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David Geller

What Inventory Reports Should You Run for Vegas?

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I like the GMROI (Gross Margin Return on Investment) reports. They show how many units were sold at each price point, thus showing which price points work the best. They also show how many of each piece you still have in stock. If you sold seven pieces in 12 months and still have 12, you have too many.

 

David Geller

Consultant to jewelers on store management.
 
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like the GMROI (Gross Margin Return on Investment) reports. They show how many units were sold at each price point, thus showing which price points work the best. They also show how many of each piece you still have in stock. If you sold seven pieces in 12 months and still have 12, you have too many.

Or do you?

You sold seven and should have seven, you have 12 which is five more pieces than you need. Maybe see if you can exchange those five for other lower price points or some other categories.

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But if you look at the report more closely to the age of the items (days on hand) that you have left, maybe almost all 12 are so old and that’s why they don’t sell. Out of style. (By the way, customers determine if they are out of style by not buying them, not by your declaration that “someone will buy it.”)

Age is a big teller of how well things move in the store. The Edge’s GMROI reports (Reports>Inventory>Performance By) are all telling. There are three reports there.

You first start with the Overall Store (age only). Once this opens make sure on the Type & Status tab that “Date Sold” is “365 Days.”

Pictured here is that report and its explanation. It’s divided into three blocks telling how long the item was in stock when it sold.

The three blocks are:

  1. Less than six months
  2. Six months to one year
  3. Over a year (which, by the way, includes over a gazillion years)

On almost every report I have run for a store, 65-75 percent of the entire inventory sold was less than six months old. The next block down is six to 12 months, and it typically drops to a terrible 5 percent.

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The last block is over a year old, and even though it might be 20 percent of sales you can see the inventory age is well over four or five years – that’s terrible! No other retailer in America keeps old stock and expects it to sell after it’s time has gone (one year for jewelers). By the way a good jeweler has a turn of “1.0.” Buy it at the New York January show, sell it by Christmas. This store (a real store by the way) has its total inventory over four years on the average. The correct amount of inventory to keep on-hand in a jewelry store is about the same as gross profit dollars. Sell a million dollars of inventory in a year, profit at $475,000, which should be the total inventory level, give or take.

Inventory over this number is too much, and half of that number easily shows up in your accounting as debt, accounts payables, credit card debt, lines of credit at the bank. Lower this and you’ll have less debt, more cash, fresher merchandise and more sales.
After running the big store by age report, then you’d run a report by category. It’s the first one to run under the “By Age” tab. Always run “365 days.” This will show you which categories sell best. Edge sorts it by highest dollar sales, and you look at sales by price point.

You might see in Bridal that by “units sold” your best-sellers are $500 to $2,500 retail. Look further down and you see while in the $3,000 to $6,000 category you sold a respectable 25 pieces (that’s two per month) that you have 40 pieces on-hand! You have 15 pieces too many, they don’t sell and you have 15 pieces more than you should stock. Somewhere in the universe is a master book, and last year it said “your jewelry store will only sell 25 bridal rings in the $3,000 to $6,000 range”. This book never lies. If you know that you have your crystal ball in these reports. Don’t stock more than 25 pieces. You can run this report monthly to see how things are selling, going back 365 days.

This “by category” report can tell you to either buy more in this price range, or it says “maybe we should stock balance some of these that are not selling.” So why are these not selling?

Many reasons. Remember that master universe book telling you how many units you will sell? It’s actually a sales report. Unless you expect sales to really take off, you should stock no more than you expect to sell in the next 12 months. Past history is a good gauge. Quite possibly you just over-bought in this price point. For us we buy at wholesale but the customer pays at retail. Prettier items are pricier, and we choose what we like too many times and those tend to be more expensive, but if customers can’t pay that much don’t buy that much.

The other reason they don’t sell? They are out of style or ugly now.

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After looking at good/bad or ho-hum categories, you then look at a category by vendor. Now we are getting down and dirty.
You don’t run this report as is. It’s too long and most of it is unimportant. If you go back to the “By Category” report you’ll see over many pages that there are only so many real categories to look at closely. Who wants to analyze vendors on page 9 with Sterling Silver tie clips? Just choose the top-selling categories by dollars.

Open up in the same area “Performance By” the one vendor. Here on the first General tab choose the category you want to look at. Run it 365 days back. So now you’ll see in a category (example: Bridal) which vendors are your best-sellers by dollars sold. Then you can see by GMROI (called “%GROI”) which vendors are best and their price points. You can easily see which price points sell best and the excessive amount of pieces you have in a price point and their age. These are the areas to chat with the vendor and see about stock balancing.

In this vendor report you might see a vendor is not doing well, and that’s one of many reasons why the overall category isn’t doing well.

So now armed with this newfound knowledge, what do you do with it? Here are some things to keep in mind:

When asking the vendor to stock balance, realize they can’t make a living exchanging one for one with you. Few will. You might have to give them back 20 pieces and buy 40 or 60. If you sell a lot of their merchandise over a year’s time this wouldn’t be a problem.

Some areas you see you have too many items in a price point. In that price point maybe a different vendor might do better. Maybe you just buy too much. Look at past history and keep that level. You can always order additional if it takes off.

It is always possible you might have to little of a category to give customers a good selection. Silly as this statement is, it’s true: “Five watches is not a good selection.”

Maybe you just can’t buy new styles; you’re stuck in your old ways. Just maybe taking the sales staff with you might give a new set of eyes.

Looking at what sells by price point (first report) you can see the dollars moving through the store. Maybe you should look at a style or vendor you’ve never tried before and buy into their items at your selling price points.

This can’t help you at a show, but maybe your sales staff can’t sell, especially higher-end pieces. Maybe your store location is bad or you’re advertising/marketing needs revamping. There are many variables why that ring didn’t sell. At the shows, all we can focus on is the items we sold and stock levels along with styling.

These reports are gold! They tell a lot and can help you. What they can’t tell you is style. Specifically, what’s out of style sitting in your cases, how good are you at picking things that sell?

I will say this, if you look at the first GMROI report by age (attached), and your sales of six months old merchandise is 65-75 percent that tells me you know what to buy. You are awesome!

So why do you have on the bottom line of the report so much excessive inventory? Because you’re lazy and don’t get rid of stuff over a year old!

From the GMROI report you can see sales by six-month period.

Try this on for size:

  • Items that are in the store, not sold yet and are less than 6 months old, don’t discount more than 15 percent. This stuff sells.
  • For items six to 12 months, discount 20-25 percent to help it move. Be very afraid that it might still be around after a year.
  • Discount items over a year old by 30-45 percent. Be very afraid that it might be here for 18 months.
  • If the item is over 18 months old, get rid of it by any and all means possible.

Dick Abbott, one of the partners in The Edge, told me long ago that history shows once an item reaches 18 months of age it has an 80 percent chance that it will still be in the store five years from now!

This reporting lesson is not just for three shows you might go to in a year. Run them monthly and keep on top of this. Doing this, reacting and being proactive on inventory will do this for the store:

  1. You’ll have less debt.
  2. You’ll have more cash in the bank.
  3. Your sales will increase because you keep in stock what customers want and get rid of what they have seen and turned their nose up to.
  4. Your store will be “electric” with excitement.
 

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