“Failing to plan is planning to fail”. – Unknown
Having an effective buying plan is one of the keystones to retail jewelry store success. Keep in mind that each month ends a previous 12 month trading cycle and begins a new one. How well you plan your buying for the next 12 months will control your success.
SuppliersWe are all familiar with the Pareto principle: 80% of the effects come from 20% of the causes. The same holds true for your suppliers. Your top 8-10 suppliers should be producing 80% of your sales. Therefore, if you want to increase your annual sales by 30%, you will need to increase the sales of your top suppliers by the same amount. What supplier wouldn’t want a 30% annual increase in sales? Let them know what your plans are and what you will need from them in order to make it happen (e.g. faster delivery time, better terms, more aggressive balancing).
Additionally, you should be replacing those suppliers that aren’t giving you what you need – even if they have been a tried and true provider for many years. We have found that as business cycles change, so do the business models and customer service levels of the wholesale suppliers. You need to make the changes to your business that will help you succeed now. Go out and find vendors who have beautiful merchandise in a price point (over $1000 average retail sale) that will help you move to the next level. You also need to find a few more diamond vendors who have the quality, cut, and price you want to pay. You will find these suppliers at the Luxury Show, the JCK show, the Continental Buying Group, Centurion, and the IJO show.
Spending“You’ve got to spend money to make money.” This is true, but it is how you spend your money that is the critical element to success. Retail jewelers look at their monthly spending and tend to think, “Wow. I don’t want to spend that much this month on stock because I have this and that to pay” and then they don’t stock their store properly. Keep in mind, a retail jewelry store doing $1 million in annual sales will spend at least $500,000 on product over the next 12 months. If you don’t spend money on the stock, you won’t have it in the store, and you can’t sell it.
This $500,000 is your open to buy for the year, an average of $40,000 per month. This is easily extrapolated; a $2 million store will spend $1 million ($80,000 per month); a $3 million store will spend $1.5 million, ($125,000 per month), etc. This is a lot of money and how wisely you spend it will completely control your prosperity.
BuyingSpending is not buying. Spending is having money leave your bank account. Buying is the process of knowing what you need and then spending the money necessary to get it. When you go to the tradeshows these figures should be foremost in your mind. You are not going to the shows to look; you are going to the shows to buy very beautiful diamond semi-mounts, diamond pendants, bracelets and earrings one piece at a time. You should also know what price points of what product you need to adequately stock your store and have the wholesale price already calculated so that you can ensure a target of 130% average markup.
Diamonds and color should yield 80% of your sales, with the diamond departments accounting for 62% of sales and the color departments comprising the remaining 18%. The rest of your store will account for the remaining 20% of your business, but your focus needs to be on how you buy the items in this 80% group. You should be looking to obtain gorgeous pieces that fall into the $3,750, $6,500, $15,000, and $25,000 retail price ranges.
When attending the trade shows, be sure to stop by the Chinese and the Indian pavilions to see the new exciting trends that are coming into the United States. Visiting these sections also gives you a broader worldwide perspective of what is going on in the jewelry industry today.
What is your planned open to buy? The chart below shows how much you should be looking to wisely spend at the trade shows, along with the amount of old stock that you should actively stock balance (or exchange) with your vendors.
|Annual Retail Sales||New Purchases||Stock Balance/Exchange|
A solid buying plan is critical to the success of your retail jewelry store. Remember: What you do purchase at these shows is dictating what you will sell, and how well you will profit, in the next 12 months.