Business Report

Six Ways to Improve Retailer-Supplier Relationships

Your dealings with suppliers should of course be as cordial as possible, but you also need to protect your interests. Here are some useful tips for avoiding misunderstandings and improving your relationships at the same time.

  1. Don’t accept late or partial shipments. If the jewelry arrives after a special event or after the Christmas season, you may not want it at all. And paying shipping for partial orders can add up to big bucks.
    Elizabeth Parker, chief financial officer of Curt Parker Inc. in St. Louis, has a creative solution. When she orders jewelry, she attaches a sticker to the order form on which the vendor states the credit terms and initials agreement to Curt Parker’s requirements: “Ship complete. We pay only one shipping charge” is one such requirement. Another one is “Cancel order if not shipped before ___ date” (typically within 12 weeks).
    “If you absolutely need something by a certain date, the supplier needs to know that,” says Parker. Of course, if a supplier can’t agree to the delivery terms you require, you’ll want to know in advance. This process helps both parties decide whether they want to do business together. Large jewelry chains do this as a matter of course, but smaller stores may not realize they have the clout to get these terms.

  2. Create a visual order book. Sometimes a supplier sends the wrong merchandise, but if the invoice simply lists item numbers, you might not notice. Before Parker’s firm places an order, she requires a “visual order” from the supplier, which can take the form of a photocopy, fax, e-mail image, or sketch of the goods. A visual order is especially helpful with vendors for whom English is not the primary language. These images are attached to the purchase order and placed in a notebook titled “On Order Now.”
    When goods arrive, they’re screened first against the visual order. Then, each item is compared against a quality checklist, and defective items are returned immediately (see Curt Parker’s checklist on the facing page).

  3. Clarify return policies in advance. Though most jewelers hope to sell every piece they buy, it’s important to clarify in advance what will happen if the product doesn’t move. As designer Paul Klecka, president of Paul Klecka Inc., Chicago, said at a recent AGS Conclave, “The more astute approach is to assume that, for whatever reason, something will not sell and to plan ahead for that. Discuss options for handling this inventory in a way that will benefit both parties.”
    Return policies vary widely and should be written on the invoice or attached to the order. Don’t rely on verbal assurances, because by the time you need to return the jewelry, the sales rep may have moved on, or the supplier may not have records of the agreement. Keep that original invoice so that you’re assured of a smooth return process, especially if you purchased the jewelry two or more years ago.
    Return policies typically cover the percentage spent on the order that the jeweler could get back if goods need to be returned. Most of the 40 retailers and suppliers attending Klecka’s presentation agreed that 10% would be a fair amount for both parties, but there was support for 25% to 50% return policies. Fortunately, there is typically some flexibility built into return policies.
    The return ratio—the value of new goods ordered compared with the value of old goods returned—is another negotiating point. The retailers polled at Conclave favored a one-to-one dollar ratio. But the suppliers polled preferred a three-to-one ratio in the supplier’s favor. Thus, to return $5,000 in old goods that didn’t sell, a jeweler would have to order $15,000 in new goods. Suppliers feel this ratio is necessary to make up for the costs associated with lost or deferred profits on the returned goods.

  4. Consolidate vendor relationships. The risk of using too many vendors is that it puts you in a weak bargaining position with any one supplier. “You’re taking your economic clout and spreading it too thin,” says Parker. “But, if you concentrate on your best suppliers, you can get better credit terms, a better price, and a stronger relationship with the salesperson who can give you better service.”

  5. Get a JBT rating. A strong credit record can help a jeweler negotiate attractive credit terms with suppliers. Many jewelers assume they don’t need to be rated because they have long-standing relationships with suppliers. In fact, nearly two-thirds of the 36,000 jewelers listed in the Jewelers Board of Trade “Red Book” are not rated. But, warns JBT president Nat Earle, “as the number of suppliers in the industry decreases, many firms don’t want to go to the trouble of working with unrated jewelers.”
    Not having a rating can stall the process of placing orders with a new supplier because the supplier needs to research the jeweler’s credit history. It can also be a problem if a longtime supplier is acquired by another firm that manages credit risk more conservatively. Many jewelers balk at providing the financial information that JBT uses to compile its ratings. But, says Earle, ratings are “a vehicle that can make your life easier.”

  6. Prepare a 30-second introduction. Jewelers shopping a trade show should be ready to introduce themselves and state their interests succinctly. The introduction should include your name, your firm’s name and location, its credit rating, how long the store has been in business, and the lines or pieces you’re interested in. Some jewelers even prepare a one-page store profile with this basic information about the store, as well as bank and credit references, to give to prospective suppliers. This saves a lot of time and reflects favorably on the jeweler’s business savvy.

Quality Checklist for Jewelry Orders

Most suppliers require returns associated with defects, shortages, or errors within five to 10 days of shipment. You should immediately scrutinize shipments that arrive at your store to make sure you’re accepting the right items into your inventory. Here’s the quality checklist used by Curt Parker:

  1. Confirm that the order received matches the order that you placed—in terms of both the particular pieces shipped and the number of each item. Look at the jewelry and compare it against the order form and your “visual order” document described above.

