Prologue
A Necessary Evil?
A mother of several young children was working in the house one morning. She realized that she had not heard from the children playing in the backyard, and looked out the window to see what they were doing. To her amazement, they were all quietly huddled together in the center of the yard. Curiously, she went outside to see what held their interest. As she approached them, she could see some furry animals in the midst of them. She thought they were playing with the neighbor’s kittens, or maybe they caught some baby rabbits from the nearby woods. When closer, she was astonished to find the children playing with a family of baby skunks.
Run! Run Children Run, cried the mother frantically.
The children, not knowing what concerned the mother, jumped to their feet. Grabbed a skunk, and ran towards the house.
From all the excitement of the mother screaming, the children grabbing them and running, the skunks became frightened. They, doing what skunks do, lifted their tails and left a trail of their presence all the way into the house.
That mother, right then, standing in the middle of the yard, felt the same way many of you feel trying to run a shop. Everything seems to be going along smoothly and then without warning, up comes the tail, and out comes the odor.
Work from the shop seems to be done on time, then in walks a good customer to pick up her ring. You look for her ring and it has not even been started, and up goes the tail. Profits seem to be finally up in the shop. Then a stone breaks or a piece of jewelry becomes damaged, and up goes the tail. There is a back log in the shop and it seems like the harder you work the farther behind you get, and the tails are flying up all over the place. You hire an additional jeweler and the only difference seems to be that payroll is higher, and on and on it goes.
In addition to all the problems they cause, Repair Departments Do Not Make Money!
I remember vividly the first time that I heard these words. I was in college studying to become a jeweler. From time to time, the school I was attending would bring in a guest lecturer. The lectures were usually well attended; college students do not need much incentive for missing class.
I attended many of these lectures in my three years at college. Today, I do not remember what any of them said except one. On one occasion, a local jewelry storeowner was the guest speaker. He spoke for over an hour. I do not remember much of what he said except this statement. “Repair Departments do not make a profit in any jewelry store in America. They are the necessary evil of the retail jewelry industry.” Wow! What a motivator. I could not wait to get back to class to learn more about becoming a jeweler, now knowing that for the rest of my career I was going to be a “necessary evil” to my boss. Yeah right! As I recall, I took off the rest of the afternoon.
This storeowner overstated the fact saying that no store makes a profit in their repair department, but he is not far from the truth. Across America, the 80/20 principle rules in most retail jewelry stores. That is the shop causes 80% of the headaches and only 20% of the income (and 0% of the profits).
This needs to change. A store should not only make a profit in their repair department, but in order to survive in the future, most will need to.
There was a time when margins on diamonds and other jewelry were high enough to cover the expenses of the shop. However, in today’s competitive retail environment, with discount store chains, TV shopping channels, and the Internet selling jewelry, this is rapidly changing. With price sheets, grading reports, and stock numbers in hand, consumers are price comparing now more than ever.
With more and more pressure on retailers to keep margins close on the products they sell, the stores who survive will be the ones who look to other areas of their business to generate a profit. The shop is a prime target in most stores. In the years ahead, the shop may very well be the most important asset for the independent retail jeweler. It is now more important then ever to operate the shop professionally and profitably.
This concept is not new to business in America. In many industries, stores need to make every aspect of their business turn a profit in order to survive. For example, look at the automobile industry. One car that rolls off the assembly line is the same as the next car that is produced. The car each dealer has for sale is just like the same model car at another dealer. Price comparisons by consumers and price list are wide spread in the industry. Consequently, margins on new cars are very low. Car dealers can not cover losses in the repair shop by the profits made on new car sales. Because of this, car dealers run profitable repair shops.
The computer industry is another example. Discount stores, Mail Order companies, and Internet sales dominate this industry. For an independent retail computer store to survive they must provide technical support. This service must be provided at a profit.
In the ever-changing business environment, retail jewelers are compelled to do the same. If a store is to survive in the future, not only can it not support a loss in the shop; the shop must contribute to the profits of the store.
Years ago dinosaurs roamed the earth. Their inability to adapt to their environment caused them to become extinct. The history of American business is cluttered with similar dinosaurs, businesses that at one time were leaders in their field. However, because of their refusal to change with the business environment, like the dinosaurs before them, they are now extinct.
The retail jewelry industry is no different. The business environment has changed over the years, and business practices must change along with it. No longer can the shop be the Necessary Evil, the Achilles Heel of the retail jewelry industry. The shop must be able to stand on its own and provide its share of profits to the store. Then, the store will not just survive in the future, it will THRIVE.