Note: Real Deal scenarios are inspired by true stories, but are changed to sharpen the dilemmas involved. The names of the characters and stores have been changed and should not be confused with real people or places.

Joel Hammond and his twin brother, Tom, liked to think of themselves as the “poster boys” for brothers as business partners. Joel is the creative one – the great salesman, while Tom is the organized, detail guy. In their Hammond & Sons store, management tasks are pretty clearly divided along interest and ability lines with Joel handling the sales floor, customers and the store’s six salespeople and Tom handling vendors, bankers and financial and administrative tasks). They invariably approach a problem in totally different ways, from totally different perspectives – but have learned how best to communicate with each other and how to combine their unique talents to benefit the business they inherited equally from their father nearly five years ago. Both Hammond brothers struggled to remember all of that, as they found themselves knee deep in a disagreement that threatened to mirror one of the old playground knock down drag-outs they used to have as boys.

Inventory management, in the form of both planning/buying and front-end merchandise control was one of the biggest issues Joel and Tom had to deal with when they took over the store. Dad was an old school jeweler and had never been much of a planner. He bought whatever his vendor reps recommended, whenever they came through town. He never had any sort of computer or point of sale system in the store, but he insisted that he “just knew” what was selling and what his customers would like. When a piece had been around too long, he simply put it back in the safe for a while to make room for something new, in the belief that bringing it back out later would give it a new lease on life.

Even though they’d grown up in the store, neither Tom nor Joel was prepared for the stockpile of old goods they found after their father’s untimely death. With the help of a well-known business transition firm, the guys held a remarkably successful inventory reduction event that coincided with a showroom renovation. As a side benefit, they developed a great relationship with Aaron Daly, the industry-veteran manager who ran their sale for the transition firm, and came to rely on him for expert counsel as they reconstructed their family business. Aaron helped them settle on a widely used POS system for the store, and also recommended strongly that they engage the services of a professional inventory management company as they began to build their operating budgets and construct merchandising strategies for the new Hammond & Sons Jewelers.

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Joel chafed at what he saw as the restrictive recommendations of the inventory management experts, even though he clearly saw the value of the right mix with the right turn to the store’s bottom line. He especially disliked the group’s fondness for “basic programs” – those price-labeled trays that offered stock basics like solitaires, colored gemstone items and diamond stud pendants and earrings in a variety of sizes and qualities. He didn’t like the “mall look” they presented in the showcases, wasn’t comfortable with visible pricing, and resented what he saw as a lack of imagination in the displays. He went along with the plan, though, largely because the programs helped Tom keep essential items in stock, and because he had to admit that the trays made finding things at-a-glance a lot easier.

Things moved along fairly smoothly for several years, with the store growing in volume and profit. Programs became a staple in the store, and as Tom felt more comfortable with the company’s inventory management position, he gave Joel a bit more flexibility in buying what he considered “discretionary” pieces. In turn, Joel began to re-create what he saw as the unique Hammond & Sons look in the store, much to the delight of his sales associates. Then came the busy Saturday before last Mothers’ Day …

Becky Davis, one of the store’s newer salespeople, showed a customer the diamond stud earrings from the $1,299 slot in the store’s step-up program tray, and after putting them back into the case, showed him several other pairs. The customer settled on the $1,299 pair, but when she went back to the tray to get them, Becky couldn’t find them. The $1,299 slot was empty, and the earrings were not in the group lying in the showcase waiting to be put away. Frustrated, the client left. Becky was certain that the client didn’t pocket them – but no one could come up with an explanation for where the earrings went. Tom was furious, and made sure Becky knew it. He made her do a complete inventory of diamond stud earrings, including back stock, before she was allowed to talk with another customer. After several re-starts, Becky completed the inventory, only to find out that the $1,299 earrings hadn’t been in stock for several weeks. Another pair – with a tagged retail of $1,995, had been in the $1,299 slot. Under what Joel saw as Tom’s browbeating, Becky acknowledged that she never looked at the tag when she showed the earrings – that she just assumed that “The price on the stupid program display was right.”

After the store was closed, Joel laid into Tom for what he felt was his unnecessarily harsh treatment of Becky. He reminded Tom that price issues surrounding the program displays were a concern of his from the start. Tom responded with a flat out demand that Becky be fired – for losing the customer and creating a bad impression of the store, for carelessness in not checking the tag before showing the earrings, and for her “snotty response” to her mistake.

The BIG Questions
What is the store’s responsibility when a visible price on a piece of merchandise is incorrect? Do the advantages of visible pricing outweigh the potential for confusion? How should Tom and Joel resolve the situation at hand? Should Becky be disciplined in some way? Should she be fired?
Comment below (please leave your name and store) or at [email protected]

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