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Buying the right inventory is a major key to the success of a Retail Store. Using the proper tools to achieve this is just as important. To control inventory, there are several buying problems that must be surmounted.

The following will addressed some of these major problems and point out steps necessary to overcome them:

I.      Most Retailers don’t have a Buying Plan.

  • Jewelry Retailers think that if they pour all their profits and credit into inventory, they will get all the sales. Statistics show that eight out of every ten people coming into the store walk out without buying.  Of the two who buy, one buys a repair.  These are terrible statistics and if you measure them in your store, you will be horrified to find out exactly how true they are.
  • Why do people walk out without buying? They come to your store because they want to buy from you — they walk out without buying because you don’t have what they want to buy.  The hardest part of a sale is getting a customer into the store, and yet, we so easily let them walk out without buying.
  • Customers buy what they like. The store is empty of the merchandise customers want to buy because these items are sold but never replaced. The secret is to buy what your Customers buy.
  • Jewelers and their staff tend to buy what they personally like. The store is full of their poor choices.
  • To build a Buying Plan, the right sales and inventory information is crucial. Reports must be set up for each department and the information must be meaningful.  Not only should the Reports tell you what is selling (and in what quantities), but they should also tell you what is not selling.  You should know what return on investment each department brings in.  You should know what mark-ups are being achieved, what average retail sale is being achieved, and what should be achieved in each of these areas.
  • The Average Retail Sale is the most powerful tool at your disposal. You cannot buy intelligently if you do not know or understand the power of the Average Retail Sale.
  • You must be able to recognize your aged inventory and the potential disaster it poses. Removing the old stock from your cases will show you just how little stock you really have.  Statistics show that if a piece of jewelry doesn’t sell in four months, there is a good chance that it will never sell.


II.     Most Suppliers don’t have a Selling Plan. 

  • Most Suppliers’ sole Plan is simply to “sell jewelry.”
  • Whether or not stock repeatedly sells in the Retailer’s store is not given the focus it deserves. A presentation to the Retailer is made by starting at the top tray of the Supplier’s samples and moving through to the bottom.
  • Inventory that has been sold is automatically reordered without consideration as to how long that merchandise had been in the store before being sold.
  • No thought is given to “types” of inventory (g. Diamond Earrings, Diamond Pendants or Diamond Rings) or if there is an overstock (or understock) of merchandise in any one Department or category.

Ask yourself these questions:

  • Does your Supplier want to know how much you plan to spend and what you need to strengthen each of your Departments and total sales?
  • Does your Supplier talk about the Average Retail Sale of their stock compared to the Average Retail Sale of your store?
  • Does your Supplier talk about price points?
  • Does your Supplier talk about profit or stock that doesn’t sell?

The reason the Supplier cannot “plan” with a Retailer is the lack of information as to what is happening within the Retailer’s store.  This is the Retailer’s fault.  The Retailer should have the information and a Plan and must be in control of that Plan and the situation.


III.          Debt and the lack of liquidity destroy self esteem and buying opportunities.

  • Most Retailers buy beyond the limit of their credit. This puts a strain on good relationships with their Suppliers.  It puts a strain on their marriage and it stops their sons & daughters from wanting to come into the business — especially when there is no profit to show at the end of the year.  Even if there is a profit, Retailers are not enjoying the fruits of their labors — there are many wealthy people out there that believe they are paupers.
  • Unplanned and out of control debt can destroy a business and a family. Well-planned debt can develop a business at an accelerated pace and also bind a family.
  • Lack of profit and a huge amount of inventory that does not sell causes debt.

Too much inventory (that doesn’t sell) is bought and not enough fast selling stock is replaced once it is sold. 

  • Most Management Instructors teach that 20% of a store’s inventory will produce 80% of its sales, but few will tell you how to find that 20%. The “80-20 Rule” does not apply to stores that have accumulated large holdings of dated inventory that has built up over the years.  Most Jewelers mistakenly believe this is a good investment when, in reality, it is a disaster.  
  • The only attention their inventory gets is the good old “Annual Clearance Sale.” These sales destroy profitability by selling off the good inventory and leave only the old stock still sitting on the shelves. (6% of the total inventory produces approximately 70% of the sales in these cases).
  • When inventory is properly controlled, $100,000 (cost) in inventory should produce about $600,000 in retail sales and, proportionately, $1 Million (cost) should produce $6 Million in retail sales. This is based on a 100% mark-up (50% Gross Profit) and a 3-times inventory turn.  (Retailers readily ridicule statistics like these if their buying is out of control.)
  • Inventory control, done correctly and with a Plan, builds a business to great heights and profitability. A business using a strong Plan will quickly expand and can develop into a multiple-store business.
  • Relatively few people have the ability to successfully run a business and employ people. Once you develop this ability, you will be able to build your business and provide employment for many people. You will be able to pay your employees a good living wage and you will be reward by making a lot of money in the process.

To reach new heights, you must be able to open your mind and draw from the wealth of knowledge of those who have been there before you.  Listen, learn and act accordingly.  If you develop and use the tools available to you, your Plan will come to full fruition.