  2. Check and verify ring sizes and the length of each necklace or bracelet.

  3. If an item was ordered for a customer, verify it against details in the customer’s original order.

  4. Inspect the workmanship. Does the clasp work? How does the finish look? If it’s a white gold piece, does it need to be rhodium-plated? Is there any pitting?

  5. Check the jewelry for smooth operation. Look specifically at clasps and joints on necklaces and bracelets, hinges on a bangle bracelet, and the findings and point on a pin (is it dull?).

  6. Try the jewelry on, time permitting. Does it feel and look good when worn? Does it hang properly, and is it properly balanced? Check earrings to see whether posts are placed correctly and backs work properly.

  7. If the jewelry contains colored stones or diamonds, does the color, quality, cut, size, and estimated total carat weight match your requirements? Are there any chips from the manufacturing process? Are the stones seated properly in the prongs?

  8. Make sure you tag the jewelry, and enter it into your inventory records. One strategy is to create a visual inventory book using a color photocopier (prices begin at $350). Better yet, use a color scanner (prices start at $150), which offers the advantage of loading images at a one-to-one size ratio (as opposed to a digital camera, which may not be one-to-one scale) directly into your computer, and print out using a color printer (prices begin at $120).

On both the tag and the sheet prepared for a visual inventory notebook, enter the manufacturer’s name, the item number, the price, and the stones and metals used. Should a tag ever fall off, this visual inventory is helpful to staff. At Curt Parker, staff members also use the visual inventory book to familiarize themselves with each manufacturer’s merchandise and price points (it’s filed alphabetically by manufacturer). When an item is sold, a removable “sold” sticker is attached to the page in the visual inventory book. Then, when that reordered item arrives in the store and is checked in, the sold sticker is removed.

Don’t Leave Jewelry in an Unattended Car

Jewelry left unattended in a car invites theft—and a busted-in window.

Carla is the manager of a growing jewelry store in a midsized city in the Northwest. She has a comfortable routine. Every Tuesday and Thursday she leaves the store at 11 a.m. and drives three miles to a repair and custom-design shop. She drops off pieces for repair and picks up items that have been completed. Then she heads to the deli for the day’s sandwich special.

One Thursday, after her stop at the repair shop, she locked the repaired items in her car and walked to the restaurant. When she returned five minutes later, she found the passenger-side car window smashed and the briefcase with the jewelry missing, along with the repair documentation. She couldn’t even tell which items were missing or which customers had dropped off their jewelry for repair.

Unfortunately, the loss isn’t covered by the business’s Jewelers Block policy, which specifically excludes coverage for merchandise left in an unattended vehicle. (What’s more, in order for jewelry to be insured while it’s away from the store, it’s necessary to have an off-premises limit on your Jeweler’s Block policy. Check your policy or call your agent to make sure you have this coverage.)

Losses from unattended vehicles occur frequently in virtually every aspect of the jewelry business. Anyone who transports jewelry between stores or to and from a repair shop, a goldsmith, or the post office faces the same risks a traveling jewelry sales rep would. When you’re transporting jewelry, be sure to place it in the trunk and stay with your vehicle at all times.

Also keep in mind that thieves are on the lookout for a pattern to follow as they plan their attack. If you regularly transport jewelry as part of your job, be unpredictable. Vary the day and time of your trips and use different routes. Drive evasively—change lanes, slow down, turn corners, drive around the block. Watch for cars that may be following you as you leave your store, arrive at your destination, and depart. If you believe you’re being trailed, drive to a safe place such as a bank drive-up, police station, or convenience store. Use a portable phone to call police and ask for assistance. Be specific. Say, for example, “I’m carrying valuable jewelry, and I believe that I’m about to be the victim of an armed robbery.” If you have car trouble, assume you have been targeted and, if possible, continue driving to safety.

One last recommendation: Carla would have found it much easier to identify which items were missing and who owned them if the store had used a three-part repair envelope. One part of the form should stay with the repair envelope. The customer keeps the second copy, and the third copy should be stored in a safe location away from the item to be repaired.

This is one of a series of case studies prepared by Ronald R. Harder, president and CEO of Jewelers Mutual Insurance Co.

Prime Platinum Markets

Demand for platinum jewelry is on the rise globally, according to Johnson Matthey’s recently published “Platinum 1999” report. The firm’s precious metals division in Wayne, Pa., reported that in 1998 worldwide demand for platinum used for jewelry fabrication rose to 2.37 million ounces, up from 2.16 million ounces in ’97.

The most dramatic increase in manufacturing demand for platinum occurred in China, where jewelry manufacturers used 70% more platinum in ’98 (for a total of 620,000 ounces) as several new factories opened and others increased output. U.S. jewelry manufacturers used 60,000 more ounces in ’98 (for a total of 220,000 ounces) than they did in ’97.

The major exception to the pattern was Japan, where a recession led to a 3% decline in sales of platinum items—compared with a 15% decline in unit sales of gold jewelry. According to Johnson Matthey, the Japanese market had a ripple effect on Swiss watch manufacturers. The use of platinum in watches in Switzerland fell by around 20% in ’98, primarily owing to a contraction in exports to Asia.