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David Brown

These Jewelry Stores Reported Sluggish Sales for October

Plus: something to think about.

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OUR SAME STORE DATA for October 2018 again showed a drop in sales performance across the stores being measured. Monthly sales of $102,602 were down 4.85 percent compared with the same period last year. Average sale of $399 for the month was an increase of 8.7 percent on last year’s monthly average retail value of $367. Sales volume, however, continued the decline, dropping from 262 units to 218, a drop of 16.7 percent, which has dragged the overall performance down.

Our rolling 12-month figures show a decline of 0.33 percent in the result from last month, representing the ninth straight month that numbers have fallen across the data pool. Year-to-date sales figures have now declined from $1,629,755 in January to $1,574,687 at the end of October, a drop of $55,000 in sales. Given a profit at keystone this will have reduced the average store’s bottom line, assuming all other costs stayed consistent, by over $27,000 during this period.

As the numbers above show, keystone is becoming increasingly harder to achieve, with margins consistently being below 50 percent over the last three years of data. Within these figures is also another story. When you look at the result achieved for October 2018 of 48 percent margin, the breakdown shows the smaller stores under $1 million in sales achieving 50 percent margin and those up to $3 million in sales per year achieving 46 percent. The largest stores have a margin of just 41 percent for the month.

“Well, they must be selling more high-priced diamonds at a reduced margin,” I hear you say. Certainly the bigger stores are achieving a much better average sale in diamonds, which will be contributing a squeeze to margin where there are higher ticket items. However, the best-performing stores for diamond sales, as a percentage of overall store sales, are stores doing between $1 million and $3 million, with diamonds representing 55 percent of total sales. Next are stores with less than $1 million in sales, which are making 53 percent of their sales from diamond product. The biggest stores are only seeing 46 percent of their sales coming from diamonds.

Where the biggest difference lies is in the area of watches. Here’s a look at the numbers across all stores.

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As the chart shows, the bigger the store, the more significant the percentage of sales for watches, with the resulting impact on margins that watches can have compared to jewelry.

Although smaller stores can congratulate themselves on maintaining a better margin and doing well in diamond jewelry, this does raise the question, why are smaller stores not achieving a bigger percentage of sales in watches? Although we don’t carry ongoing data on the average sale from watches, a quick glance at October results does show an average sale for larger stores of $4,000 versus $1,200 for medium-sized stores and just $360 for smaller stores. The elite brands carried by the bigger stores are making a difference in this area.

20 percent of sales is a significant amount. Not every jeweler can carry a top-brand watch, or would want to, but it does show that the watch market is not all about discount stores and cheap knockoffs. Where do watches fit into your store strategy? Are you assuming they are a market you can’t get a larger slice of? Should you be reviewing your strategy in this area?

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

Here’s How to Succeed at Succession Planning

Be sure to consider these four areas to prevent unnecessary conflict.

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MONEY CAN BE A sensitive topic to talk about. Generally, people don’t like to discuss it even in the privacy of their own home. Yet, not talking about your financial situation can make a significant difference in how much of your wealth is passed on to other family members. Whether it’s a business being passed on or the wealth that it has created, careful planning is required.
Government legislation is constantly evolving in this area. It’s important to set up for the passing of wealth and to ensure this is compliant with the current laws.

Here are some things to consider:

1. Inform family members of what may be coming their way. Give them the opportunity to prepare for the financial impact an inheritance may have. More than one family has been undermined by a sudden arrival of wealth they didn’t expect and couldn’t handle. Such preparation can help them to plan their ownership and tax structures to handle it effectively.

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2. Be sure to involve key stakeholders. Be selective about who is involved in the decision-making process, the administration and the final beneficiaries. The process can be daunting and potentially alienate family members and cause unnecessary conflict.

3. Ensure a single unified vision. Particularly where parents are concerned, it’s important to ensure a consistent message is communicated about the ongoing management of the family business. If there is to be a successor, there needs to be an agreed upon approach as to who it will be and how it will be handled.

4. Don’t wait too long to pass on ownership and responsibility. If the business is to go to the next generation, a grooming process is recommended to ensure the transition is smooth and the successor has done their “time.” You should always be prepared for an unexpected event that may speed this process up faster than you intended — it’s better to be over-prepared in this area than under-prepared.

Whether a business is being passed on or the wealth that the business has created, it’s important that the vision is clearly communicated regarding how the legacy will be passed onto future generations. Sharing this vision can be an effective means of making sure the succession plan goes as smoothly as possible.

