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David Brown

To Sell More Jewelry, Look for This Key Signal From Clients

Stores are seeing reduced sales unit volume but increased average sale.

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The year ended well for most jewelers, according to our industry KPI results. December’s average sales performance came in at $371,019, up from a December 2016 result of $359,919 – an increase of just over 3 percent. This lifted the rolling 12-month average from $1,614,820 in November to $1,625,921, a 0.69 percent increase for the month (or the equivalent of annualized growth of 8.28 percent). This represented the third straight month of monthly sales growth compared to the equivalent 2016 month.

Unit sales for the month showed a drop of around 10 percent coming in at an even 1,000 units per store, on average, with average sales continuing to grow — up 12.8 percent from $296 per customer to $334 per customer.

Margins held firm at 47 percent with an increase in gross profit of 3.5 percent from $169,685 to $175,665. Of particular significance is the impact the holiday season has on total yearly sales. December 2016 represented 22 percent of full-year sales for the average store, with 2017 increasing to 23 percent.

We’ve emphasized several times the recent trend in reduced sales unit volume but increased average sale being achieved. Nowhere has this been more apparent than in the growth in diamonds being sold.

This area has been a contributor of double growth in recent years – an increase both in the number of diamond units sold and also the average value of what has been sold.

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Of particular note is the leveling off in results that is happening in this area. Average diamond sale values peaked in 2013 and 2014 with unit sales beginning to level off in 2017. It may be that stores who have depended on sales growth from diamonds could have to look for other means of continuing this level of growth during 2018.

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So what are the options? Growth doesn’t have to be dependent on any particular product – it can be more about the opportunity that an existing customer can give you to leverage further sales. The easiest sale to make is to a customer standing in front of you who has just said “Yes.” One of the key measures we have emphasized to customers to measure as part of their KPIs is items per sale – how many pieces of jewelry are involved in each transaction.

Too often we congratulate ourselves on getting a customer across the line without viewing it as a step in the sales process. “Yes” can be seen as the end of the sale, but it can also be seen as the beginning. We frequently speak about buying signals that customers provide you such as “Do you take credit cards?” but “I’ll take that” is also a buying signal and there is no reason to assume that the customer won’t want to spend more.

It’s not just about the holiday season. December is a great time to get foot traffic through your door. But let’s not forget: By the law of averages, one in every six people will have a birthday in the first two months of the year. Why should your customer have to go to the trouble or shopping again in the next few weeks when they can solve the birthday dilemma now? Likewise the one in six who buy for a birthday in November or December can save themselves the hassle of returning for Christmas shopping when the crowds are everywhere by picking up their holiday gift at the same time. This effectively means that between November and the end of February, you have a four-month window where one-third of gift buyers will also need to find another gift very soon. Do you need a better opportunity than that to turn the first “Yes” into a second sale?

That’s just one approach to increasing your average units per transaction – simply asking for an extra sale from customers at any time of year, whether it’s a gift or for themselves, will achieve results, but this requires training with your staff and the building of a habit. We all know how effective McDonald’s “fries with that” approach is, but are you doing this in your own business?

If not, you could be leaving money on the table.

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

Why You Need to Talk to Your CPA ASAP

A conversation and some planning today can minimize your tax burden tomorrow.

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A CONVERSATION WITH YOUR CPA now can help minimize your tax burden later.

With the end of the financial year fast approaching, now is a good time to start thinking about your end-of-year financial results. No one wants to pay tax, and certainly no one wants to pay any more than they must. Tax evasion is a criminal act that will see you finish up in court. Tax minimization, however, is a perfectly legitimate way of keeping your tax to the most you’re required to pay.

Too often businesses wait until the financial year has ended, determine their financial result, then wonder how they can reduce their tax bill. This can be a little like closing the gate after the horse has bolted. Many tax minimization strategies can be implemented before the end of the financial year, and now is a good time to talk to your CPA about some possible approaches.

Much of this strategy can revolve around the expenses you might be planning to claim. Larger investments in assets can often have their cost apportioned over several years, and there can be an advantage, if you are planning to make this investment, in undertaking it before the end of the financial year.

Another aspect to discuss with your CPA is how income is allocated. It’s important to take advantage of different tax rates for owners and partners in a business. Again, this decision sometimes needs to be made before the financial year has ended to avoid making retrospective decisions that may be frowned upon by the IRS.

Before you talk to your CPA, try to have a handle on how your financial year is going, as this will make a difference to what they may recommend. Your accountant will want to know how the year is tracking and what performance you are budgeting on for the last month of the year. Obviously, some constructive estimating, especially around the busy December period, will be needed. Your CPA will then be able to best advise you of what actions will help your financial year-end before the 31st of December.

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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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