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David Brown

Where Did All the Customers Go? For These Jewelry Stores, September Sales Were Down

Here are some ideas for solving the problem.

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This month our KP data across all sample stores showed a drop, with rolling 12-month sales figures down by 0.33 percent on August 2017 results. Average sales YTD are at $1,598,493, down from last month’s $1,603,719 for the 12 months ending in August.

September yielded average store sales of $104,429, down $5,226 from last year’s September result of $109,655 – a decline of 4.7 percent.INSTORE DavidBrown NovCharts

The table above compares data for the month of September across the last three years and reveals a declining trend in sales being achieved. Since 2015, September store sales have dropped from $112,239 to $104,429 – a decline of $7,810, or just under 7 percent. The most disturbing factor is the rate at which unit sales have dropped. 419 units were sold on average per store in 2015, and this is now down nearly 39 percent in just a two-year period. The increase in average sale achieved from $247 to $368 is not sufficient to make up for this decline.

Although sales are down 7 percent, the decline in margins from 46 percent to 45 percent has seen profit for September drop by over 9 percent from $51,648 to $46,675. This is a significant drop – in most cases costs will not have declined in this time and, in fact, will have probably increased in the two most significant areas, rent and wages.

The increased cost of running a store is now being borne by lower gross profitability. (The above figures don’t allow for expenses other than cost of goods sold.)

A worrisome number is the percentage contribution to overall sales. Despite the decline in numbers, the contribution to the year’s results is unchanged, showing that this shortfall is not being made up elsewhere and that the annual data is most likely following the trend. 

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As the chart below, which shows annual sales units, indicates, this trend has been happening for some time.

In fact, September 2015 represented the peak in a small rise that had begun in mid-2014 and began to taper off from early 2016. It would be easy to dismiss the decline on a lower level of sales in the bead market, but as the graph shows, the impact of this fall off was happening back in 2013 – the larger decline in the graph. For a time, jewelry stores were seeing a bounce back in units sold, which has now reversed during 2016 and 2017.

The question is – where have all these customers gone? Are they spending elsewhere or just not spending at all? Do they still visit? If they are unrelated to a drop on the bead market, then what has caused them to stop buying so much?

You can start with a door counter. Any measure of sales has to begin with the question, “Are the customers coming in and not buying or are they just not coming in at all?” Your door counter will show a drop in foot traffic if the customers have disappeared. If your door count is still being maintained but the unit sales have fallen off, then this shows an internal issue that needs to be dealt with – most likely your inventory selection or your staff.

So if customers have stopped coming in, how do you combat this? There are two options:

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  • Get more customers back into your store.
  • Sell more to the ones who are already coming in.

Let’s address the second issue, because it can be the cheaper and easier one to solve. I’ll begin with a question: Who is more likely to purchase from you — someone who doesn’t know you or someone who already shops with you? The answer is, of course, the second one. Let’s take this further. Who is more likely to spend with you — a regular customer whom you are marketing to at home or a customer who is standing in front of you in the store? Again it’s the second due to the proximity and interest in your product at that point in time.

Let’s take this idea to yet another level — who is most likely to spend with you, a customer in your store who hasn’t made a purchase yet or a customer who has just bought? Logic would suggest the first one; after all, they still have a need to be satisfied. However, customers who have overcome their resistance to buying are more likely to buy again, and offering them another item while their “defenses are down” has a high chance of being successful.

Don’t believe me? How frequently do you see this in other businesses? McDonald’s add millions of dollars with its add-on of fries, and Amazon generates a large percentage of its sales by suggesting other items that customers who bought “this product” have also bought.

So if you want to improve your unit sales, start with the customer you already have in front of you.

You may be surprised at the response.

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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