Edge Retail Academy Blog

Edge Pulse Brings You Important New Insights

Inventory should be in the forefront of your thoughts. One of the keys to growing your store’s sales and profitability is having a healthy inventory of current, fast-turning products.

But how do you get there? It starts with having a clear view of your inventory.

Edge Pulse is the only provider to bring your inventory to life with full color graphs and reporting.

Plus, our latest release of Edge Pulse now includes new Inventory Reports that make it easier than ever to identify aging inventory and take action before it becomes a problem. 

Inventory Trends

With the NEW Inventory Feature in Edge Pulse, you can watch the movement of your inventory over the last 12 months. Watching your inventory age is powerful motivation to implement strategies to improve your overall inventory levels in 2018!

Inventory Aging by Category

You can also view the age of products by category. Is your aged merchandise in diamonds or watches? We can tell you.

Edge Pulse is your dashboard to key business stats — now with brand new inventory features.

Want to learn more? Contact us today.

10 Steps To Better Vendor Visits

By David Brown, Edge Retail Academy

Omaha, NE–Buying well starts with planning well. We all have good intentions when it comes to controlling our buying budget, but often we find ourselves in a reactive situation rather than a proactive one when making our jewelry buying decisions.

What do I mean? Let me ask you a question: How often do you buy product from a vendor representative who arrives in your store unannounced, or with very little notice? If you do this on a regular basis, then you are a reactive buyer.

Often when a vendor arrives you wander out, have a look through the products and spend more money than was intended to be spent. You buy a few items that look nice and will possibly sell, then receive the items a week later – and wonder why there is no money left at the end of the month!

This may be a little simplistic but hands up for those who admit they have had an encounter with a vendor that went like this at some point?

Failing to plan your buying is the single biggest contributor to the overstocked situation that most jewelry stores find themselves in. Trade shows are obvious trouble for those who can’t control their spending, but the silent danger is the regular in-store vendor visits where a few dollars spent here and there soon start to add up. The risk of this can be eliminated though with some sound planning prior to the visit and some good habits while the vendor is in-store (not to mention a couple of steps to follow up after they’ve gone)

Follow these steps to a more controlled buying experience:

  1. Insist that the vendor makes an appointment. Time is precious for both parties. Vendors who arrive without an appointment need to be politely told that unless an appointment is made there will be no looking at the product.
  2. The day the vendor comes, print a stock list of all products carried for this vendor including items no longer in stock. Determine the buying budget and STICK TO IT.
  3. Using a highlighter, mark those items which have sold in less than six months from date of purchase, that haven’t been ordered back in. Ask why they didn’t get reordered. Remember an item that has sold quickly has four to five times the chance of selling again than an unproven item. These should be reconsidered first when looking for new inventory.
  4. Now highlight those items that are aged inventory and have not moved off the shelf. These are stumbling blocks that are tying up cash that could be spent on new or proven items. Make a note to discuss these with the vendor.
  5. If there is access to the Edge Retail Academy AdvantEdge software program, print a list of good sellers for this particular vendor. This will provide a list of this vendor’s inventory items that are selling well in other stores. This is the perfect starting point for choosing new product as these items are selling well elsewhere, so there is a good chance they may sell well in your store.
  6. When the vendor arrives, ask firstly what they can do to help clear the old/aged product. If the items aren’t too old, many vendors will consider exchanging them for other pieces. Take the dollar value of what can be exchanged and add this amount to the existing budget to determine what can now be spent.
  7. Once you’ve dealt with the old/aged product and discussed the vendor’s fast selling items, its then time to look at what else is new, and as yet, unproven. This is your time to experiment – not before! Make sure this is only a small percentage of your buying budget – ideally less than 20%.
  8. Always ask if the items being bought are exchangeable and if anyone else in the area will be stocking them. Now is the time to set the ground rules.
  9. Arrange delivery dates for when the product is needed. Deferring delivery to the first of the following month or the completion of a sale will provide an extra month’s credit to pay. Now is the time to negotiate any deferred settlement terms
  10. Get the new items on the shelves as soon as they arrive and make sure items that are being exchanged are returned promptly. A little training for your staff when new items arrive, is also essential!

Follow these simple rules and much of that frustration of carrying too much inventory will start to disappear. And, as always, if you would like more strategies, for the healthiest inventory picture for your business, please reach out and we can help!

