Connect with us

David Brown

Why Warren Buffett Places So Much Trust in Emotional Currency — And How Your Store Can Get It

It’s time to create a “moat” around your prices.

mm

Published

on

HE’S LONG BEEN CONSIDERED America’s foremost investment guru, and given the returns achieved by his company, Berkshire Hathaway, it’s easy to see why. Understanding what Buffett considers to be a good business can shed light on how to improve your own business strength — to put, as he calls it, “a moat” around it to ward competition away.

Hearing his theory on business value is well worth doing, whether it’s his annual Berkshire Hathaway meeting or other snippets of advice the media shy guru may drop. It’s his take on business value from a commission investigating the financial crisis back in 2009 that recently caught my attention.

Rooftop Burglars Take Everything from Jewelry Store
Headlines

Rooftop Burglars Take Everything from Jewelry Store

Video: No, I Won’t Help You Commit Fraud … But Thanks for Throwing Water in My Face
Cullen Wulf

Video: No, I Won’t Help You Commit Fraud … But Thanks for Throwing Water in My Face

Video: When Should a Jeweler Fire Someone?
Jimmy Degroot

Video: When Should a Jeweler Fire Someone?

When asked about his investment in the ratings agency Moody’s, Buffett had the following to say:
“If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business. I’ve been in both, and I know the difference.”

Buffett went on to discuss his belief that good management can’t save a bad business, but a good business can continue no matter what management does.

Moody’s represented a case in point. Because of their duopoly with Standard and Poor’s as the benchmark of rating agencies, they effectively had a business with a moat around it. Even if a competitor came in offering ratings at half the price, both Moody’s and Standard and Poor’s had created a business that would not suffer. Price increases or decreases would make no difference.

In a jewelry industry where pricing competition often seems to be the only thing that customers are concerned about, it raises the question, “Can a jeweler successfully build a pricing moat around what they offer?” Moody’s and Standard and Poor’s perform a task that others can do but no one else can do it with the prestige of having their name attached — and that makes all the difference.

Advertisement

On the face of it, it may seem difficult to achieve this level of power when selling a commodity that can be purchased elsewhere — yet jewelry is an emotional buy. By definition, you should also be able to achieve an emotional moat around the association of your name to the process. Tiffany has achieved this — however, is what they are offering any different to what you or other jewelers able to provide? Does the customer gain any form of tangible benefit, or is it a feeling based on emotion?

Just because it’s intangible doesn’t mean it’s not real. The ability to increase prices and have your customers accept it because you are the only feasible option is priceless — the number one thing Buffett considers when investing.

If it’s worthwhile for Mr. Buffett to consider it for his major investments, it’s worth you considering for yours.

 

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

Advertisement

SPONSORED VIDEO

Gene the Jeweler

When Gene the Jeweler Speaks, His Employees Listen

In this episode of Jimmy DeGroot’s Gene the Jeweler series, Gene has a simple request for his employees. The good news is that they follow his instructions. The bad news is that they follow a bit too literally.

Promoted Headlines

David Brown

How to Make The Most of Your Department Reports

Allocating the appropriate time, money and space to each department is critical to success.

mm

Published

on

DEPENDING ON THE TYPE of business you run, chances are your sales will be coming from perhaps 30 or 40 different departments across your store. Some, such as bridal, are more obvious. Others, such as silver earrings, may not make a big difference — yet it’s important to understand the contribution from each department and where it fits into the overall performance of your store.

A department report in order of sales will reveal the biggest contributors, and it should come as no surprise to know that the top 5 or 6 departments might be contributing 50 percent or more of your storewide sales. What might surprise you is which departments make up the top 5 or 6. Take a guess now and then compare it to your actual results; chances are you’ll see at least one department that wasn’t in your estimate.

Podcast: When Is It Time to Let an Underperforming Employee Go?
JimmyCast

Podcast: When Is It Time to Let an Underperforming Employee Go?

Podcast: This Advertising Copywriter’s Last Minute Pitch Changed <em><noscript><img src=
Over the Counter

Podcast: This Advertising Copywriter’s Last Minute Pitch Changed Everything

Podcast: Millennial Gem Trader Dave Bindra Steps Into ‘The Barb Wire’
The Barb Wire

Podcast: Millennial Gem Trader Dave Bindra Steps Into ‘The Barb Wire’

Knowing this will enable you to allocate your resources towards these areas. These resources are, in no order of importance:

1. Time
2. Money
3. Space

Time refers to the energy you and your staff devote, both physically and mentally, to this area of your business. You might have a love of watches and enjoy spending time checking out the latest models available, but if watches represent 3 percent of your sales, this category doesn’t warrant a lot of effort.

Money will predominantly be spent on two fronts: one is your inventory, while the other is marketing. Is the inventory you carry in each department relevant to that department’s contribution to your sales and profitability? If not, consider reallocating it. Are you running ads for an area of your business that is neither a significant contributor to sales or profit? Do you allocate your marketing spend by area based on what product you are advertising? It’s not unusual to find a business spending 90 percent of its marketing on diamonds when that category represents only 30 percent of sales.

Space refers to how you allocate the merchandise within your store. Are your best sellers front and center? If your store is 50 percent bridal, does your merchandising say this when your customers walk into your store?

Review your departmental contribution and determine how you are allocating your resources of time, money and space across each area. Make a decision to rebalance each area as required so it more closely aligns to your store’s performance. The exception to this is if you are hoping to grow a particular area, in which case your resources should align with your anticipated results and performance.

