Business Report

Don’t Eat Bad Checks

If you think bounced checks are a problem now, wait till you see what’s coming. American Banker magazine predicts check fraud losses will grow by 25% annually in the coming years. Last year alone, some 1.4 million worthless checks were written daily, for an astounding total value of $9.9 billion, according to the American Collectors Association (ACA) in Minneapolis.

Prevention is the ideal approach, but bad check writers and bad checks don’t look any different from the rest. So how do you protect yourself? For starters, consider third-party verification services such as TeleCheck Services Inc. of Houston (, which says it’s the world’s largest check guarantee service. TeleCheck served 200,000 retailers worldwide and handled $98.3 billion in checks in 1997.

The firm takes approximately seven seconds to confirm the validity of a check presented – using a driver’s license and a check swiped through a payment terminal. The cost to the retailer is 10 cents per check plus a transaction fee that’s typically less than a credit card transaction fee.

TeleCheck approves 98% of inquiries. Once an approval is issued for a check, the retailer receives payment in full – regardless of whether a check later bounces.

“We focus on stopping bad checks on the front end, by pooling information from retailers, wholesalers, and merchants,” says Jalinna Jones, a company spokeswoman. A customer who passes a bad check at another TeleCheck location won’t receive approval for subsequent checks until he or she makes good on the first check. TeleCheck, not the retailer, has those rubber checks on its books and handles collections on them.

Alternatively, a jeweler might choose to collect on bounced checks by using third-party agencies, which typically charge a percentage of funds retrieved.

If you’re looking for a referral to a check-collection service in your area, call ACA at (612) 926-6547. Keep in mind that the national average for check recovery is 30% of the value of checks returned for insufficient funds. While that may not sound like a substantial percentage, it’s nearly twice the national recovery rate that collection agencies achieve for all types of consumer debt, according to ACA. And the rate can go a lot higher – up to 75% – if the check-collection firm receives bounced checks directly and immediately from the retailer’s bank.

It usually doesn’t pay for a jewelry store itself to try to collect on bad checks, unless it’s large enough to maintain a formal collection department. Collections can be a time-consuming distraction, and there’s the added risk of alienating customers. Also, employees assigned to dun customers may be unaware of various state and federal consumer-protection laws.

Focus on Retention

How much do you know about your store’s best customers? Your answer ought to be “a lot,” according to Greg Furman, a New York-based luxury retail consultant.

If you really want to increase store revenues, Furman says, one of the best places to start would be to work to retain more of your most profitable customers. After all, they typically spend 16 times more than a retailer’s average customer.

A lot of jewelers go all out for their best customers – sending thank-you gifts, arranging private showings, and so on. “There are a lot of ‘special specials,’ ” says Furman. “But sometimes the basics are more appreciated because so few people pay attention to them.”

By basics, he means helping your most profitable customers by anticipating events that might prompt a jewelry purchase and alerting them to jewelry-buying opportunities. One example is reminding a longtime customer that his 30th wedding anniversary is approaching and showing him a ring that his wife would love – by her favorite designer, in her size, and in his price range.

To even be able to attend to these “basics,” retailers need to analyze who their best customers are and how much they contribute to profits. Share the list with your sales staff and enlist them as partners in gathering more information about each customer. But take care not to be too intrusive.

Anthony Magnemi Jr., president of Beverly Hills Auctioneers in Beverly Hills, Calif., keeps detailed client records on a custom-designed computer program – using only information that’s voluntarily shared by clients in the natural course of conversations.

“I try to keep personal notes on each client that include how much they like to spend, what type of jewelry they like, what they do for a living, their country club, anniversary dates, and birthdays,” says Magnemi. “It helps me see when a special occasion is coming up so I can tell a client that maybe this gift is more important than in other years.”

Magnemi’s program also categorizes clients by the type of jewelry they’re interested in. “If something special comes up, I can pull up names from a computer and call the client to alert them or highlight items in a catalog before it’s mailed,” Magnemi notes. Of Beverly Hills Auctioneers’ $5 million in annual revenues, $1.5 million comes from sales to private clients.

Some jewelers, though, wouldn’t dream of contacting a customer about an upcoming birthday or anniversary. Donald Levinson, president of Chicago-based Trabert & Hoeffer, says, “My fear is that even though it might increase sales, we wouldn’t want to alienate that one customer in 25 who might resent the approach or consider it too pushy.”

However, Furman views anticipatory selling as a natural and practical extension of genuine relationships with customers. “Small talk can yield a lot of personal information that can be very powerful from a sales perspective. The cues and the clues are there. It’s an astute salesperson who will pick up on them and engage the customer in a way that will broaden the relationship and alert the salesperson to a coming need.”

