GMROI

By Frank Dallahan, Publisher -- JCK Online, 5/1/2004 2:00:00 AM

My first experience in the jewelry industry was a raucous ArtCarved sales conference under the guise of checking out the conference center for a Lenox China sales meeting. (Lenox had purchased ArtCarved a year or two earlier.) It was a wild meeting for one who came from a very controlled organization like Lenox where things were orchestrated and timed to perfection. ArtCarved meetings were freewheeling discussions from both the podium and the audience. The topics were covered, and the pros and cons were debated—sometimes heatedly.

At a subsequent ArtCarved sales conference, the topic of Gross Margin Return on Investment (GMROI) was presented. In its annual statistical survey of the retail jewelry business, Jewelers of America had included data on GMROI. At Lenox, there was continual battle with retailers because the Lenox markup was 45% vs. 50%. Sound a bit like Rolex today? The reality was that Lenox contributed more gross margin dollars to the retail community because of an inventory turn factor that was substantially higher than that of the competition. The debate with the retail community continued until Lenox changed its markup structure to 50%, finally achieving keystone and making the GMROI even better!

Applying GMROI to the wedding-ring business was a smart and necessary move. ArtCarved's marketing concept was a stable display inventory of 24, 36, or 48 women's and men's wedding rings in sizes 6 and 10. Maintaining the assortment was crucial to this marketing program because of jewelers' tendency to sell down the assortment to where the style and selection elements of the presentation were severely impacted. To offer a sensible alternative to the sell-down, ArtCarved offered a unique marketing program: The jeweler was assured that discontinued styles would be accepted for exchange (for size) or return within six months of discontinuation.

This resulted in a significant positive impact on the jeweler's business—and on that of ArtCarved.

Part of JCK's mission is to help retail jewelers manage their businesses more effectively. Beginning at The JCK Show ~ Las Vegas, JCK will launch a new initiative for retail jewelers—"Profit Mastery," a joint program of Business Resource Services (BRS) and JCK. One key element is a focus on the relationship between good buying practices, inventory turn, gross margin, and retail sales effectiveness—the fundamentals of GMROI.

But "Profit Mastery" is more than GMROI: It's an approach to the business of running a jewelry store as opposed to just knowing about jewelry. Industry analyst Ken Gassman noted the difference between the two concepts at the CEO Forum at The JCK Show ~ Phoenix. "Profit Mastery" will pick up where the CEO Forum left off.

The jewelry business is one in which topics are still hotly debated. The topic of improving your business performance is one that "Profit Mastery" will directly address.

fdallahan@reedbusiness.com