Continue Reading

David Brown

What Business Owners Can Learn from Abraham Lincoln’s Failures

He would never have been in position to succeed if he hadn’t failed first.

mm

Published

on

WE ARE CONDITIONED BY society to fear failure. Our education system defines performance as “getting the answer correct.” This result-based measurement is an effective method for assessing a level of knowledge, but it doesn’t encourage the hands-on learning process so necessary to develop true understanding and retaining of information — nor encourage the discovery of new knowledge.

Sadly, this aversion to getting things wrong starts at an early age and continues our whole life. Despite the copious number of successful people who have failed spectacularly before achieving success, we still attempt to follow a path that has more to do with avoiding ignominy than with enjoying the benefits of stretching ourselves into uncharted territory.

Podcast: When Is It Time to Let an Underperforming Employee Go?
JimmyCast

Podcast: When Is It Time to Let an Underperforming Employee Go?

Podcast: This Advertising Copywriter’s Last Minute Pitch Changed <em><noscript><img src=
Over the Counter

Podcast: This Advertising Copywriter’s Last Minute Pitch Changed Everything

Podcast: Millennial Gem Trader Dave Bindra Steps Into ‘The Barb Wire’
The Barb Wire

Podcast: Millennial Gem Trader Dave Bindra Steps Into ‘The Barb Wire’

Abraham Lincoln never feared failure — he could little afford to. His list of unsuccessful endeavors in both business and politics would have forced a lesser man to give up. Here are just some of his “failures.”

1831: Failed in business.
1832: Ran for state legislature — lost.
1832: Also lost his job — wanted to go to law school but couldn’t get in.
1833: Borrowed some money from a friend to begin a business, and by the end of the year was bankrupt. He spent the next 17 years paying off this debt.
1838: Sought to become speaker of the state legislature — defeated.
1840: Sought to become elector — defeated.
1843: Ran for Congress — lost.
1846: Ran for Congress again — this time he won — went to Washington and did a good job.
1848: Ran for re-election to Congress — lost.
1849: Sought the job of land officer in his home state — rejected.
1854: Ran for Senate of the United States — lost.
1856: Sought the vice-presidential nomination at his party’s national convention — got less than 100 votes.
1858: Ran for U.S. Senate again — again he lost.
1860: Elected president of the United States.

What sort of president would Lincoln have become if he had not had his failures? Had his life been a succession of unbridled achievements, would he have had the fortitude or fighting qualities to drag the country through its toughest challenge ever? Or would he have been ill-prepared for the physical and mental battle the presidency required? I believe his history of failing provided him with the steel and determination he needed to see the job through. Had he not “failed” so many times, he would not have become the man he was — and the history of the United States may have looked sharply different.

Learning to fail helps you overcome the fear of testing your boundaries and ultimately helps you grow and succeed. When it happens, embrace it for the lessons it can teach.

Continue Reading

David Brown

9 Ways to Unload Dead Inventory

When old inventory clogs the cash-flow arteries of your store, here’s how to clean it out.

mm

Published

on

LAST MONTH, WE talked about the process of controlling what you buy and what you consume with your inventory. Much like dieting — where your buying and consumption dictate how many pounds you put on — the process of clearing extra inventory is much like shedding that extra weight that works its way onto your hips and stomach. You have to hit the exercise gear when the weight goes up, and the same is true with your surplus inventory. If you don’t move it on, that inventory will sit around your business waistline, clogging up your cash-flow arteries and damaging the health of your business.

Podcast: When Is It Time to Let an Underperforming Employee Go?
JimmyCast

Podcast: When Is It Time to Let an Underperforming Employee Go?

Podcast: This Advertising Copywriter’s Last Minute Pitch Changed <em><noscript><img src=
Over the Counter

Podcast: This Advertising Copywriter’s Last Minute Pitch Changed Everything

Podcast: Millennial Gem Trader Dave Bindra Steps Into ‘The Barb Wire’
The Barb Wire

Podcast: Millennial Gem Trader Dave Bindra Steps Into ‘The Barb Wire’

Here are some of our best suggestions for shedding those surplus items that are no longer helping your business health:

1. Run a sale. The obvious answer is to have a major clearance, but care needs to be shown here. Some businesses live constantly in sale mode to the extent that it harms the ability to generate sales at any other time. Use this sparingly and be creative in how you promote it.

2. Have a clearance area. Less harmful than a full-on sale to your bottom line, this can allow you to drip out items that are not going anywhere at full price.

3. Talk to your vendors. In some circumstances, vendors will be happy to exchange items that are not moving for you. This, however, will depend on the item and their ability to sell it elsewhere. Don’t expect this as a right. This needs to be done in a way that is a win/win for both parties involved.

4. Talk to your fellow retailers. As the old saying goes, “One man’s trash is another man’s treasure.” Product that may not sell in your store can be fast-selling items for other retailers.

5. Try online. Giving your product a different exposure via your web store may help it move.

6. Reposition the product. It may be good product that’s in a bad location. Have you rearranged your store displays so the product is in a more prominent place? It may be in a spot that customers don’t access easily.

7. Melt it down, make it back up and move it on.

8. Bundle it up. Often, those slow-moving items will benefit by being combined with other pieces. Maybe slow items could be put together as a special, or you could combine a slow item as a deal to go with a full-priced fast seller.

9. Use as a contest giveaway. Of course, if it’s particularly bad, it won’t encourage contest entries!

Managing dead inventory is a fact of business. You can never eliminate it completely, but regular “inventory exercise” is needed to make sure the fat in the system isn’t causing trouble to your business health.

Continue Reading

Advertisement

Advertisement

Advertisement

Subscribe


BULLETINS

INSTORE helps you become a better jeweler
with the biggest daily news headlines and useful tips.
(Mailed 5x per week.)

Latest Classifieds

Most Popular