The four biggest issues that jewelers deal with today are excess inventory, aged merchandise, unrealistic price points, and a dearth of fast sellers in-house. At least, so says Abe Sherman, CEO of Balance to Buy, a proprietary software program that tracks and analyzes jewelry sales for about 100 stores. Sherman spoke in morning and afternoon sessions on Thursday, both presentations targeting ways to reduce inventory and better understand consumers’ buying behaviors.
Sherman encouraged retailers to abandon their long-standing “dogmatic assumptions,” such as the thought that inventory is an asset, that the profit and loss statement is the right tool for determining merchandise solutions, and, that entry-level price points should not be neglected. “Your store should have entry-level price points across all categories,” he urged.
Abe Sherman, CEO, Balance to Buy, speaks about inventory management in his Thursday morning seminar.
The new realities of bank pressures on businesses and decreased consumer spending, among others, should stir retailers to reconsider customer bases and competitors, and marketing and inventory strategies, including levels and prices. The No. 1 problem in branded stores is threshold resistance—consumers think much of the merchandise in store ‘looks too expensive to buy’, explained Sherman.
This is where entry-level price points enter the picture; you don’t want the first item that someone picks up in your store to cost $23,000. “Plan price points into every category,” he said. For example, Pandora, a low-cost silver line, is a favorite of consumers—and of Sherman’s—for its affordability and collectability. “I like [Pandora] because you can buy something for $25,” he said. “Sales are about building the relationship. Pandora gives consumers permission to walk into your store; the line says ‘we’re affordable’.”
Sherman advises looking at the individual transactions that drive your business. Many luxury store owners don’t want to sell items below $500 retail, but analyzing where you’re getting a return on your investment can help clarify the cause for less-expensive goods. After all, alternative lines help minimize the jewelry-store-stuffiness factor, and help build relationships, particularly with young customers early in life and as their wealth grows. “I’m suggesting that we understand how relevant [price point] is to our business,” he said.
Abe Sherman, CEO, Balance to Buy, spoke about understanding consumers’ buying behaviors in his afternoon seminar.
To eliminate excess inventory, Sherman relies partly on re-merchandising existing stock into new price points. “Before you buy anything new, maximize what you already own,” advised Sherman. “Buying new merchandise should be a small part of the [business] process,” he said. “Reordering should be a huge part.” Other prudent tactics include using gross margin return on investment to determine inventory levels, and, assessing gross profit margins by brand; some Balance to Buy users have dropped numerous big brands after a closer look at the latter because the dollars earned on case space could be maximized through carrying other lines.
Assessing perceived value of merchandise within product categories is also enlightening. For example, pull all diamond pendants out of cases and lay all items—new and aged—side by side, then look at their prices. “Now you’ll know why some pieces sit and others sell: perceived value,” said Sherman. “Understand your consumers’ behavior and work backward from retail to consider perceived value.”