When it comes to watches, size and financial muscle matter, but that doesn’t mean the category is dead for smaller stores, writes David Brown
In the past we have made some comparisons between smaller stores (under $1 million in sales) and larger stores (over $1million). Previously we have focused around sales, gross profit, margins and stock turn but this month we delve further into the make up of sales – what percentage contribution comes from each of the major departments in a smaller store versus a larger store. This may provide a key to the success of larger stores’ sales achievements. Below is a comparison between small and large store percentage of sales makeup:
As the data shows, stores with less than $1 million in turnover are achieving a much higher percentage of sales from diamond product than larger stores. Smaller stores are achieving 8.4 percent from diamond ring sales versus 7 percent for the larger stores. In terms of diamond jewelry, overall the figure is 52.7 percent for smaller stores against 50.1 percent for larger stores. This is a change from previous analysis where generally the bigger stores were found to be achieving better in this area as a percentage of sales.
Colored stones likewise tend to be a bigger contributor to smaller store sales than larger ones with 10 percent of sales being colored jewelry versus 8.5 percent in the larger store. The trend continues with gold (10 percent versus 7.1 percent) and silver (15 percent for the smaller stores and 12.6 percent for the larger).
Obviously with 100 percent of store sales coming from some product then there is something providing a greater contribution to the larger store sales than the smaller ones. This shows up as being watches (and also repairs and miscellaneous; although we don’t measure repair figures in this report they explain the difference between the percentages shown and 100 percent of store sales).
So why the large difference in watch sales? Smaller stores find watches contribute only 3.1 percent of their store sales. This is nearly three times higher at larger stores, at 10.8 percent. Some of the reason could be the preference for purchasing only bigger ticket watches from a jeweler, with lower priced watches appearing in discount stores and other general merchants. Given the average value of a Tag Heuer or other high-brand product this tends to be more the preserve of the higher-end stores that can devote both space and money to developing this side of their business. So is the watch market dead for the smaller retail jeweler? Watches can be something of a commodity as it’s easy for customers to price shop on brands. That said, any business can create added value by building an offer around the watches they sell to differentiate themselves from the competition.
Here are some suggestions:
1 . Extend the manufacturers warranty at your own cost: Doubling the warranty over what the competition will charge can help swing a sale but carries minimal risk. Most problems will show up during the initial warranty period and the number of cases of customers coming back to claim the extended warranty is relatively low compared to the extra sales generated.
2. Offer free battery replacement: Again an effective selling tool and one that doesn’t have a lot of cost with it. Yes, you miss the battery revenue (which you may or may not have got again anyway) but it drives customers back to your store where a savvy salesperson will be able to show them your stunning jewelry ranges while they wait.
3. Replace the first strap for free: Again, an added value that often doesn’t get claimed but can help close the sale. The markup on straps keeps this low cost and again encourages the customer to browse while they await their new strap.
4. Guaranteed trade in on new watches bought: This can again be a great way of getting the follow-up sale when the old watch eventually dies, plus is a great way of closing the initial sale.
The important thing to understand is that you need to sell more than just the product. If you only sell commodities you will be priced shopped. I’m reminded of a Tom Peters story from several years ago about four self-service gas stations on competing corners all selling petrol at the same price. One did a roaring trade over the other three … because although it was “self serve” it still pumped the gas for you! Look at ways to increase your value proposition and it will help take pricing out of the equation.