Furman recommends tracking:

  • Patterns in spending among each of your best customers. Is their spending rising or falling, or is there a cyclical pattern – for instance, a spike every February when the client’s employer gives out bonuses?

  • Details about the jewelry they’ve purchased in the past and the types of jewelry they like.

  • Details about jewelry they’d like to buy in the future.

  • Life-cycle information, such as dates for anniversaries and birthdays (be sure to get the year, so you know when the major ones occur) and graduations, along with names of family members.

  • Notes about their interests, their involvement in social and charity events, their friends, and prior conversations that would help you develop your personal relationship with that customer.

  • Where they work and whether they would want to receive information via fax or the Internet.

One caveat: The point isn’t to grill customers, a patently offensive approach. It’s to develop genuine relationships over time, perhaps starting with a conversation about the jewelry a customer is wearing and what it means to her and continuing over the years with a series of informal conversations. Information is added discreetly to a customer’s file – after she has left the store.

Also be aware that your most profitable customers aren’t always your wealthiest customers. They’re simply those clients who are spending the most at your store – or who have the potential to do so.

“All this personal information gives you a reason to call or write a note,” Furman says. He adds, “The ability to recognize these events as an opportunity to bring customized service and attention to these customers is what separates the mediocre retailers from the real winners.”

Additionally, he recommends that retailers closely track levels of satisfaction among their most profitable customers. One way to do this: “Literally call up a customer and say, ‘I’ve known you for a year, you’ve given us a lot of business; are you happy with the way we’re servicing you, and are you happy with the product we’re offering?’ ”

Benign neglect, the opposite approach, can lead to serious attrition among your best customers. Furman cites a Rockefeller Foundation study that revealed that 14% of customers leave a store because of a complaint that was not handled, 9% leave to go to a competitor, 9% leave because of relocation, and 68% depart for no special reason. The data imply that better and more frequent communication might help a store retain those valuable customers who leave for no reason at all.

Mall Comparison

When jewelers evaluate mall locations for expansion or relocation, it’s obvious that there’s a world of difference between a site in a small 30,000- to 100,000-sq.-ft. neighborhood shopping center and a location in a huge 600,000- to 1 million-sq.-ft. regional shopping mall.

You have to think about where your customers feel comfortable shopping. And you also have to give careful consideration to the volume of sales you could achieve in a particular setting in relation to the total costs for your space.

Jon Bridge, co-CEO of Seattle-based Ben Bridge Jewelers, says, “Volumes and costs in different types of malls differ quite a bit. But then again, sometimes you can make a lot more money with less [sales] volume if you have smaller expenses, as well.”

Ben Bridge Jewelers’ 57 stores are located primarily in super regional shopping centers throughout nine Western states. These locations appeal to the firm’s customer base and generate high customer traffic. Bridge notes that security was also a factor in the firm’s site selection.


Super regional shopping centers contain 600,000 to more than 1 million sq. ft. in gross leasable space plus three full-line department stores and a wide selection of retailers, services, and recreational facilities.

Regional centers are typically 300,000 to 600,000 sq. ft. of gross leasable space containing one or two full-line department stores as well as other retailers and a variety of services.

Community centers are 100,000 to 300,000 sq. ft., are anchored by a discount department store or supermarket, and house a variety of retailers, professional services, and convenience goods.

Neighborhood centers are 30,000 to 100,000 sq. ft. of gross leasable space, are anchored with a supermarket, and contain a number of convenience retailers such as drug stores, dry cleaners, and barber shops.

Location Has Its Price

What’s the best location for a jeweler in a regional mall? According to the Washington, D.C.-based Urban Land Institute, jewelers typically ring up the highest sales in an anchor court, but they pay a premium for that location compared with elsewhere in the mall, as indicated in the accompanying table.

Rent costs and sales potential are obvious considerations in the choice of a mall location. Customer demographics can be just as important. For instance, if your customers are most likely to shop at the mall’s anchor department store, then near that store is the best spot.

Michael Beyard, vice president of strategic development for the Urban Land Institute, observes that some jewelers prefer prominent, highly visible corner locations. Other, more destination-type jewelers with typically higher price points are more inclined to choose side mall space because they’re not relying on walk-in traffic.

This analysis is based on the Urban Land Institute’s publication Dollars & Cents of Shopping Centers: 1997, which includes data reported in ’96 by nearly 800 super regional shopping centers (defined as containing 600,000 to more than 1 million sq. ft. in gross leasable space plus three full-line department stores and a wide variety of retailers). The Urban Land Institute notes that while revenues and rent are higher today, the comparisons between different locations within the mall still hold true.

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