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Merrick, NY—While every year brings change, this year seems to have brought more than most. At The Centurion, we know the retail landscape continues to evolve. To help you start out 2016 on the best note, we asked a variety of industry experts for their take on dealing with these changes. Each replied from their own viewpoint, offering strategies and insights into the changes the year ahead will bring. Our sixth installment is from Jeff Gordon, Principal of The Gordon Company, a 50-plus year old consultancy that is committed to helping independent retail jewelers deal with the financial challenges that confront their businesses. --Caroline Stanley

The three principle areas where we see tremendous change in recent years involve the lack of capital and unavailability to obtain it, the necessity of properly managing aged inventory, and the transition decisions of jewelers as they prepare to retire.

1. Let me begin with the first, the lack of capital and its overall unavailability. One of the most notable changes in recent years has been the calling of bank notes from jewelers who previously had long-standing relationships with their lenders. Some bank calls have been so onerous as to put people out of business. Retailers tell us that they are more and more nervous about the bank debt they still may have, and prefer to run a sale to relieve or entirely eliminate that debt. Additionally, there has been a continuous drying up of lenders with available capital, and a reduction (or even elimination) of jewelers’ lines of credit. Retailers who want to grow have needed to take on an outside investor (and give up a large part of their business in return) or obtain “hard-money” loans at significant interest rates that put the jeweler at sizeable risk.

2. A second, very important area of change, and concern, is the proper management of aged inventory. This may be the single most important factor that governs a jeweler’s cash flow, liquidity, and ability to grow in areas where the business can be built. Part of this hinges on what I mentioned above: the need for capital. It may seem obvious to outside business people that the effective management of inventory is vital to any business, but we have found that many jewelers still lag far behind in their understanding and ability to deal with aged or underperforming merchandise. Many retailers either don’t have an inventory aging report, or don’t pull one so as to avoid the obvious underperformance of a large percentage of their merchandise. They somehow believe their merchandise will sell – even if it hasn’t sold in two or three years, or longer. This puts their capital holdings at serious risk to ever gain a reasonable return on investment.

3. A third main point is that of family or business transition. Many first- and second-generation storeowners are Baby Boomers who are either at retirement age or quickly approaching it, with no one ready or available to take over the business. Many Boomers’ children—Millennials--lack the love—or even interest—that their parents have for the jewelry industry, and also lack any desire to take over the business and work the way they saw their parents work for so many years. Additionally, finding someone to buy the business is almost impossible due to a lack of sufficient financing. This need for appropriate transition of a traditional retail jewelry business is one of the key changes that we see taking place, and one that, unfortunately, is confounding many jewelers.

Missed any previous installments in our series? Click here to read:

• The Luxury Market is Changing: How To Turn Millennials On To Fine Jewelry Beyond Bridal by Edahn Gohan
• How Synthetic Diamonds Will Impact The Future by Abe Sherman
• For Local Jewelers, The Future Is Brighter Than You Think by Doug Gollan
• The Luxury Market is Changing: Social Media, Hiring & Firing by Suzan Flamm, JVC
• The Luxury Market is Changing: Marketing by Ellen Fruchtman, Fruchtman