Jewelers need to reconsider their diamond inventory in terms of what their consumers want, Malcolm Alderton of ARMS (Advanced Retail Management Systems) said at a seminar on “Balancing Your Diamond Inventory” at The JCK Show ~ Phoenix 2005.
“If you are not managing your inventory, you are costing yourselves sales and money,” he said. “Having enough stock is one thing. Having the right inventory is another.”
“We have to stop selling diamonds, and start selling solutions,” he continued. “Count the people who come through your door and then count the sales you have made. Look at the ratio, and you will be horrified. Customers are walking out because you cannot fulfill their needs.”
He advised jewelers to do a sober evaluation of their inventory, because “every single item is either making or costing you money.”
“If it sells quickly and makes a good margin, that’s good inventory,” Alderton said. “If not, it is sitting on the shelves and choking your cash flow. If you buy a diamond today and say, ‘I’m happy to sell this in five years,’ look at the lost opportunity … where else you could have placed that money. That diamond is costing you a lot more than you paid for it today.”
He advised that jewelers have to ask themselves: “Do I have salable inventory, or do I not?”
“Why does inventory get old? Because people don’t want it. Don’t assume you know better than your customers do. I see jewelers putting their old inventory in prime position. Why are you insulting your customers this way? They have already told you they don’t want it.
“No more than 10 percent of your inventory should be 18 months old,” he continued. “Inventory over 18 months old is unsalable and needs to be replaced. Make that your first priority. You have a lot of different options—breaking it down, clearing it out in sale.”
On the flip side, jewelers need to quickly replace items that are strong sellers.
“If you replace something that sold quickly, you have no guarantee it will sell again,” he said. “But I can tell you categorically the chances of reselling a hot seller are very, very high.”