With summer almost upon us, many store owners are thinking about vacations rather than the 2012 holiday shopping season. After all, didn’t we just get through all that?
But it’s no coincidence that the largest jewelry show takes place the beginning of June. The JCK Show in Vegas brings industry buyers and sellers together and traditionally kicks off planning for the fourth quarter. Walking around the vast showroom floor is a great way to see the latest trends and get a feel for what vendors are selling that’s new. It’s a classic case of supply and demand. And it’s a great time to take stock of your own inventory.
Successful inventory management involves balancing the costs of inventory with the benefits of inventory. Many jewelers fail to appreciate the true costs of carrying inventory such as insurance, taxes, storage and the cost of money. Since these costs continue to rise, tight inventory control is still one of the best investments you can make.
Then there is the dramatic rise in the cost of gold over the last decade. No matter how many times you’ve seen this graph, it bears repeating as a reminder that much of gold jewelry has been priced out of the consumer market. The price of diamonds has seen a similar dramatic rise.
It’s no surprise that the trend towards alternative metals, silver and colored stones are expected to continue. So aside from managing your other basic inventory, take a look at your gold inventory, item-by-item. Chances are you’ll have several pieces that haven’t sold and are worth more to you by melting. Take that money and invest in new inventory that may have a better sell-thru.
Getting back to general inventory management... the key is adherence to strict controls. You must have an uncanny ability to anticipate customer demand so that sufficient stock is on hand to accommodate sales volume while avoiding shortages. Again, this is a good reason to attend national and regional jewelry shows, talk with vendors and see what’s selling, then apply this information to your own market and buying.
Without a doubt, it’s been a crazy few years in the retail jewelry business and forecasting sales is often a crap shoot. Nevertheless, it’s important to sit down and look at your historical sales numbers and create an accurate sales forecast as best you can to predict your inventory turnover: the measure of how often, at the current rate of sales, you sell your entire inventory in one year.
To calculate inventory turnover, divide total annual sales by your average monthly inventory at retail; or, annual cost of goods sold divided by average inventory at cost. High profit stores generally have a 20% greater inventory turnover than their low profit counterparts, therefore it is important for you to understand what inventory is moving, and what inventory is collecting dust.
The following are some simple strategies to improve inventory management.
- Computerize your inventory system so you can simplify the buying process by gathering a better understanding of what your customers are buying.
- Code your inventory with a purchase date so you can create an accurate aging report and take action on your slow moving goods.
- Review the reports to identify your fastest sellers, and make sure you keep them in stock.
- Look specifically at your gold merchandise and determine if some pieces are candidates for melting - take that cash and reinvest some of it in silver and alternative metals.
- Review your open orders and speak to vendors about canceling orders that are for product you don’t have a great command for.
- Review some of your long term vendor lines and compare them to new vendors for similar, lower priced options.
- Look at purchasing inventory from jewelers going out of business, or manufacturer close-outs.
- Consider re-merchandising your store and pair up older merchandise with newer goods. Price the older goods at great values to generate cash to use for newer faster selling goods.
- When reviewing your inventory and considering markdowns, think of it this way, better a dollar in your pocket than gathering dust as unsold merchandise.
- Review your commission structure for your salespeople, and offer additional incentives to move dated goods.
As summer temperatures rise, none of us really want to hear Christmas music or the sound of jingle bells. But by working on your inventory now and using the above inventory strategies you can improve your cash flow now and better position yourself for the jingle of money in your cash register and a merrier (and more profitable) holiday shopping season in 2012.
Bob Epstein is CEO of Silverman Consultants, LLC. Offering a legacy in sales strategies for jewelers since 1945, Silverman Consultants provides guidance to store owners seeking to turn around a business, sell off unwanted inventory, or liquidate an entire store. The company helps jewelry store owners and chains formulate strategies designed to maximize revenue in times of transition, whether due to retirement, store closing, or simply when needing a boost in sales. For more information, visit www.silvermanconsultants.com or call Bob direct at 800-347-1500. Visit Silverman Consultants at the JCK Show in Las Vegas, booth B4341.