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Time for the industry to grow again

The jewellery industry is now in its third consecutive year of difficult trading conditions, and most people may not be aware that the current downturn has resulted in a greater drop in jewellery sales than in the recessions of 1974/75, 1983/84 and 1991/92.

A few hundred jewellery stores have closed their doors over the last few years. However, at Nationwide Jewellers, our view is that it is time to start growing our businesses again and to move “Beyond the New Normal” – in fact, this is the theme for our conference in June.

For the first two of the above recessions I was at Hooker Retail. We had about 200 stores turning over $250 million a year by 1990, and I remember clearly the three strategies that we decided upon to cope with the unfavourable conditions: increase market share, increase efficiencies and reduce costs.

For independent retailers, there are usually only two costs of significance – labour and rent. If labour costs are above 22 per cent of sales, then they are perhaps a bit high. That said, in most cases of a high labour-to-sales ratio, the actual problem is low sales.

"In tough times it is even more important to identify and improve poorly-performing departments"

As a result of the trading conditions over the last few years, many retailers are also finding themselves with rents above the industry benchmarks. However, there are currently significant changes taking place in specialty retail rentals – most leases are being renewed without increases, and in some cases, decreased rents.

The one cost that we were not allowed to reduce was marketing, as this helps to increase market share. Today, we need to remember that our market is not just jewellery, but in fact all discretionary spending.

A big difference from the ’70s and ’80s to now is the fragmentation of marketing channels, and the reduced reach and higher cost of mainstream media.

Today, jewellers need to have quite a few different marketing activities in place. The bare minimum would be:

  • An engaging window display
  • Good signage
  • A mobile-friendly website
  • Social media, with regular high-quality posts
  • E-marketing

At our June conference, Nationwide will be releasing what we call a ‘Marketing Parthenon’ with 16 marketing activities, plus 20 promotions to draw from, complete with in-store, social media, and e-marketing support materials.

In an industry with an inherently low stock turn rate (STR), the emphasis always needs to be on marketing – and in the current conditions, it is critical.

To make our businesses more efficient, one thing we need to be able to achieve is the same sales, or hopefully more, with less stock. We can also use buying and pricing efficiencies to increase sales.

At Nationwide we advise members that the best measure of stock performance for retailers has always been the STR. In tough times it is even more important to identify and improve poorly-performing departments and ranges. In our Retail Jewellery Business Management Course, we show retailers how to ‘drill down’ using the Management Report available in the SWIM and Retail Edge systems.

If the STR for diamond earrings is 0.7, which means the average item takes 17 months to sell, our job is to find a way to improve. We need to look at how and where stock is displayed.

Is the average retail price of items more than 20 per cent higher than the average sale price? It may be that the stock being purchased does not match what customers are buying.

If your point-of-sale system does not readily give you the information above, then it might be worth considering a new system. A lot of retailers choose stock systems because they are easy to use or low-cost, but priority needs to be given to a system that provides the information – on one page – that allows you to manage your sales, gross profit and stock easily and effectively.

If a store has annual sales of $500,000 and a STR of 1.0, which means that the average item takes 12 months to sell, a small improvement in the STR of just 0.1 can add approximately $25,000 to your bank account.

All this may seem like a lot of work, but unfortunately retail requires attention to a lot of details!

Name: Colin Pocklington, B Bus, FCPA, FGIA, FCIS
Business: Nationwide Jewellers
Position: Managing director
Location: Sydney, NSW
Years in the industry: 46 years

SAMS Group Australia

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