Diminishing Margins on Branded Goods
I worked very hard to acquire the brand name jewelry that I have in store—but sometimes it frustrates me to death that the margins are miniscule. Most of the brands I carry dictate a price—KEYSTONE—and of course we have to abide by it because others in the area are carrying those lines as well. What frustrates me even more—I pay my staff salary and a commission of 2%…the item is only keystone—so the store ends up very little. Of course, we all know, for an independent, this is barely paying the rent—especially with today’s competition.
I thought I had to have these brands to bring in people—I hate to say it but, the jewelry industry is extremely behind when it comes to branded jewelry. None of the customers that come into my store know of any of the lines I carry—even with my advertising of their name. I find this to be very upsetting—I carry many of them because I love the product, and thought their advertising will bring customers to my door—this turned out to be untrue. The more time I spend analyzing my customers—the more I’ve learned that they just want a good quality product and many do not care who makes it or where it comes from.
Much of the product I purchased from Hong Kong vendors has lead to larger profit margins—more than I could even believe. Am I saying this is right for all independents—NO. I am saying don’t buy from designers—NO. I’m saying choose wisely. Buy good quality jewelry—branded or non-branded but from manufacturers and designers who recognize we need to make a well deserved profit.
To all the manufactures and designers out there—this start’s from the top—why haven’t you all kept suggested retail at keystone plus .3 or .4?????????? Are the designers and manufactures making more on their end and screwing us? What kind of product do you carry to keep those margins up?
Julian West Des Moines IA commented:
Both the jeweller and the brand share the task of ensuring lower
margin branded product turns at a higher velocity than non branded
higher margin merchandise. How does the brand quantify (opinion or
facts) to the retailer how much the retailer must spend on
inventory and marketing for the privilege of taking up valuable
real estate? When margin is low the turn should be higher (low
margin\\high turn or high margin\\low turn) if this is not the case
then one must question the current trend for offering branded
jewellery. Is the emperor wearing clothes? How will a jeweller
recover the lost business when their number one brand opens their
own designer retail concept store a few doors away? Jewellers
should be cognisant of certain brands whose hidden agenda is to use
retailers to establish their clientele then later open up their own
retail stores: examples would be Tiffany, Movado and David Yurman.
What are the intentions of Aaron Basha and Honora? There are brands
that are no more than wholesalers with a marketing strategy who
prey on weak retail merchants. In this situation one may be better
to buy direct form China and offer a value proposition that drives
a stronger GMROI. The onus rests upon good retail merchants to do
their homework and not succumb to smoke and mirrors.
Alan J Zell commented:
Shanu, Your problem is universal . . . that it costs more to do
business than just keystone costs. This is not a new thing. For
years jewelers have had to use 2.25 markup or higher on
“blind” goods. Blind goods, if you are not familiar
with the term, are those goods that have no direct relation to like
items. As one of the comments made, looking to overseas resources
as you are doing is a way to do this. Now, this brings up another
point. How much are you marking up the jewelry you’re
importing from Hong Kong? Can it carry a higher markup than you are
using. Most imported goods are blind items and if others on your
area are not carrying the same goods hece, addting 5% to 15% more
may not hinder sales. Think of it this way: if you were buying
these goods from an importer here in the US, what would the price
be? If you are buying these goods from the maker in Hong Kong, an
importer would get a better price than you get due to the size of
orders they place. But, most likely, they have to keystone their
cost to come up with their wholesale price which you would
keystone. So, if you used a 3X or 3.5 markup on cost, you would,
most likely not be out of line. However, there are other sources
such as the craft jewelers that are all around the US. Many show at
the jewelry show and at the major craft shows. There three keys to
profit – turnover by item if reorderable or by category of
goods if not reorderable – and markup and lastly, using the
80/20 Rule to your advantage (see article in the Business Articles
section of my web site – www.sellingselling.com) As to the
brand name giving you ONLY keystone markup versus a longer markup.
Well, if having these brands in your store are bring people into
you store, then they have done some of your marketing for you. So,
instead of giving you a higher markup, they have put that money
into their advertising which brings people into your store. Have
you thought about that? But, there is also something that your post
tells me and that you do not have a business plan or, if you do
have one, you are not keeping it up to date. If a 2% commission on
keystone goods is going to put you in a negative profit picture,
there may be other expenses that are more out of line than this.
For example, do you have too much inventory when you don’t
need it? Do you track rate of sale or turnover for each category of
merchandise in your store? Hope this helps and wishing that your
Xmas sales will be very good for you. Alan Alan J. Zell, Ambassador
of Selling, Attitudes for Selling azell@aol.com Winner of the
Murray Award for Marketing Excellence Member, PNW Sales &
Marketing Group Member, Institute of Management Consultants You are
invited to learn about programs and services and article on
business topics that affect selling at www.sellingselling .com
Pamela Meltzer commented:
I work very hard branding my product (Puppy Paws) BUT I also work
just as hard helping my retailers. I ask my retailers to Keystone
my product BUT I also have an exclusive with them and will not sell
to another in their area unless they decide to no longer carry the
product. It works out as a partnership.
Christopher commented:
You may make less money on designer goods, but if you are selling
more it makes up for it. Little Ceasers is a prime example,
undercutting their prices to $5 for a large pizza seemed risky at
the time, but now they sell so many it makes sense. There is a way
to make money with designers, sell their goods or more money! Sure
your competition may be selling it for less but consider the facts:
It's a designer so most likely not every Joe will have it. MSRP
means just that, SUGGESTED retail price. You can sell it for more,
are they really going to say "Sorry, you sold our product for more
money, we must pull the line?" If you have good salespeople, price
will not be a boundry. Consider this: Store A says this Ritani ring
is $1,500. Store B says this Ritani ring is $2,000 on sale for
$1,500. Most consumers will fall for the sale price thinking they
are getting a better deal.
Frankie commented:
I think the name on the front door is the only Brand that matters.
You can buy almost any designers styles for much less than the
branded product and sometimes even better quality. Offer it to you
customers for less and make more margin for yourself. Great
concept?
Vivek commented:
Hello you can always try non branded designs from manufacturers
overseas or lesser known brands, Customers always get attracted to
the piece by design then comes quality and cost. Certainly brands
do have an advantage but not all brands, the best is to carry lines
that compliment their clothes.
