by Mark Kippenberger
Independent jewelry owners are predominantly owned / managed by baby boomers.
Consequently, the issue of business succession is a process looming ever larger for many independent jewelers. The issue is not going away.
For those family business owners lucky enough to have “next generation” kids already part of the business & willing to some day take over the business, your successor may be chosen, but typically many handover questions remain.
Traditionally a succession process has revolved around the transaction itself. Today succession starts a long way before any transaction, and begins with the all-important transition of management.
Is your family successor sufficiently skilled and experienced to continue to build business value or does the family risk erosion of business value? Does your successor have the appropriate management style to grow, motivate and build your store team? If the answer is ‘no’ to either question, you may want to build a grooming plan for the successor, including desired outcomes and measures to monitor progress.
The grooming plan for your successor would look something like this:
- Make sure you are truly ready to retire!
- Groom the business, so it is ready for the next generation to take it over successfully – make it the healthiest possible, to give them the best chance to thrive!
- Call a family meeting to discuss the succession
- Respect, compassion and discretion are all key elements of these conversations
- Are there other family members not in the business that need to be considered?
- Clearly define each family member’s role moving forward – take into consideration their strengths and weaknesses, so both they and the business is set up to succeed
- Keep leadership, professionalism and communication skills in mind
- Set up an organizational development chart
- Create employment contracts
- Talk about money/inheritance – don’t avoid these topics
- Work with an independent advisor to help with these plans and conversations if needed
As advisors to independent jewelers, the Edge Retail Academy team take a collaborative approach that includes interviewing family members from both generations. We assist the Founder generation and consider & define a series of guiding principles that are designed to clarify their thoughts on management transition, phase down scope for the founder leading up to a transition with detailed funding plan attached.
The inter-generational family succession is not a quick process, but needs to reflect the compromise between the founder’s aspirations and “next generation” expectations with a series of specific actions.
If you would a complimentary conversation about your succession plans or feel you need some additional strategies to help you achieve the best outcome in your succession planning, please reach out to The Edge Retail Academy, and we can help! Contact Becka Johnson Kibby at Becka@EdgeRetailAcademy.com or 1-877 569-8657, Ext. 1 today.
by David Brown
Maintaining your best selling inventory is, without doubt, the most critical area of your inventory control. Fast sellers are often only 5-20% of the average stores inventory but can be responsible for generating up to 80% of all storewide sales. Getting them back isn’t just important – it’s a necessity.
The crucial factor that is ignored is just how big an impact losing a few fast sellers can have. Let’s illustrate with an example:
|Items in store||No of items in-store||%||Unit sales||%|
This typical store has 10% of its inventory as good (fast) sellers (500 out of 5000 items). These good sellers are accounting for 75% of all store sales (3000 of the 4000 items being sold).
What happens if this store only reorders its fast sellers at the end of the month?
Let’s assume it sells, on average 10 items per day. If we know that fast sellers represent 75% of items sold then we can safely assume that 7 of the items (lets round it down to keep it simple) sold each day are fast sellers.
At the end of the month our sample store will have sold 210 items (7 items per day for 30 days) none of which will have been reordered. Let’s have a look at how the number of items in-store will appear now:
|Items in store||No of items in-store||%||Unit sales||%|
With 210 items sold and not reordered back the number of fast selling items for any customer walking in has dropped to only 290 pieces – or around 6% of the total inventory. Let’s put some dollars on this – imagine the original 500 items represented $50000 of saleable inventory. Let’s assume that the 290 items remaining represents $29000 of saleable inventory. You’ve just deprived your customers of $21000 (at cost) of good inventory to choose from – that’s $42000 retail value at keystone.
If your best selling selection has dropped by 40% (500 down to 290) then what are your sales in danger of dropping by? You guessed it. 40%! You’ve just taken away 40% of the selection that matters so the chances of them buying have got to drop also.
“Oh but they’ll just buy something else” you may say.
Let’s assume you’re average customer comes into your store 4 times per year, and the average length of time that your aged inventory has sat there is 18 months. That means your average customer has seen that “something else” six times already and has decided not to buy it. What are the chances that it’s suddenly the answer to all of their problems when they see it for the seventh time?
There are a few critical factors that make looking after your fast sellers all the more profitable:
- Send the reorders regularly. It’s one thing to be reordering fast sellers but don’t sit on those orders too long. We see many stores who reorder weekly or evenly monthly. Reorders should be processed daily for high volume items. The cost of a little freight (that should be factored into the cost price anyway) is nothing compared to the lost profit if you can’t sell it. Look at your daily sales report and get those fast sellers straight back in. Think of it this way – how can you sell more than 12 in a year if you only reorder monthly?
