The Rule of Holes

The rule is: When you find yourself in one, stop digging!

For most jewelry retailers, business is being buffeted by strong macroeconomic headwinds. Fewer customers are buying less-expensive merchandise. Better customers are buying less often. Here are five ways to cope:

  1. Don’t discount merchandise. Otherwise, you teach your remaining customers that you’re no better than big-box retailers in terms of the price/value equation they operate under. Once you start down this path, you won’t be able to stop when times are better. If a customer asks for a deep discount, don’t cave in. Instead, have your staff take some of the value-added options (e.g., credit terms, extended warranty, packaging, engraving, restringing, lifetime appraisals) off the table in exchange for a reduced price. Chances are those elements are part of the reason they shop at your store, and they won’t want to cut them. Thus, you reinforce the price/value equation instead of eroding it by taking 30 percent off. Stop looking desperate.

  2. Take a hard look at inventory. You’re headed into jewelry show season. Pare back inventory on lines that don’t have an excellent perceived price/value equation and a better-than-store-average turn. Now may not be the time to add much in new product lines, but any new pieces within the lines you do carry had better shout their great look and reasonable price. What’s a reasonable price? It depends on the rest of your merchandise, but the rule of thumb is “good, better, best,” so concentrate on finding the best “good” and “better” product you can. Never apologize for what you sell. If you have product you need to apologize for, return it or scrap it.

  3. Get a local business coach. Find someone who will work with you as a sounding board, devil’s advocate, cheerleader, confidant, and sometimes a shoulder to cry on. Even Tiger Woods has a swing coach.

  4. Redouble your efforts on the banking and accounting side. Have frequent and detailed discussions with your accountant about managing cash flow and receivables. In a nasty recession, cash is king, and you need to make it work as hard as possible. Let no dollar loaf. Work with your banker on revolving credit lines and ask the bank to host coffee klatch roundtables with other business owners in your community with similar-size mortgages, loans, and lines of credit. You’ll find these brainstorming sessions invaluable, both fiscally and emotionally, and they’ll often produce novel solutions. Remember, your local florist and bookstore owners have their own Blue Niles (ProFlowers.com and Amazon.com) to deal with.

  5. Use credit lines to get you through financial patches, not as the backbone of your business. Otherwise you’re at the mercy of outside banking forces that are beyond the control of your local banker’s ability to work through with you. Money issues make sane people irrational. Irrational people make bad decisions and mistakes. Don’t let yourself become irrational.