Coping with information overload is like mining for diamonds: You have to dig through a lot of waste to find a few carats’ worth of gems. To help you deal with the challenge, we describe four key types of information jewelers need, along with explanations of where and how to obtain it and suggestions on how to use it. Most of the data are available at little or no cost.
Know your market share. If you have several stores in a single metropolitan area, you should know your market share, say financial experts. To calculate market share, divide your sales by local, county, or state sales. A U.S. Census Bureau study called the Economic Census provides figures for county and state jewelry sales every five years. (See box below for instructions on navigating the Census Web site.)
Citywide market share information may be available from a local newspaper advertising department, says Ken Gassman, a retail stock analyst with Davenport & Co. LLC, in Richmond, Va. Newspapers might not advertise the service, he notes, but they might be willing to calculate market share for local businesses, especially if it means gaining a new or bigger ad account.
Know your consumers. The only way to determine exactly who is buying what in your area is to commission a study by a private research firm. No single U.S. agency tracks such specific data free of charge. Fortunately, free or low-cost information on sales by jewelry type is available to jewelers:
National jewelry, watch, and repair expenditures are available annually through the U.S. Bureau of Labor Statistics. (JCK typically publishes this information around the beginning of the calendar year.)
National sales of products, such as diamond and gold jewelry, are available in the five-year Merchandise Line Data survey from the Census (See p. 64, “What Do Jewelry Shoppers Buy?”)
A breakdown of sales by merchandise is included in the Jewelers of America annual Cost of Doing Business Survey. To obtain a copy, call JA at (212) 768-8777.
You can obtain demographic data on any metropolitan area through the Census Bureau on an annual basis. (See sidebar on the following page for instructions on obtaining demographic data from the Census.)
Compare your data against JA’sCost of Doing Business Survey. Perhaps the most comprehensive jewelry-industry-specific information is available through this annual survey. Rick Nagele, president of Advantage Research in Wickford, R.I., whose company handles the job, cites three key reasons to use the study.
First, you can compare your operating results with the national average. “The numbers may not tell you what’s wrong, but they can show you the questions to ask,” he says. For example, if your inventory turnover is below the industry average, you have reason to be concerned about profits. Determine how much money is tied up in inventory. If it’s too much, make adjustments in purchasing. “Turnover may just be a problem in one particular department,” says Nagele.
A jeweler from the Northeast who owned a medium-range, single-store business confided to Nagele that although his performance numbers were creeping up, his profits were dropping. When Nagele helped the jeweler analyze his sales by department, they discovered that lower-end goods, such as 10k gold items, were slow sellers. Not coincidentally, a Wal-Mart had opened in the area at about the same time the jeweler noticed profits dropping. To correct the problem, the jeweler put 90% of lower-end items on sale to move them. After six months, the jeweler’s sales bounced back, and he was able to allocate the lower-end monies to more service-oriented-and profitable-departments.
Another reason to pay close attention to the JA study is to compare your own ratios with those of previous years. “Ratios such as assets-to-liabilities are something you should look at frequently,” advises Nagele. “If your liabilities-to-short-term-assets [figure] suddenly dips into negative numbers, then trouble may be ahead. Tell your buyer to stop buying so much. Just because you’ve got a positive checkbook figure doesn’t mean that all is well.”
A third reason to refer to the study is to reflect on your own business goals. Where is your business now, and where do you want it to be? The owner of a small department store in Rhode Island, which featured a jewelry department, found out too late that he should have made some changes. After deciding to close the store because he couldn’t keep up with local competition, the store owner called on Nagele to help him summarize his assets. When Nagele walked into the store, he observed scuffed, 1960s-style fixtures and decor, with a few jewelry items on display and the rest hidden in bulky chests of drawers. And though the owner told Nagele that his customers were “upper middle-income females, ages 35-54,” it was obvious that his sales staff was indifferent to fashion trends. Nagele asked the owner: If you were to open the same store today, would you retain the same interior look and sales staff? The owner promptly answered, “No.”
Write a business plan. A business plan is helpful for setting goals and for securing a merchandise loan from a bank. The plan should include information on marketing, competition, demographics and customer base, market share, market potential, and financial data. Some examples of business plans can be found at www.allbusiness.com. A concise outline on how to write a business plan can be found on the Small Business Association of America Web site at www.sba.gov.