- Get it back on the floor within 24 hours. Nothing is worse than reordering daily and having the item arrive overnight to then have it sit in its parcel for a further 3 days –then the staff take another day to get it ticketed and on the floor. Make sure everybody knows how critical these key pieces are and give them the VIP treatment. Don’t leave them in the ‘coach’ queue when they deserve business class check-in!
- Maximize the mark up. There are plenty of dogs in store that you will have to special to quit. The profit you make each year is dependent on your fast sellers. Don’t discount them when you don’t need to and look at increasing their mark up if demand warrants it. The customers will soon show you the price the item is worth. When it comes back in, try putting a few more dollars on the retail price – you can always bring it back down. Jewelry retail is very much a case of supply and demand and if demand is high (read a fast seller) then prices can warrant a premium. The best example of this is Valentines Day. Would you expect to pay the same for a dozen red roses then as you would on May 21st? Of course not. Florists meet the market price and you need to do the same. Putting the same mark up on a fast selling item as a slow moving one does not make sense. Sensible retailing is more than just applying a ‘cost plus’ mentality to each and every product.
- Keep them front and centre. Your best sellers need the prime locations in-store where they are seen by the maximum amount of people. These are the pieces that will drive sales. Give them a chance to flourish in your best foot traffic areas.
If you would like ideas and strategies to ensure you have the healthiest inventory picture, going into the 4th Quarter, please contact us and we will help you ensure more success during this important time of year. 877-569-8657, Ext. 1 or Becka@EdgeRetailAcademy.com
The Holiday Season will be here in the blink of an eye…and as you know, the last quarter of the year doesn’t happen by chance! With a little planning and sales training, you are giving your store associates the chance to celebrate at the end of December.
The Edge Retail Academy has close to 50 pre-recorded webinars available to get your staff in top shape…and NOW is the time to start your training.
These webinars are available 24/7 and can be viewed by your entire team, from any computer or tablet (store or home).
For only $295 (and 6 months to utilize these effective strategies), you have almost 50 training meetings taken care of for you!
- Watch them together as a team
- Have your associates watch them on their own
- Delegate specific Webinars to different team members and let them share the highlights with your team
If you are interested in purchasing access to all of these Webinars, for the one low price of $295, please reach out to the Edge Retail Academy at: Becka@EdgeRretailAcademy.com or 877-569-8657, Ext. 1.
We wish you a very successful upcoming Holiday Season!
by Sherry Smith
Today’s customers are tech savvy and multi-channel customers. Even though the majority of sales take place in brick & mortar, online channels and social media have a dramatic impact on costumer behavior. These customers demand an integrated, seamless experience across all channels. This means that this new class of customers must be able to transition from their smartphone to personal computer to your physical store.
In order to ensure retail success, a retailer should have a well-planned omnichannel strategy that will seamlessly integrate social media and commerce. It goes beyond just the physical store or pure online business. For example, Amazon, an online behemoth, is planning to open its second physical store in November in San Diego. According to Amanda Nicholson, professor of retail practice at Syracuse University’s Whitman School of Management, online retail sales are about 9% of all retail sales and it could reach 20% by 2020. “There is still reason for people to go out and look at things and touch things,” she said. “Online strategy has not single-handedly destroyed people’s need (to do so).”
At a recent conference Macy’s noted that when they close a location, their online business from that area drops as well. This can be attributed to in part to customer’s shopping behavior and the fact that they demand easy transitions between physical and online stores. Customers might buy the product online and return it in the physical location or vice-versa. Make sure your online store personalizes the customer experience by utilizing live chat platforms that allow customers to connect with product experts or sales executives directly from the website.
One of the strongest influences in retail in both online and physical is social media, especially social media review platforms. Retailers are all too familiar with Yelp where a bad or poor review can lead to long lasting negative effects. Customers who seek multiple channels to shop value product reviews and feedback, especially from their peers.
Retailers should map their customer purchase behavior. Where are the purchases made? In the store, at home, in the car, etc. When the purchases are made; morning, noon or night. What kind of products are purchased or are more popular? What is the frequency of the purchases? Finally, how are purchases made, smartphone, tablet, personal computer or in the store. This helps define the customer’s journey. Understanding the customer decision making process is key in your omnichannel development.
Understanding your customer’s purchasing behavior will help you set up relevant triggers across channels. The goal of these triggers is to maximize customer engagement and drive sales. Triggers include boosting customer engagement by initiating conversations in active dialogue on social media platforms. This strategy also helps to boost brand value. Send reminders about offers or discounts and integrate with social media to enhance the in-store experience. Have screens or wall that relay live social media feed. Include images, videos and tweets to further drive the customer engagement.
Notifications regarding loyalty points or rewards can act as a trigger for making purchases. Be sure you have a unified loyalty program that integrates the customer journeys across online and physical platforms. Rewarding customers for their online involvement can be very effective in growing your online customer base. Barney’s New York uses data from their customer’s online journeys to send personalized notifications and product recommendations when their customer is in the store. These notifications are based on products in the customers’ online shopping bags, wish list and the customer’s browsing patterns.