The Edge Retail Academy provides customized strategies for retailers and vendors to increase profits, optimize growth, reduce debt, create profitable inventory solutions, build effective teams and enhance brand loyalty and profitability. The Academy is committed to helping jewelry businesses improve their bottom line while reducing uncertainty and stress. Edge Retail Academy software and their business advisors provide real world knowledge and advice on a “no-contract” basis. (877) 569-8657, ext. 1, or www.edgeretailacademy.com.

Originally published in The Centurion.

The Five Things You May Not Realize About Stock Turn

Knowing your turn ratio is one thing, but understanding how to use it is another.

Stock turn: that elusive nirvana between having too much and not quite having enough products to drive your sales. Getting the balance right can be challenging because it is always a moving target.

You may have a good grasp of stock turn and how to calculate it, but here are a few significant facts that may affect how you look at it.

1. Stock turn is only one part of the return on investment equation. The other is margin. You can afford to have your inventory sit around a while if you have the profitability to handle it. The lower the margin on an item, the faster you have to turn it over to achieve the same profit.

2. Freight needs to be part of the equation. All too often, I see jewelers who don’t add freight in as part of the cost of the item. The problem with leaving it out is that the faster your stock turn, the more it will cost you as each item gets shipped. Ignoring it will distort the profit on your product and give you an artificially higher margin than you really have.

3. Fast stock turn can be as bad as slow. If your inventory is turning over too quickly, don’t celebrate — it is possibly a sign that demand is beginning to exceed supply and you will be losing sales as a result of this.

4. Accurate stock turn can only be measured over time. Take a snapshot of a week or a month and the figures can deceive you. Stock turn is calculated using your average inventory holding between two periods. If those periods are seasonal, such as December, the numbers can deceive if you don’t take this into account.

5. Stock turn can predict the future as well as show the past. Too often, I see retailers who analyze their stock turn but don’t use it as a basis of prediction. History does repeat, and if you find trends developing around certain areas, it helps to use them to plan future inventory levels across that area.

An awareness of stock turn is one thing, but knowing how to manage it and use the information to drive your business is the secret to getting the most value from this key financial variable.


DAVID BROWN is president of the Edge Retail Academy. To learn how to complete a break-even analysis, contactinquiries@edgeretailacademy.com or (877) 569-8657.

This article originally appeared in INSTORE.

So What Does a $3M Jewelry Store Look Like?

By David Brown

There’s a key factor that sets it apart.

With growth in the number of stores whose data is being collected, we have updated our reporting system to further differentiate between the levels of store information we have. Our previous breakdown into stores over and under $1 million has now been further split to reflect stores that are doing in excess of $3 million in sales per year. With over 100 stores now fitting into this category, we have our first in-depth breakdown of the performance of large stores on their own, and how their results compare to smaller stores.

February 2018 results

First, let’s look at the results for February. Same-store rolling 12-month data shows a decline in sales achieved to $1.616 million from $1.629 million. However, this difference can be partially attributable to a change in the weighting of the data being reported thanks to the new category.

Average sale for the month of February remained similar at $329 on an average margin of 46 percent with unit sales down from 328 to 279 for the month (again allowing for an adjustment in data gathering). These numbers will no doubt continue to show a variation over the next 12 months until the new data-gathering works its way through.

Now that we have an additional split of stores doing in excess of $3 million it is interesting to compare the sales makeup of each type of store.

Larger stores sell fewer diamonds

Looking at the percentage contribution of each department across the categories, it’s interesting to see how larger stores make up their sales mix. Contrary to expectation, it’s not all coming from diamond rings, with larger stores showing the lowest sales percentage contribution from diamond rings at just 7 percent compared with smaller stores at 10.9 percent. Obviously this converts to a higher dollar value but is not the main driver of the extras sales.

Diamonds overall contribute just over 52 percent of $3 million store sales compared to 53.7 percent and 57.3 percent for under $1 million and over $1 million, respectively. In fact, the largest stores also receive a lower percentage of their sales from colored stone, gold and silver departments than the small and medium store performance.

Watches are significant

It’s in the area of watches that the large stores make up the difference. Based on a sales percentage of over 16 percent, the average $3 million-plus store is doing a minimum of just under $500,000 per year in watch sales – a relatively significant sum. In fact, these larger stores can be doing as much from watch sales as a smaller store is achieving from all categories put together. Margins may be lower in this department, and the return rate of warranties will be higher than jewelry, but there is still obviously money being made in this area despite the arrival of cell phones, Fitbits and other time-measuring devices that will supposedly spell the end for the watch industry.

