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Incredible business turnaround for jewellery retailer

In what can only be described as an extraordinary turnaround, an independent jeweller has transformed his store into a vibrant and profitable business after facing closure two years ago.

When the retailer wrote to Jeweller detailing the store’s dire financial predicament in late September 2013, he said he had always invested in his business and kept abreast of trends and yet nothing was working, the business was failing.

The storeowner – who asked to remain anonymous – said he felt helpless and was overwhelmed by the state of retailing and industry change, writing, “I need to be re-invented as a person. Just as the industry needs re-invention.”

He contacted Jeweller following a story about a well-known supplier that had gone into liquidation and, at the time, our article stated: “We don’t normally make our reader’s letters the subject of a specific story, but in this case we feel the heart-felt explanation about the battle for small business to deal with the enormous change in the digital age is worthy of publication.”

He described himself as a 'proud jewellery retailer' and his letter was a cry for help with a difference; he was not pointing the blame at other people (as is normally the case) nor had he ignored the changes taking place across the jewellery industry and general retailing.

At the time, the business had an annual turnover of around $1.6 million and was facing liquidation. So how did the jeweller transform his family business, which had been trading for 70 years over three generations, into an operation approaching $3 million in revenue and generating healthy profits? 

Sack customers

Some strategies were obvious; he re-negotiated a 20 per cent rent reduction with the landlord and shopped around his banking requirements. While these were quite observable decisions that would have an immediate impact on profitability, other options were more difficult.

The jeweller decided to ‘sack’ customers, embrace CAD/CAM technology and target a different customer base.

“We were trying to be everything to everyone by carrying a broad range of stock and offering a wide range of traditional [jewellery] services,” he said. ”We reviewed all the services we offered, which ones were profitable and which were ‘debt’ to the business, keeping in mind that you have to service existing clientele and try and find new clientele. We stopped offering valuations as a service to people who had purchased jewellery overseas or from other places.”

He explained that after careful analysis he realised that a charge of around $100 per valuation was costing the business more than $75.

“We found that we were offering a great jewellery valuation service but not obtaining those people back as customers. So now we only value our own jewellery for our existing customers or items that are owned by customers who do business with us. If they have done business with another party in Australia or overseas, we politely advise that we do not do their valuations,” he said.


The store also stopped providing jewellery cleaning and watch battery replacement services. “It could be costing you between $15,000 and $30,000 a year to service people who would never ever be profitable customers. It was the old ‘if we do the right thing by these people, they will return’ and we found that it was not being reciprocated in such numbers that made us money.”

The largest change came with the introduction of CAD/CAM jewellery design and manufacture, which created a new customer base. While the retailer acknowledged that major learning curves were involved, he believed it was vital for businesses to embrace technological change.

“We started off with quite low investment in that [CAD/CAM] and we took equipment, which was considered almost hobbyist, and have now turned that into a proper manufacturing process. The learning curve was between 6 to 9 months. It took that long before we started to produce the high-quality jewellery that is expected from our company, to replace handmade jewellery, which, in my particular case, is no longer profitable.”

Competitive

The improvements were staggering, with the jeweller commenting that the store could now “manufacture jewellery cheaper than the overseas bagman who visit our store can sell to us. That does not mean we produce it cheaper than they produce it, but we produce it cheaper than they can afford to sell to us”.

In 2013, the store was unprofitable with $1.6 million turnover; however, with current turnover close to $3 million, the retailer explained that, even though margins were less, because of increased volume, “We are a profitable business”.

The next change was around staff requirements. When the business was facing closure there were the equivalent of nine fulltime employees and while it has increased to 10, the employee mix is very different. The ‘re-invention’ of the business meant there was a need to change staff and introduce new skills.

“We cut down on people who would be considered traditional salespeople and went for people with more professional skills such as CAD/CAM design work and people who could also help me on the bookkeeping side of the business,” he said.

With a change in focus, came a change in the type of customer and with that came a different selling approach. The retailer said the biggest shift came about when he realised that rather than selling what the store had in stock he needed to sell what the customer wanted and needed by focusing on custom-made jewellery.

The introduction of CAD/CAM technology as the mainstay for design and manufacture resulted in sales quickly increasing. The new technology meant sales staff weren’t really ‘selling’ but instead demonstrating the creation of a jewellery piece and working with the customer on the design as opposed to the ‘old skill’ of closing the sale on product in a showcase.


“If you want to be clinical about it we now have a sales process. We have a computer-based system showing customers what we can do for them, how we do it, and clearly the salespeople have to have far greater computer skills than they have ever needed in the past.”

An unexpected and unintended consequence of the new approach was the shift to a younger customer demographic. “By embracing CAD/CAM and 3D printing technology, we have definitely increased customers between the ages of 20 and 40, whereas the traditional jeweller’s major [customer] base would be 40 to 70 years old.”

The shift was gradual and flies in the face of conventional wisdom that younger people shop on price alone with less regard for quality.

“The people who buy from us want to have complete control of the design and purchasing process of the size, colour and clarity of diamond. It seems there is an enormous market out there that make a decision that this is the jewellery design they want – not what we can get for them but what they want – and that is where our customer service is focused.”

Increased selling prices

Not only has the technology increased sales but also it has dramatically raised average selling prices, which was one of the major reasons for a turn around in profitability. Prior to the store’s ‘re-invention’ the average handmade ring sale was $6,000; however, it now it exceeds $8,000.

“And importantly, customers will say, ‘I am very happy and feel in control of the process’. This is a customer comment that has been made to me several times, and is about the process of which they have very limited knowledge,” the jeweller explained.

“So, in the past the customer was scared of buying items between $10,000 and $20,000 but by putting them in control and showing them how it is done and being open and upfront and, to use a current buzzword, to be ‘transparent’ in how we do things, we have just given the customer the confidence to do ‘deep’ business with us.”

He added that he was extremely surprised by the number of sales between $12,000 and $15,000.

The store’s third-generation heritage had always been based on quality handmade jewellery; however, competing with overseas product was difficult and meant that such pieces were no longer profitable.

“As a traditional jeweller, I still believe that hand-making is the epitome but I am absolutely enthusiastic with the precise nature that we can get with CAD/CAM work and with the new jewellery manufacturing techniques – the product quality is way in excess with the old casting that was done, which I started doing 40 years ago. We produce a better product today in a cheaper method than we have ever produced.”

In terms of advice for other retailers who might be facing similar difficulties to his in 2013, the jeweller offers this: “Embrace the ‘new’ and concentrate on profitable services; those where you have an advantage. And above all, listen to your customer – even more so than in the past. They are educated, prosperous and aware of their options.”

More reading
Original story - Jewellery retailer calls for help











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Saturday, 18 January, 2020 05:16am
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