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David Brown

These Stores Have Seen Lower Silver Sales in the Face of Better Overall Results — How Do Your Results Compare?

Check out The Edge Retail Academy’s latest results.

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ROLLING 12-MONTH SALES for June averaged $1.897 million, up 1% from the June 2018 result of $1.879.

Storewide sales for the 12-month period averaged 6,118 units per store, down 5.5% to 6,474. Average sale per item increased from $290 per item to $310, a rise of 6.9%.

With sales increasing $18,000, gross profit grew from $859,000 to $871,000, a rise of 1.37% on the back of markups, which improved from 84% to 85%. This again illustrates how even a slight increase in margin can have a significant effect on bottom-line profit.

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We’ve spoken a lot through these results about the decline in units sold across store data, and this is most obvious when looking at the performance of silver sales. Our 12-month data through June shows average store sales of $99,000 for silver items, down from 2018’s figure of $113,000 (a 14% decline) and 2017’s figure of $136,000 (2019 result represents a drop of 27% from 2017). Unit sales match this decline with sales of silver items at 926 items, down from 1,210 in 2018 (a fall of 23.4%). The drop in units has been offset by a healthy increase in average sale of silver items, with the average increasing from $94 to $107 between 2018 and 2019 – a rise of 13.8%.

Based on this information, the typical store has seen silver’s contribution to overall sales decline from 7.7% to 5.2% in the last two years. How has silver been for your store? If silver sales have declined, has there been a trade-off in other areas? Clearly most stores have seen a rise in sales while silver has dropped, indicating that they are more than making up for it. Is this the case with your store? If silver has dropped but you haven’t made up for it elsewhere, its time to look at your store’s performance.

Inventory

Does your store still say silver? Have you continued to focus on an area that has become less profitable? Print an inventory by department list and determine what percentage of your store product is silver. Does it represent a greater percentage of your overall inventory than you are selling?

Silver will generally have a faster stockturn that most other items, so you should expect your percentage of inventory to be significantly lower than your percentage of sales in this area. If it’s not, you may be saying “silver” to your customers when you should be saying something else.

Marketing

What message are you sending your customers? Are you focused on the right type of product in your marketing? Are you still emphasizing cheaper silver product when the market wants something else?

Staff

Have your staff moved on from the bead market in what they are attempting to sell? Are they skilled up to sell higher-priced items? If the average sale in most stores has increased by 20% in the last two years, then your staff need to realize the performance goalpost has shifted for them, too. They need to be increasing their average sale to keep pace with the general trend – but they won’t know to do this if you don’t tell them. Print a salesperson performance report for your staff and compare it to a similar report from two years ago. Who has lifted their average sale? Who is still at the same level? Be prepared turn potential into profit to discuss this with them. They may not know what has been happening, and they cant change if you don’t tell them.

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David Brown

Here’s How to Make Your Biggest Sale Ever … Again

To reproduce your highest-priced sale, you have to show the right product.

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CHANCES ARE YOU easily recall the single highest-priced item that you’ve ever sold in your store — the adrenalin rush of seeing it appear on your terminal or as a line item in your reporting or maybe a deposit on the bank statement. The excitement of moments like this makes retail worthwhile.

Assess how it happened. What were the circumstances of that particular sale? Did you consciously create the opportunity, or did it fall in your lap?

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A better question is, have you consciously tried to reproduce it?

Perhaps you thought you got lucky and it was a one-off sale. Yet, the reality is that if you did it once, you can do it again.

Let’s assume the item was a diamond ring, as that’s the most likely scenario. Do you have anything in your inventory at that price range? Perhaps it was a custom piece made for someone; nevertheless, chances are you do not have a similar piece displayed in your store.

The challenge is that your current inventory influences your customer’s perception. If your diamond rings range between $10,000- $20,000 retail, your customer will see you as a store that offers fine jewelry up to $20,000. A customer who is willing to spend $50,000 may not see you as the place to shop, causing you to lose these potential luxury sales.

We are not suggesting that you rush out to buy a lot of $50,000 rings. Instead, work out an arrangement with one of your top performing vendors that will allow you to showcase these higher-priced items. Remember, if you hope to sell a $50,000 ring, you may need to show a $70,000 one to get the market interested. Customers will seldom spend more than you show them.

The best way to reproduce your highest-priced sale is to make sure your inventory includes those price points and to prominently display them in your store.

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