So are watches a big part of your business? Do you neglect them in favor of other areas that you feel warrant more attention?

We’ve highlighted the difference in watch sales between larger and smaller stores before, but never has it been more apparent than in the data we have here. The further split of the data shows that the larger the store, the more significant it seems watch sales become. Compare nearly $500,000 of sales versus $30,000 being achieved by the average $1 million store and you’ve accounted for almost 25 percent of the sales difference between the two types of entities.

It certainly provides food for thought.


DAVID BROWN is president of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about tfinhe Academy’s management mentoring and industry benchmarking reports, contact inquiries@edgeretailacademy.com or phone toll free (877) 569-8657.

This story originally appeared as an INSTORE Online extra.

Understanding These Three Key Factors Will Save Your Business from an Early Grave

By David Brown

Sustaining a profitable business can be a challenge. With statistics showing that over 70 percent of businesses close down within 10 years, it’s easy to feel that the odds can be against you. If you’ve already lasted longer than this, then congratulations!

It’s no time to be complacent, however. Even a successful business can take a turn for the worse. Sometimes, the warning signs aren’t immediately apparent to the owner.

Here are three key areas to watch:

  1. Profit. Of course, profitability is the ultimate measure of how you are doing, and any decline is important to take note of. You need to ensure you are growing at least at the rate of inflation to continue to provide yourself with the reinvestment funds and lifestyle you currently have.
  2. Cash flow. Even more important than profit, however, is cash flow. Many a profitable business has become undone because they have been unable to match the inflow of their cash to what they must pay out. In fact, failing to manage cash flow effectively is the number one cause of business failure. According to Business Insider, 82 percent of small businesses in the U.S. fail due to cash flow issues. Cash flow problems can be a hidden symptom, as many owners mistakenly believe that as long as they are “making money,” everything will be alright.
  3. Debt. One of the most obvious signs of cash flow issues (and one of the biggest contributors to cash flow decline) is the size and the level of debt. Firstly, if the debt is high relative to the assets of the business, then even a relatively profitable business will have a large portion of their profits and cash flow being siphoned off to debt repayment and servicing. You can have the fastest car in the world, but if you face a strong enough headwind, you’ll struggle to get underway. The second issue is the change in your debt. If you find your long-term debt or your level of creditors are increasing on a monthly basis, this is a problem that will cause you further headaches down the track. 

How has your store profit trended over the last three years? Has the level of your creditors been increasing? What is the level of your overdraft and how does this compare with the last few years? Seasonal fluctuations in cash flow are normal, especially in the lead up to the holiday season and the period immediately afterwards, but you should compare how this trend is relative to previous years.

DAVID BROWN is president of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about tfinhe Academy’s management mentoring and industry benchmarking reports, contact inquiries@edgeretailacademy.com or phone toll free (877) 569-8657.


This article originally appeared in the April 2018 edition of INSTORE.

What Price Is Your Inventory Really Costing You?

By David Brown

If there is one question that I am asked more often than any other by my clients, it is “How do I deal with my excess inventory?”  It is a little of a ‘glass half empty’ question for some.  A better question would be “How do I deal with my lack of sales relative to the inventory I have?”

Inventory is only excessive to the extent that you don’t have the sales to match it, and it is important that you always have capacity to grow your business further.  Strangling growth from a shortage of good product can be a bigger issue than being awash with surplus inventory.  That said, we deal with clients in several countries and there would be few of our international clients who run with the high level of surplus inventory commonly found in the US.  The level of overstocking reaches almost pandemic proportions in some stores, and in reality, I am less concerned by the number of clients who ask the above question than the number who don’t!

Are they really saleable?

Many see their oversupply of aged inventory as a non-issue, being under the assumption that it is still good, saleable product that could be purchased tomorrow, or that somehow this “nest egg” represents a retirement fund when the business is sold.  Certainly, given the price of gold, several of these pieces would cost more to purchase from vendors today than they would have originally, but are they really saleable, to either the public or somebody buying your business?  The answer is generally “no.”

Sadly, there is more bad news, as the longer the items are sitting on your shelf, the more they are costing you –even if you didn’t use debt to purchase them. Let’s do an exercise with a pair of gold earrings that have cost $100 to purchase from the vendor.  What is the true cost of these earrings if they are sitting on your shelf twelve months later?

