What you buy and when you buy it can have a profound effect on profits
Who cleans the jewelry at your store? The new staff member? The owner? The people who should clean your jewelry are the people who buy it your customers.
You clean the dogs, the items that sit in the showcases and dont sell, says Don Greig, president of Advanced Retail Management Systems USA. Greig presented a seminar on When and How To Buy at The Professional Jeweler Show & Conference in Las Vegas. Let your customers handle and buy the jewelry, he advises, because that will tell you what you need in the store and what you need to reorder.
Goal: To Make a Profit
He explains that many jewelers lose focus. They forget theyre in business to sell love and to make a profit. Selling jewelry shouldnt be a money pit; it should be your method of achieving financial goals.
Greig advocates learning the power of the average sale price. As recent Jewelers of America statistics point out, the average jewelry store in the U.S. sells 5,000 items each year. From this statistic, you can begin to plan your profit strategy which should start at increasing your average sale price.
If the average is $100, the store sells about a half-million dollars in merchandise annually. If the average increases to $200, the store is a $1 million retailer. To reach $5 million, your average sale needs to be $1,000.
Greig says you can achieve substantial increases in average sales if you pay careful attention to what you buy, why you buy it and how quickly you reorder.
You need to determine what sells best in every department and reorder it until customers decide they no longer want it, he says. The customer calls the shots.
Know what percentage of sales comes from each department in your store. With this knowledge, you can effectively allocate purchases and balance your inventory throughout the year.
If, for instance, 8% of your sales are from diamond earrings, this is $80,000 in sales for a $1 million store. Greig says the correct amount of inventory for these sales is $20,000. Unfortunately, the average store in the U.S. carries more than twice this amount most of it in excess inventory that produces few profits.
Here are a few other statistics your store ought to have available to create a usable buying plan:
u A list of what does not sell.
u The return-on-investment for each department.
u Your markups.
u The average sale prices in each department.
How can you buy merchandise intelligently if you dont know or understand the power of the average sale? he asks.
Learn About Old Inventory
Greig also advises you to know which pieces in your inventory are aged and not likely to sell. If you remove this inventory from your showcases, it will demonstrate how little genuine stock is in your store. If a piece of jewelry doesnt sell in four months, theres a good chance it will never sell.
He reports about 6% of unit sales in most stores account for half of total store sales. So when planning to buy new items, look to this 6%, try to increase the average sale price in all departments and fully develop the departments with the highest average sales.
Another resource to develop is your network of suppliers. Do you work with them to develop a buying plan that quickly replaces sold items but doesnt saddle you with unwanted and unsalable items? You should, he says.
When a customer asks Is this all youve got, dont think it means you need more inventory. The customer really means, You dont have what I want.
Greigs final points summed up:
u If you can create buying programs where 40% of your stock are fast-sellers, theyll become 90% of your sales.
u A corollary involves your sales staff. In the average store, the top salesperson sells twice as much by dollar amount as the second-highest salesperson. Why? Because the best salespeople dont sell the lower-priced merchandise, says Greig. The high average-ticket price is what makes the salesperson, and the store, profitable.