Customers are highly informed and expect exceptional experiences on every platform. Every day, more and more retailers realize they can no longer operate in a silo. The retail norm will include digital and physical commerce. Retailers will have to leverage new technologies and realign processes in order to create impactful and valuable retail experiences.
If you would like ideas and strategies to ensure you are running an omnichannel business, for maximum success, please contact us and we will get you started on the right foot. 877-569-8657, Ext. 1 or Inquiries@EdgeRetailAcademy.com
by David Brown
Let’s face facts … one day we’re all going to retire whether we want to or not!
Some of us will do it on our own terms when we are good and ready; some will be forced into accepting a modest retirement due to poor health or poor decisions while others will take their last breath behind the counter claiming until the end that it was their choice.
An effective Retirement Plan means – ‘Being in a position to retire, financially, emotionally, and physically … and then choosing whether to retire, or not.
Cash-flow is the name of the game in retirement …
To enjoy a fulfilling retirement, you need ‘reliable income’ or cash-flow more than you need capital. Of course, capital helps, but too often we see business owners having to live on less money and hoping they won’t outlive their money.
More often than not, people who retire will have a healthy attitude towards retirement i.e. they accept responsibility for their retirement and they have high, or at least comfortable expectations, and they back their expectations up with a solid plan and a sense of urgency.
Here are some questions for you to consider. If something happened to you today …
Q1: How would it impact the lives of those people left behind such as your significant other; your children; your staff; your customers or your business partner?
Q2: What would happen to your business if you were no longer able to manage the business or have a physical presence at your store?
Q3: Could you sell your business if you had to?
Q4: How would your retirement nest egg and lifestyle be looking?
What are your retirement options?
- You can sell the business either to a family member (Succession), a manager or an independent third party.
- You can have a GOB and close the business.
- You can retain ownership of the business without you having to be there.
Before you go too far with any of these options, I urge you to seek guidance from a trusted Financial Advisor (not one who is trying to sell you an investment product) to establish your ‘required retirement income’. Once you know this number, you can work back from your other known income sources e.g. rental property, pensions, dividends, savings and other investments, to see how much you need from your business to top it up.
Let’s say you need $100,000 as a retirement income and you already have $50,000 from other sources, that means you need another $50,000 to come either from the capital you receive from the sale or closing down of your business or from an ongoing passive income from your business.
The biggest mistake retailers make is over optimistically valuing their inventory or the value of their business. Jewelry stores are not easy to sell nowadays, so it is rare to see them sell at a level that meets the owner’s expectations. With interest rates of approximately 2.3% for conservative investments (you can’t afford to be too speculative or bullish in retirement), you would need to clear in excess of $2m from your business to safely generate another $50,000 annual income for your retirement.
This makes the idea of retaining the business, what I call ‘exit without exiting’, a more attractive option. Why would you sell your business to a new owner who is going to get their money back in 4 to 5 years (based on an expected 20-25% return) while you take that same money and get 2-3% if you’re lucky.
What can you do to start preparing for Retirement?
Create some urgency no matter how far away you think retirement is for you. Tomorrow is not promised to any of us and ‘Hope’ is not a strategy.
Regardless of which retirement option you choose, they all require a degree of ‘grooming’ or ‘positioning’ the business to make it as attractive as possible to sell, close or keep.
- Maximizing your Net Profit.
- Determining your Optimum Inventory Level (OIL) and aggressively targeting any aged or non-performing inventory. OIL is the level of inventory that is actually ‘needed’ to run the business, as opposed to what you have.
- Re-ordering your fast sellers.
- Starting to transition and delegate your own skills and responsibilities to others. Everything from the finances, inventory management, staff, marketing, personal sales and trade skills.
- Getting your business in ‘ready to sell’ mode.
You need to empower, trust and enroll your team rather than doing everything yourself. Effective delegation takes time and it is not to be confused with abdication i.e. you can delegate tasks but not the responsibility.
It is wise to seek professional help along the way. Good legal advice can save you a lot of money and heartache just as good accounting advice can help resolve your taxation and compliance issues. Retail advice is also available to help you establish your retirement priorities and implement strategies to achieve them.
The first step in the retirement process is to set the timeframe i.e. when do you plan/need to be in a position to retire? And remember, hope is not a strategy and tomorrow is not a promise. Make it sooner than later.
Next, establish the gap between your required retirement income and what you currently have in place. Then it’s a matter of defining, implementing and monitoring your retirement plan.
If you need further help with strategies and advice around this topic, please contact The Edge Retail Academy at Inquiries@EdgeRetailAcademy or 877-569-8657, Ext. 1.