What is the true cost?

Look first at the one-off costs at time of purchase.  There is freight to get it in-store, computer processing, time spent selecting the piece and time spent getting it displayed in the store.  Let’s allow $5 for freight and another $10 for staff and your time in selecting the piece, processing it in-store and getting it on display.

  • Vendor cost                        $100
  • Staff time                               $10
  • Freight                                    $5
  • Initial costs                       $115

On top of this we have holding costs for the 12 months.  Let’s use 5% interest for the year (although in more prosperous trading times this would be closer to 10%).  In addition, we have the time spent cleaning and showing the piece during the twelve month period even though it hasn’t sold, plus insurance, a percentage of rent, advertising, boxing, the tax you had to pay on it given that you diverted ‘profit’ to purchase it, and so on.

  • Interest                                                     $5
  • Staff cleaning and other costs             $10

Note: Most financial and industry experts agree that the ‘holding cost’ associated with non-performing inventory is 20% per annum.

So even giving you the benefit of the doubt, we are already up to $130 cost for this item in just 12 months and we have not allocated any packaging yet because it hasn’t sold.  If the item needs to be reduced and cleared after this period these costs will further reduce the profit on the item–if there is any.

The Opportunity Cost of Old Inventory

But the real cost of this item is the opportunity cost that has been missed.  Opportunity Cost is a term often discussed in economics.  It represents the cost of the opportunity missed by choosing this particular action, as opposed to another.  In the case of our jewelry example, the cost is the missed profit that could have been achieved if another faster selling item had been chosen.

So how much is the Opportunity Cost?  Who knows for sure, but if another piece had been chosen that had sold, been reordered and sold again once more during the year and the gross profit on each of those sales was $100, then the opportunity cost of not choosing the other piece would be the $200 of profit that has been missed out on. This is best summed up by the phrase “stock-turn”.  The more often a good item is sold and reordered the less this opportunity cost becomes.  That’s why it is important to keep inventory fresh and turning over, and why not carrying excessive dead inventory is crucial.  Suddenly, without stock-turn, these humble gold earrings start to look very expensive indeed!

We can’t all be crystal ball gazers and know with certainty what will sell, but the important thing is to acknowledge when an item has become old and “cut your losses” as soon as possible.  Continuing to forget about it will only increase the ‘holding cost’ and the ‘opportunity cost’ of not sourcing another piece that could yield a profit.

The Effects on Your Bottom Line

So, that aged inventory you have is more expensive than you thought. Realistically, for every $100,000 you are overstocked you will be looking at $5,000 to $20,000 in holding costs – so carrying $400,000 in excess inventory will take $20,000 to $80,000 off your bottom line while contributing nothing to your sales.  In fact, it may even reduce your sales, if your percentage of aged inventory is so high your customers can’t see the good product through the bad.

So, think carefully before deciding that surplus or aged inventory isn’t costing you anything.  It may be more expensive than you think.

If you would like strategies for your excess inventory or aged inventory, please reach out to The Edge Retail Academy, and we can help!  We will work with you, to help you obtain a healthier level and the right selection for your customers.  Our complimentary Business Opportunity Analysis may also be helpful to you.  Contact Becka Johnson Kibby at Becka@EdgeRetailAcademy.com or 1-877 569-8657, Ext. 1 today.

 

Originally printed in Centurian Jewelry Show in September, 2017.

6 Absolutely Essential Benchmarks to Gauge Your Marketing Success

By David Brown

Many business owners believe that their marketing results are best measured by sales achieved — yet at the end of the day, marketing will not make anyone buy from you. You could have the best marketing in the world but poor location, ordinary inventory or underachieving staff can all conspire to stop the sales from happening.

So how do you measure marketing effectiveness? Here are six key benchmarks that can help gauge your marketing activity:

1. Door counter. If you don’t currently measure foot traffic, how do you know if your marketing is bringing you more customers?

2. Website traffic. Not all sales are generated in-store. Whether you have an online store or not, website inquiries are still a direct outcome of your marketing efforts. Measuring your monthly traffic will show whether you are gaining a greater share of the eyeball in your marketplace.

3. Social media following. Growing your social media following is not an end in itself, but it is a direct byproduct of the online activity you are doing to promote your business and how you are creating a two-way communication style with your customer base.

