Growth returns thanks to a sterling savior
The Edge Retail Academy uses proprietary technology to gather data from jewelry stores, which it analyzes and then organizes into actionable information. Key performance indicators—sales, gross profit, stock turn, markup, average sale, quantity of sales and other measures—allow participating retail jewelers to compare their stores against industry averages on a month-by-month as well as a rolling 12-month basis.
Despite what has been a trying 18 months for most jewelry store owners across the United States, several months of largely consistent growth data suggest things are looking up.
The numbers are still well short of the highs of two years ago, but are a positive sign that the decline has stopped. We are now in for a slow but sure period of recovery; the data shows year-on-year growth each month since June 2009, except for January.
What’s interesting is the changing makeup of sales for most jewelers-. Bigger average sales have been replaced by a higher volume of lower average sales, countering the belief that customer volume has dropped off. Jewelry store unit sales have been growing, but have been partially offset by the decline in average spend per transaction.
PROVING ITS METTLE
Silver has been the biggest contributor to the volume increase, with the arrival of the bead market providing jewelers with some relief from gloomier data. This area is in its infancy compared with sales in overseas markets, and it will be interesting to see whether the popularity of bead products rivals that achieved internationally. We can only imagine the sales declines we might have seen if the market hadn’t taken up a fascination with this product line.
There has been a sure and steady increase in rolling 12-month volumes of silver product sold. February’s average volume of just over 3,000 units per annum is up from 1,500 one year ago, an increase of 100 percent. To discover any product is experiencing 100 percent growth in a little over 12 months is impressive, but during an economic crisis, it is astounding.
However, the opportunity to truly cash in on these extra sales has been limited by a fall in average sale per silver item. The result has been an overall increase in silver sales, but not to the fullest extent possible.
From February 2009 through January 2010, the average amount spent per silver item decreased from $55 to approximately $45, a fall of 18 percent. February has shown a slight increase, but we will wait to see if this is sustainable.
Why the decrease? Some may claim it reflects people’s desire to cut back in tough economic times. But is this the reality? This might explain a fall in the average sale of diamond rings—but, interestingly, that hasn’t happened. When consumers switch from higher-priced items, such as gold and diamonds (where volume has been down), to lower-priced silver, why should there be a double effect, where the value of that average sale falls also? Silver is cheap enough. Persuading customers to spend $55 rather than $45 has less to do with the money in their bank account and more to do with the opportunities presented to them and the beliefs that staff members may have.
WHAT YOU CAN DO
• Have you been buying cheaper silver? Is your silver inventory’s average value declining? Your average sale will match the average value of your inventory holding. If you are progressively buying lower-priced product because you believe your customers will spend less, then guess what? They will. You’ve left them with no choice.
• Has your staff been trained to believe customers will want to pay less, perhaps not by you, but by the constant media reminders that we are in difficult trading times? If this is their perception, then the customer will spend less. Your staff has a far greater influence on your customer’s willingness to spend than they, or you, might think.
GRAPHICS BY ROD LITTLE