Using Your Computer to Increase Profits

Every year more and more jewelers are using store-management software, and no wonder. They say it increases inventory turn, streamlines accounting and management processes, and enables them to market more effectively to customers.

“Use it or get out of business,” is the enthusiastic, if blunt, advice of Umit Nasifoglu, chief executive of Marquis Jewelers, a four-store chain in Minnesota. “Without a computer, I don’t know how anyone could stay on top of what they need to know on a continuous basis—especially multiple-store operations. If you’re just sitting dormant, making decisions the old-fashioned way, you’re not going to survive.”

A JCK poll shows most jewelers agree with him: Nearly two-thirds of the respondents use management software, and another 10% are deciding on a program. Among the benefits they cite: reduced inventory costs, more time for selling, better management information, and more timely information about store operations and profitability. Cost reductions are another factor for some, with savings in labor costs pegged anywhere from $500 to $50,000 annually.

Acceptance of store-management software in the jewelry industry has come only recently. Nearly half of the jewelers using software today installed their programs only within the past four years. In addition to the applications already mentioned, they use the software for interstore merchandising, returns, point-of-sale tracking, repair tracking, and interstore transfers.

“Sure, you can crunch the numbers by hand. But it’s not a terribly efficient use of your time,” says Joe Romano, president of the North Bergen, N.J., retail consulting firm Scull and Co. Inc. “Everyone should have at least a minimal inventory tracking system, given that inventory is the biggest financial risk in the store.”

Inventory impact. At Marquis Jewelers, the impact on inventory turn has been remarkable. Nasifoglu says the store doubled its inventory turn rate from 0.9 times a year to 1.8 times since it began using software four years ago. During that time, the firm grew from one location using a single-store program (Applications Systems Corp. of Boston’s ASC Apprentice) to four locations using a multistore program (the ACS Craftsman). The software was a big help with store transfers. “If our managers had to track merchandise by hand, most of their time would be spent chasing down jewelry instead of manning the store. The computer system gives them time to sell.”

Similarly, Thomas Dixon, president of Schwanke-Kasten Co., a retail jeweler in Milwaukee, says when he takes inventory and reconciles it, “what used to take us a few weeks to straighten out now takes six hours.” The firm, which does $2 million in sales, uses Compulink’s “Jewelry Shopkeeper” program. “Knowing what you have, turnover rates, what’s selling and what’s not, helps keep inventory fresh.” He estimates saving $40,000 annually in labor from a $15,000 investment in hardware and software in 1992.

Many programs provide a way to evaluate profitability and turnover by vendor and product. They automate the reordering process so that when salespeople visit, jewelers can spend that time looking at new products instead of placing reorders. For Stan Saunders, owner of Saunders Jewelers in Marianna, Fla., “the biggest benefit is that it keeps me out of high inventory items.” He uses custom-designed software to find product shortages and gluts. For instance, when his inventory analysis revealed in January that he had more amethysts than he had a year before, he decided to put them on sale in February to “blow out my inventory.” He also found that he was low on citrines, so he planned to shop for more at an upcoming trade show.

Insurance claims. Hopefully most jewelers won’t need to file claims for stolen jewelry, but this is another area in which computers can really help. “Shoplifters don’t stop at the door and tell you what they’re taking,” says William Mosher, president of Mosher’s Jewelers in Port Huron, Mich. Mosher uses Tyler Management Information System, which is designed for high-ticket retailers. Last year, when a shoplifter took a tray of rings, Mosher was able to determine within three hours “exactly what pieces were missing, the cost, manufacturers, and stock numbers. We were able to file a claim instantly with Jewelers Mutual, and the whole thing was settled in two weeks. Otherwise we would have had to spend days and days going through our inventory.”

Management insights. Software can also help managers evaluate employees. Heyward Sullivan, president of Hale’s Jewelers in Greenville, S.C., began using Compulink’s Jewelry Shopkeeper last year. He found it helpful to compare his personal assessment of his sales associates’ strengths with the computer-generated analysis. “There were a few surprises—several employees were doing better selling in some product areas than we had realized,” he says. The upshot was additional training to help those associates develop expertise in the products they sold best.

Phil Minsky, president of Wyman Jewelers in Stoughton, Mass., uses ASC’s software to analyze monthly sales results for each sales associate. “I can see when someone’s going lower, not higher. Then we can sit down and talk about it,” he notes. He also tracks sales by salesperson to make sure that salary increases match gains in sales performance.

Jewelers also use software for “relationship marketing,” the buzz word for one-on-one communications designed to develop relationships with customers and to anticipate their buying needs. Dale Perelman, president of King’s Jewelry, a 41-store chain based in New Castle, Pa., says, “We’re trying to use our system to cement relationships.” The firm tracks customers’ past purchases, reasons for those purchases, birthdays, anniversaries, and the like. Through phone calls, letters, and special mailings, King’s alerts its best customers to upcoming buying opportunities. “Isn’t it nice on your anniversary to have your jeweler remind you, and even have a special suggestion as to a gift?” says Perelman.

Technological nightmare. Unfortunately, not all software programs are created alike. Most jewelers we polled were pleased with their software, but a few were spending money and time on their systems that could be spent more fruitfully elsewhere in their stores. In some cases, jewelers’ systems created more problems than they solved. An accompanying article (page 152) tells how to protect yourself from these situations.

