Following a period of sluggish results, April has seen an impressive turnaround in results for the average U.S. jeweler. Same-store sales were up from $84,260 for April 2013 to an impressive $103,418, an increase of 22 percent on the equivalent month. This resulted in an increase in the rolling 12-month sales figure from $1,348,394 to $1,367,552, an overall year-on-year increase of 1.42 percent. If this continues on an annualized basis, we’ll see sales growth of over 12 percent for the year.
NB Total sales figure excludes repairs
As the data shows, growth has come about from both an increase in sales volume and a rise in the average sale with number of units sold increasing by 12.8 percent from 304 units to 343. The average value of each sale has increased from $259 to $270, a rise of 4.2 percent. Margins have suffered during this time, dropping 8 percent from 48 percent to a low of 44 percent, the lowest margin measured since we began recording data. Despite this, gross profit was still a healthy $45,800, an increase of 13 percent on April 2013’s figure.
The positive result has meant the annual rolling sales figure has now rebounded back from the lower figures of recent times to be back to the levels of July 2013.
If we are to be critical of the results, then the obvious area to look at is margin. This is probably the area most often misunderstood and can be one of the greatest leakages of money for any business. Had margin been maintained on the April sales results, there would have been a profit of $49,640, or an additional $3,840 to keep the bank manager happy.
So how could margins be improved? It’s sometimes easier said than done, and there will no doubt have been a portion of the sales that only happened because the margins were reduced. But what if the margins had been 48 percent … or even better? Would it have been possible to achieve a better overall level of profitability?
The question comes back to how margin can be protected, and this can be approached in a number of ways:
- Ask enough for the item in the first place. If you’re getting pressured for margins from discount-hungry consumers, then make sure you have put enough margin on the item before you start. It’s all very well to say you already have the best prices but the truth is consumers don’t always believe you. Starting at your best price simply means you are about to discover what it means to go below your best price, or lose sales in the process
- Look for small ways to make margin improvements. We have spoken a lot about the 80:20 rule in the past and never is this more apparent than with your inventory. Twenty percent of your products give you 80 percent of your sales, so why not focus on maximizing your margin on just these items? If they are a good seller, then ask more for them. Chances are you will get it, and imagine the impact a few more dollars on 80 percent of your sale items will have.
- Don’t forget the cents. I know a store that made a point of adding $0.95 onto the price of everything under $200 in their store. The impact was an additional $6,000 in net profit during the year. A small step that can soon add up
- Try saying no. You’d be surprised at the response. Around 50 percent of people will accept it if you say you can’t do any more off the price. For those who push, you can decide to bend a little, but imagine the impact of losing half your discounting overnight. For those who are persistent you might be able to offer an alternative slow-selling item or negotiate some terms such as cash up front that will offset some of the cost that discounting will incur for you
Protecting your margins is about being creative. Looking for these opportunities can make a huge difference to your bottom line and the satisfaction you gain as a business owner.
David Brown is president of the Edge Retail Academy, an organization devoted to the measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact inquiries@edgeretailacademy.com or phone toll free (877) 569-8657.
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