The watch industry advertises a recommended retail price of $500 with a cost of $250, a 100% markup; this yields a $250 gross profit. The watch company expects the retailer to give a 30% discount and be satisfied with a markup at 40%. This reduces the gross profit by $150 leaving only $100 of gross profit per watch. The average store needs an 80% markup just to breakeven.
Consider this:
When a jeweler sells 200 watches at the full markup at $500, the gross profit is $50,000 and the cost of sales is $50,000. When jewelers discount 30%, they need to sell 500 watches at the discounted price of $350 to make $50,000 of gross profit. The cost of sales is $125,000.
This is why many retailers say that watches are a pain and that you can’t make money selling them. It’s true, especially when a watch company demands that you invest $50,000 or more in their product, just to get started. The sad part is that the jeweler who is discounting 30% doesn’t sell more watches than the jeweler who doesn’t discount.
When people ask for a discount, it’s often because they have been conditioned to do so, or they simply don’t trust you. If you want to start earning their trust, stop discounting. You’ll be surprised at how many people will accept your policy. Some will actually be relieved.
The profit on larger diamonds is often less than the profit made on watches. There is something terribly wrong when you can’t make money on a beautiful diamond or a fine watch. A professional sells with love, enthusiasm and product knowledge. A mediocre salesperson needs to discount to close a sale.
It’s time for retailers to wake up and start making an acceptable profit from the investment they have in their store. You should monitor the discounts that are given away each day, each week, each month, and for the whole year. It will shock you to see how much beautiful, lovely profit you have given away by discounting.
Get rid of the cancer. Stop discounting!