This message contains excerpts from an article I wrote for Canadian Jeweller magazine in its April/May 2012 issue.

Inventory Control & Business Management

When I was President of GIA, I recognized a desperate need for business management skills for independent retail jewelers. In 1992, we began servicing independents with inventory control software, and training them on how to run their stores by interpreting concrete data provided through their management system. We didn’t take the romance out of selling. We simply added objective criteria to help jewelers understand their businesses, and utilize the power of quality information in making buying and selling decisions.

As industry people, we have a tendency to fall in love with our jewelry. But there is really only one criterion we should use to better understand our business: what customers buy. In the early 1990s, many jewelers weren’t computerized, and even fewer understood the importance of running their stores as a business. You’re in business to make a good living, and far too many jewelers are still not making the profit they should because they don’t have control of their inventory, their buying, their pricing, and even their selling.

Lack of Liquidity

The single biggest problem for most retail jewelers is a lack of liquidity due to capital tied up in dead inventory. We take it out every day and put it back in the safe at night. We repeat this process, often for years. We think (or hope) something will sell the next day, but the truth is that most jewelry over six months old, and especially over a year old, has little chance of selling. We are better off re-designing the piece, re-purposing it, or simply scrapping it. If we can trade products back to the supplier for something that will sell, both supplier and retailer will benefit.

A Vicious Cycle

Here’s how the scenario usually goes: A jeweler sells a new product quickly and uses the money to pay down debt to a supplier whose goods aren’t selling. It’s good to pay down debt, but if you don’t have the capital to reorder your fast seller, you get caught in a vicious cycle of using your limited liquidity to pay down debt on products that haven’t sold. Long-term supplier debt cripples a jeweler’s ability to pay the supplier whose goods sell quickly. So the key to inventory control is to first control buying. Suppliers who insist on large minimum orders often bury retailers with goods they can’t sell. How does it benefit the supplier to make such a sale when they’ll never get a reorder?

The Importance of Suppliers

Most retailers don’t understand that the single most important aspect of their business lies in their suppliers. The top five to six suppliers will create over 50% of the sales and profits; 10 to 12 suppliers will generate 70 – 80% of sales and profits. Suppliers, in large part, control your business, so it only makes sense that we have to control who we buy from, how much we buy, and what we stock. Specifically, we must not buy out of whim, expectation, or obligation. We must buy strategically. We must buy what sells.

Here are a few Business and Life tips to think about:

Business Tips

• If we spent more time praising staff about what they do right, we would be less prone to criticize the few things they do wrong.
• Already satisfied customers are your best bet as “new” customers. Don’t neglect them. Instead, nurture and cater to them.
• If you try to be all things to all people, you will be few things to any people. Instead, focus on your single, over-riding product or service.

Life Tips

• If you really want to make an impact, invest time and energy into people. That’s the only way to invest in something that will outlast you.
• It takes time for most of us to make a mark in life. Be patient. Be kind. Work hard. Work smart. And make good choices.
• When placed under daily pressures, take time to reflect. Reflection gives you time to use logic, and not just emotion.

Tags: Business, Business Tips, Crisis Management, Knowledge, Leadership Problems, Management, Responsibility, Wisdom