The High Price of Showcase Space

June 1999

Managing:Showcase Space

The High Price of Showcase Space

To maximize profits, plan your displays down to the last inch

By Larry Johnson
Presentation Box & Display

You can take great care in choosing the jewelry you sell. You can evaluate showcase materials and dimensions. But unless you know how to put jewelry and showcases together, you're not making the most of your space.

Design experts have differing views on how to use showcase space – partly because of personal preferences, partly because different retailers need to project different images. Even more importantly, the use of retail space is an inexact science. Until now.

By taking industrywide sales figures and adding a few other calculations, you can figure out what type of merchandise should get how much space to reach your sales and profit goals. Sharpen your pencils and follow along.

Based on Jewelers of America's annual "Cost of Doing Business Survey" and industry averages from other sources, assume a typical independent jewelry store has merchandise sales of about \$750,000 per year. These sales take place in a 1,950-sq.-ft. store, of which 1,300 square feet is selling space. Sales per square foot are \$577.
Calculation: \$750,000 ÷ 1,300 = \$577.

Assume, then, the typical jewelry store has 12 showcases averaging 5 feet each for a total of 60 feet of showcase space (not counting the 5% of sales typically done through countertop units and wall cases). This means each linear foot of showcase space accounts for \$12,500 in sales in a typical independent jewelry store.
Calculation: \$750,000 ÷ 60 = \$12,500.

Most showcases are about 17 inches deep, yielding 204 square inches of selling space per linear foot. The harsh reality: a sales average of \$61 per square inch of showcase.
Calculation: \$12,500 ÷ 204 = \$61.

If that's not sobering enough, remember all the empty space – the corners, nooks and crannies – of those showcases. This dead space – in addition to the trim, risers and tray frames – can double the average sale per square inch. But for the moment, let's work with \$61. If the average ring tray is 8x4 inches (32 square inches), our typical store owner must sell \$1,952 in merchandise from that one tray each year. If the tray holds seven rings, that's \$279 per slot per year.
Calculation: 32 x \$61 = \$1,952, and \$1,952 ÷ 7 = \$279.

The JA survey claims typical annual turns of 1.3 times. This means each ring in those seven slots should sell for about \$215. And this figure is applicable only if the entire floor of the showcase is covered with trays. Cover only half of the available space and the selling price must double.
Calculation: \$279 ÷ 1.3 = \$215.

Difference in Merchandise Value
The picture changes when you determine your 6-ft. diamond case contributes more sales dollars per inch than your 6-foot chain case. Turns are greater with chain, but the average selling price is substantially less. The density of merchandise in these midrange cases is probably higher than seven rings per tray. Remember if the same 32-sq.-in. tray holds 14 rings instead of seven, the amount you must receive for each ring drops by half.

Sales volume isn't the only thing to consider. What about your profit? The JA survey says the average gross margin for a midrange independent jewelry store is about 50.1%. On annual total sales of \$750,000, our typical jeweler will gross \$375,000. The same arithmetic sequence brings you to \$31 per square inch per year gross profit. That 32-sq.-in. tray must generate \$992 in gross profit per year. Here are some suggestions to meet this challenge:

1. Evaluate your merchandise purchases in light of your sales-per-square-inch requirement. Before you decide to stock any piece of jewelry, consider how much you would net and how much space it would require. If it doesn't provide the profit you require per inch, don't buy it. It should be adequately profitable with 1.3 turns per year, or it must turn more often.
2. Consider adding more selling space. Look how the top three jewelry chains (which sell about \$1 million per store) do it. Can you add cases without damaging your image? Countertop displays normally have higher-than-average turns and take up no floor space. Can you use your walls as a selling area?
3. Consider adding new trays that hold more pieces. Don't get carried away and diminish the appearance of your store, but a tray that holds 12 rings instead of nine won't likely hurt your image.
4. Keep your cases replenished. Every square inch is valuable and must carry its share of the sales/profit load. A 12-ring tray with three empty slots places a 33% increase in the profit burden on the remaining pieces.

Larry Johnson is senior vice president of Presentation Box & Display in Pawtucket, RI. This division of International Packaging is directed at the needs of the independent retail jeweler. Johnson frequently speaks at industry gatherings on operational topics of interest to jewelers. He's also working on a book on jewelry display and can be reached at www.Interpak1@aol.com.

 To calculate your own sales-per-square-inch requirements, fill in this easy-to-use worksheet. A. Total amount of showcase sales for your store in 1998 \$ B. Total amount of linear feet of showcase C. Average depth of showcase (front to back) D. Multiply B and C to get total square inches E. Divide A by D to get the sales your store achieved per square inch of showcase space For 1999, change A to what you will need to achieve in sales to reach your profit goal. Divide A by D (or a new amount of selling space if you plan to make changes) and see how much you need to sell per inch this year. Good luck! ______________ ______________ ______________ ______________ ______________