4.  Email list. Is your email list growing? Despite the relative age of email in the digital environment, it still represents one of the most effective ways to communicate with customers and costs very little if anything to act on.

5. Clienteling contact. How many customers do you reach out to every month? Marketing is no longer a passive game through recognized channels. You need to proactively contact customers and measure the effectiveness of this approach.

6. Keyword ranking. Part and parcel of your online efforts involving tracking the keywords you want to be found for. How do you rank each month? If you are halfway down page 2 for “diamond rings San Jose,” how does this compare to other months?

As you measure, you create questions that lead to actions. A drop in your email list can lead to a plan to increase email numbers. A static social media following raises the question, “What are we doing to attract and engage potential customers online?” A simple A4 sheet tracking each area monthly will help drive your business growth into the future.

DAVID BROWN is president of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports, contact inquiries@edgeretailacademy.com or phone toll free (877) 569-8657.

Originally published in InStore Magazine in January, 2018.

What’s Trending

Edge Pulse and Aggregated Data

At The Edge Retail Academy, we aggregate data from close to 850 stores, through Edge Pulse.  This allows us to give you up-to-date and meaningful reports and stats.  Take a look at some of these stats below…

Loose Diamond Sales for 12 months to Oct. 2017

$115.2M in Sales

20,855 diamonds sold

H: SI2 was the most sold in the color and clarity for All diamond sizes and shapes

Loose Round Diamond Sales for 12 months to Oct. 2017

$20.2M in Sales

3,397 diamonds sold in the 1.00 – 1.49ct range

H: SI2 was the most sold in the color and clarity for round diamonds

Loose Princess Diamond Sales for 12 months to Oct. 2017

$2.8M in Sales

566 diamonds sold in the 1.00 – 1.49ct range

F: SI1 was the most sold in the color and clarity for princess diamonds

Loose Oval Diamond Sales for 12 months to Oct. 2017

$2.4M in Sales

437 diamonds sold in the 1.00 – 1.49ct range

G: SI2 was the most sold in the color and clarity for oval diamonds

Loose Cushion Diamond Sales for 12 months to Oct. 2017

$1,636K in Sales

318 diamonds sold in the 1.00 – 1.49ct range

G: SI2 was the most sold in the color and clarity for cushion diamonds

Loose Pear Diamond Sales for 12 months to Oct. 2017

$934K in Sales

183 diamonds sold in the 1.00 – 1.49ct range

G: SI1 was the most sold in the color and clarity for Pear diamonds

After Holiday Tips

  • OBJECTIVES & STRATEGIC PLANNING – It’s time to set your bold 2018 objectives.
    • Take time out of the store to review what worked last year and what didn’t.
    • Review your ‘2017 Holiday’ journal.  What did you do, when and how did you do it, how did it work?
    • Review what your opposition did and what impact it had on your business?
    • Review your Staff performance.  Who gets to stay …
    • Review your Vendor performance.
  • FINANCIAL – Chances are you will have more money in your bank account after the holidays so you need to make sure you spend it wisely.
    • Set aside enough money for sales tax, federal and state income tax.
    • Set aside funds for vendor payables that will come due in January.
    • Pay off debt – credit cards, and interest-bearing loans.
    • Start an emergency fund for 2018 worth 3 times your monthly expenses.
    • Invest your money:
      • Max out your 401K
        • Under 50, $18,000
        • Over 50, $24,000
      • IRS limits
        • Under 50, $5,500
        • Over 50, $6,500
    • Take a distribution or bonus from the company after the first 4 above have been accomplished

2017 Holiday Tips – Part 8 of 8

  • OBJECTIVES & PLAN OF ACTION – Timing is everything.  Check progress throughout the day and make adjustments as required.  It’s time to ‘bring it home’.
  • SALES – It’s the last week – have fun.
  • Initiate contests (largest sale, largest ticket, most units, best increase, most add-on’s, etc., to keep things fun and exciting for the staff.
  • MARKETING – Last chance for an email blast.
  • Feature in store items.
  • Make sure it has a sense of urgency and a call to action.
  • Schedule your last week of posts for your social media such as last-minute gift ideas.
    • Again, feature in-stock items.
  • STAFF – Have your last team meeting. Share your month to date figures.
  • Celebrate all wins!
  • Schedule food deliveries for your team.
  • Affirmation & recognition – continue to high five your team in the last few days.

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