Articles and News
Too Much Inventory? An Industry-Wide Problem, But What To Do With It? | July 03, 2019 (0 comments)
Pompano, Beach, FL—Increasingly, we are seeing fine jewelers moving to a much more modest level of inventory to reduce their drain on capital and to create more and more custom-design jewelry. This is understandable for two main reasons: 1) No one can afford to make buying mistakes that absorb cash flow and make monetizing unwanted merchandise a huge, long-term problem; and 2) computer aided design (CAD) technology has become so prevalent and affordable that customization is no longer a feat for only the vastly experienced hand craftsman.
When you add these factors to the mentality of most Millennials (and Generation Z,, who are graduating from college and now entering the workforce), who want things “their way,” you have a formula that demands your attention now and in the future.
We are also seeing many long-time brick and mortar jewelers reduce their store footprints and become “by appointment only” or “private” jewelers, catering to their more exclusive clientele who seek larger, finer goods in a personal setting that provides a richer experience. Sometimes this is done at retail on the ground level, but very often these professionals opt for a nice office in a multi-story building.
Many jewelers aren’t ready to retire, but want to get away from the day-to-day grind. They want to take advantage of a more relaxed lifestyle while not getting completely out of the business. So becoming a “private jeweler” is very popular today, and reduces the need for excessive inventory, and maybe only a few important pieces that cater to their upscale clients.
But what to do with the rest of the inventory? Since most jewelers’ assets are tied up in inventory, they must monetize a great portion of it to retire comfortably, transition the business to a new owner or heir, or just downsize it. Scrapping it gives the lowest return, maybe 15% or 20% of what you have in it. Selling it to a close-out merchant might get you a touch over scrap but not much more.
The bottom line to all these trends is that aged and under-performing inventory is not just your problem, it’s an industry-wide cancer that stalls businesses at best—and forces them out of the retail industry at worst.
If you are at a point where you are considering such a restructuring of your business (or exiting altogether), you are at one of the most crucial times in your business since you started it or took it over. How can you maximize your return on investment and create a result that meets your individual needs?
You can try to sell your store to a qualified buyer. Unfortunately, there aren’t many, and those less qualified will have a hard time getting a loan from a bank or generating enough cash to buy it. Then there’s the question of price. Most jewelers think their business is worth more than what the actual books will show. Often a child, relative, or employee has demonstrated the ability to run the business effectively, but how are they going to pay you? Usually over years—and with some degree of measured risk to you if they falter.
If you want to stay in business in a new format (like being a private jeweler), you need inventory solutions that free you to pay off debt, invest in fresh merchandise, develop new designers, expand your mailing list, and prepare for a successful future. Whatever your future plans are, inventory liquidation sales are very effective at getting the majority of your capital investment back in the form of cash, and over a relatively short period of time. There are other methods to liquidate unwanted jewelry, but there’s still no guarantee the merchandise will sell, and it costs you money just to hold on to it, keeping you from your future dream.
The Gordon Co.’s extensive experience provides a wide range of services to maximize our clients’ return on investment of underperforming assets. We tailor our services to meet specific needs and achieve your goals. Our goal is to be your strategic partner to accomplish your stated objectives. Some of the primary services we provide and events we conduct for upscale retail jewelers include inventory reduction events, cash raising, retirement sales, store relocation events, strategic store closing, store consolidations, ownership transition events, going out of business, and more. For information, visit www.gordonco.com or call (800) USA-GEMS.