How much to discount this Christmas

Here’s what happened last year. In 2008, other than Platinum going to $2000, business was good until the end of the summer. Like all of the years before, most of you kept on buying higher end merchandise because “guys come in and spend big bucks at Christmas.”

You were caught with your hands down as that didn’t occur. In fact what did happen was that people who wanted to shop were either facing job loss or reduced income, they cherry picked the lower price points. This left you with the higher price points that didn’t sell to pay in January.

Then in January you owed for higher goods that didn’t sell. A tight squeeze. Being business was now officially in a downward spiral, you continued to owe for goods that didn’t sell and you couldn’t “rob Peter to pay Paul” because Tom, Dick and Harry didn’t come into shop.

Many jewelers were trying to live off of old merchandise in the cases. “Please, someone buy this Ballerina pin!”

But jewelers who have had good cash flow this year scrapped the old inventory or had a big sale on it to raise cash.

Guess what they did with the cash?

1. Paid some vendors to get them off of their backs.
2. Actually bought some exciting new, lower priced lines and price points.
3. They are actually selling merchandise rather than waiting for a “schnook” to come by and buy that ring that so far hasn’t sold for 3 years. And probably won’t sell this year.
4. Continued to advertise.

So what to do this season?

1. Consider “old merchandise” to be anything over 1 year old.
2. Make a showcase by itself and put a number of pieces of old in that case. Don’t over crowd as I know over half of your store is old.  J
3. Discount the merchandise from the retail tag as such:
   a.   Over 4 years old          70% off
   b.   Over 3 years old          55% off
   c.   Over 2 years old          40% off
   d.   Over 18 months old    $30% off
4. Know that retail jewelry statistics say that once a piece hits 18 months old it has a 75-80% chance of still being in your store for 5 years!

So when customers come in and want a deal, direct them to the Deal showcase.
Some people even name the showcase:

“Say good-bye to our old friends”
“Extreme Value case”
“Retirement Case”

Merchandise 12 months and younger, try not to discount more than 15%.

Also use old merchandise as bait. If you’re selling a new piece and they want a bigger discount, instead of discounting more, use these tactics:

1. Give a discount gift certificate to be used in the future.
2. Split the above discount gift certificate into two parts. If they want 30% off new items, give them a cash 15% discount and a 15% gift card/certificate.
3. Offer them an old item for free if they buy this new items.

So if they are looking at a $1000 new ring and want a discount, see if they need more gifts.

“Mr. Jones, these are new rings and they are in high demand but as a good customer I’d like to help you. In that vein, please allow me to give to you your choice, absolutely free, any pendant/chain/ring from THIS CASE over here that sells up to $350.00. Now you’ll have 2 gifts for the price of one and the $350 ring is like getting a 35% discount on this new ring you love.”

If you keystoned the $350 ring, then what you’re giving away is your cost at $175.

$175 is only a 17.5% discount on the $1000 item. So:

1. You received $1000 rather than discounting the new ring to $650 or $825.
2. You used old merchandise to move new merchandise.
3. The customer got two items for the price of one.
4. You got rid of an old item at your cost.
5. You have a happy customer.
6. The bookkeeper is happy.

Use the old merchandise however possible to not let a customer walk.
If the merchandise is really old, you know it just might be butt ugly! Consider melting it down, taking apart and keep the stones while cashing in the gold.

For sure after the Christmas holiday is over dispose of old inventory. Some inventory has such little value it may not matter. Consider charitable donations, gifts to kids in school (mothers will come into the store) anything to move it out.

You want to look at this year to be a good cash flow year and if you have newer inventory you have a better chance of having what the customers want.

Have a profitable Day!

David Geller
Director of profits
www.jewelerprofit.com