The worst scenario described (by a jeweler who wished to remain anonymous) was this one: After using a store-management program for three years, the jeweler found that gradually all of the store’s customer and financial data had been destroyed through a series of glitches, or “bugs,” in the system. He had backed up his data, but the bugs were in the back-ups, too. The software vendor did a diagnostic assessment over the phone, and even flew in to try to patch together a fix, but to no avail.

Now the jeweler must use the phone book to contact customers—after he had carefully compiled 8,000 detailed profiles of his best ones. “There’s no amount of money that can replace that,” he says. “If I had donated the money I spent on this program to some organization I despise and then agreed to have extensive root canal, I’d be happier. This system has caused me too much grief and aggravation.”

Even when the software is excellent, there’s a risk of paralysis by analysis. “I don’t make a dime sitting in my office analyzing reports,” says Saunders of Saunders Jewelers. “I try to meet everyone who comes in the door and stay on the floor.” Sullivan of Hale’s Jewelers concurs. “I’ve seen businesses that have gone downhill because of too much computerization. People make judgments on printouts without using common sense. We still want our instincts and experience to rule.”

Software Shopping Simplified

Buying store-management software is a major step that must be taken carefully to avoid nightmares like those mentioned in the accompanying article. Here are some tips for selecting the best program and learning how to use it to full capacity.

Comparison-shop. Look at as many software programs as you can at the next jewelry trade show you attend. This is a good way to narrow the field of choices because you get to see the software firsthand and, in many instances, meet the firm’s owner and software designer. Additionally, contact computer companies listed in this article and ask jewelers whose opinions you trust for software recommendations.
Insist on Y2K compliance. Ask the firm to back up its assurances in writing to avoid any date-related problems when the year 2000 arrives (see article on page 142). That assurance should extend, as well, to the hardware and operating system that the software runs on.
Avoid DOS- and Macintosh-based programs. Virtually all programs should run on the PC-based Windows platform, now the computer industry standard.
Focus on jewelry-specific software. Otherwise, you risk spending a lot of time and money customizing a generic package only to re-create a manual bookkeeping process without introducing new management and financial analysis strategies. Jewelry-specific packages typically cost $1,500 to $30,000. Don’t forget to tally up costs for entering and importing financial data, ongoing technical support, and future software upgrades. (However, if store revenues are modest, an off-the-shelf accounting or address-management program may make the most sense.)
Ask how many jewelers use the program. If 50 or fewer retailers use the program, that might be a warning flag. However, the reason may simply be that it’s a new program. Or perhaps the firm’s users may be migrating from DOS to the Windows format. Find out more.
Check the firm’s references several different ways once you have a short list of programs to choose from.
• Ask for referrals among the firm’s jewelry clients—then ask those jewelers what they like about the program, how they use it, and what they would change if they could. Also ask whether the investment in the program was worth it. Can they refer you to any store owners who are dissatisfied with the program? Did the software provider have enough technical support staff to handle problems and training?
• Get a sampling of opinions about the software on the jewelry industry’s Internet discussion channels through discussion groups restricted to members of jewelry industry associations such as the Independent Jewelers Organization.
• Attend the software firm’s next user group meeting. This is an excellent way to see the company in action as it responds to user questions and concerns. Some of these groups focus on improving the software, while others focus more on business-development strategies.
Find out what reports the software generates. You’ll want to understand the scope of inventory management, accounting, store management, and customer profiling analysis and reporting capability that’s included. Ask the firm and its references whether you can create additional reports tailored to your store’s needs and save the format so you don’t need to re-create the report criteria each time. If the report-writing function doesn’t allow you to customize, find out what it would cost to modify the software to generate the data you need. Be sure to ask the firm’s references how easy it is to generate reports. Virtually all software creates the same reports; the issue is what you have to go through to generate them.
Find out whether the package can export data and whether the features come in modules or are bundled together. If, for example, you learn that the inventory-control feature on a program is excellent but the financial-reporting capability is weak, you’ll want to know whether it’s possible to export data into a better financial package so that you won’t have to enter data twice.
Ask if the firm’s software can electronically import data from another program. Find out the costs for this important aspect of getting started with a program. Or, if necessary, ask about costs for manual data entry.
Ask an independent software consultant to analyze your short-list of two or three programs to test the software makers’ claims. Though you could test the software yourself during a trial period, it’s time-consuming and can be confusing for computer novices. Your consultant should also tell you whether the program is written in a bug-free, flexible, and easy-to-modify programming language that’s likely to still be in use in the coming years. Modifying software written in an antiquated program language can be expensive and difficult.
Take advantage of in-store training once you’ve installed the software. Guidance from an expert user—not a manual—is the best way to learn software. Manuals are best used as reference tools once you’re up and running.

“I’ve seen businesses that have gone downhill because of too much computerization,” says one jeweler. “People make judgments on printouts without using common sense.”

How Jewelers Use Software

Inventory control	100%
Customer tracking	94%
Accounting	72%
Merchandising	68%
Returns	63%
Point-of-sale tracking	59%
Repair tracking	39%
Interstore transfers	27%
Source: JCK panel survey, February 1999