WE HAVE ASSISTED MANY retailers in assessing their bridal data and sales performance, and it is amazing how many of our retailers are genuinely surprised at what the data reveals. It is imperative to review the data because often, the perception is far removed from the actual data.
We generally find several key areas that require immediate attention.
First, their margin is far below the industry standard, and second, their on-hand inventory doesn’t align with their sell-through data. That’s a real problem.
Retailers will often have many loose diamonds that could be classed as outliers. That is, the goods might be awfully “pretty,” but they are not what sells on a day-in and day-out basis. There are many reasons why this might occur, but it is usually due to trade-ins and over-the-counter buys.
Our retailers love off-the-street buys because they feel they’ve just landed a great bargain. However, you buy for the sole purpose of selling, so no matter what price you paid for the diamond, if it doesn’t turn, did you get a great deal?
When it is a part of your overall strategic plan, off-the-street buys can be smart and lucrative, but there should be an exit strategy in place in case the inventory does not sell. Having access to data shows a retailer why missing their best-selling loose diamonds, while sitting on numerous non-performing stones for years, is an extremely costly proposition.
For instance, our data shows that loose diamonds, semi-mounts and completed engagement (bridal category) represent 22.2% of our $2B in aggregated annual gross sales across our base of independent jewelers. That’s too important a category to not be managed properly and, to do so, demands a full understanding of the data.
Despite that, many retailers have a love/hate relationship with loose diamonds. We need them, we love them, but we often struggle to manage that business in a manner that delivers profitability.
Unfortunately, diamonds have all too often devolved from an emotional sale, celebrating a monumental occasion in our customer’s lives, to a commodity transaction, often sold by paper.
During this devolution from symbols of love to paper, we’ve been assaulted with internet options, certified diamonds becoming the thing, and now lab grown diamonds; all driving down margins and making the bridal business much less fun than it ought to be for all concerned.
Even in this COVID world, we’re seeing independent retailers with solid sales increases versus previous year driven by motivated traffic. Our industry stats on loose diamonds show the overall gross margin holding steady at 36% for the last three years and the average retail sale climbing over the last three years, from $5,790 to $5,982 to $6,128.
We selected the overall performance stats to see how loose diamonds fared by gross margin and average retail sale regionally.
- Midwest: average retail sale is up to $5,461 and gross margin is 38%, down from the previous year of 39%.
- Northeast: average retail sale is up to $6,631 and the gross margin has climbed to 33%, up 1 point from the previous year of 32%.
- South: average retail sale is up to $6,387 and the gross margin is 36%, up 1 point from the previous year of 35%.
- Southeast: average retail sale is up to $6,558 and the gross margin is 35%, down 1 point from the previous year of 36%.
- West: average retail sale is up to $6,513 and the gross margin is at 38%, down 1 point from the previous year of 39% which was down 1 point from the previous 12-month period.
It was interesting to note that the Northeast region had the highest average retail sale but the lowest gross margin while the Midwest and West regions tied with the highest gross margin of 38%.
Why should this data matter to you? If you’re a Midwest retailer and your overall loose diamond gross margin is just barely 30%, you should make it your goal to find out why you’re missing out on potentially 8 points of gross margin in one of our industry’s higher ticketed items and, most likely, one of your best performing categories.
You might feel the need to compete with online pricing, or you’re giving your staff the freedom to discount or perhaps your markup is simply too low. Regardless, you need to determine what those reasons are and take steps to improve performance.
When it comes on online pricing, there is absolutely no reason to match pricing. According to the big data companies such as Forrester and Bain & Co. 80-85% of consumers prefer to purchase luxury items in brick and mortar.
In fact, I would argue that when a customer walks in with their online pricing, they’re asking you to give them a reason to buy from you. If their entire decision was based on price, they would have completely bypassed you and made the purchase online.
According a recent survey by Salesforce, 72% of luxury purchasers want to walk out with their purchase. In other words, they want to touch it, feel it, and most importantly buy it from a human, especially someone who takes the time to build a rapport with them.
If the reason you’re missing out on margin is because you and your team are discounting, well that can be strategically addressed with a great ongoing training program on how and why to discount less. Although you won’t change your discounting culture overnight, you can make huge strides and recover some of those profit dollars by merely discounting less often.
If it’s because your markup is too low, well that’s the easiest one to address. Adjust your markup, reprice and retag immediately.
When it comes to managing your bridal performance, start with your data. Do a complete analysis. Look at industry and market trends to uncover areas of opportunity. Identify what’s impeding your bridal category’s profitability and layout an aggressive plan of action to remedy this.
Managing a successful bridal business is like a good marriage itself; hard work, but so very worth it in the end.