The overachievers: America's Best Jewelers 2009

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The overachievers: America's Best Jewelers 2009

By Michelle Graff

November 06, 2009

Optimism is hard to come by these days, as even stalwarts such as Tiffany and Co. and Sterling Jewelers continue to watch double-digit slides in their sales.

But the retailers who rose to the top in National Jeweler's 2009 America's Best Jewelers (ABJ) Benchmarking Survey are proof positive that being positive may help. In fact, among the most profitable jewelers responding to the survey, 64 percent expected sales to rise this year, with 40 percent anticipating boosts of 1 percent to 10 percent.

The sunny expectations didn't come easy--not this year. Overall, ABJ survey respondents reported a median drop in sales of 0.7 percent between 2008 and 2007, and average transactions fell from a median $450 in 2005, to $425 in 2008. Still, some stores have been faring better than others at keeping sales strong during this downturn.

High-profit firms, defined in the survey as those firms that rank in the upper 50 percent of all companies according to ratio of earnings before interest and taxes (EBIT) to total assets, saw sales rise 3.7 percent. Low-profit firms, those in the bottom half of the EBIT-to-assets bracket, saw sales decline 12.6 percent.

So, what's the difference between the habits of the big earners and the bottom dwellers? National Jeweler talked to a few of the stores designated as America's Best Jewelers to find out.

While the winners offer a wide range of tactics for retailers to pick and choose from, two-time winner Susan Eisen of Susan Eisen Fine Jewelry and Watches in El Paso, Texas, offers a simple business philosophy: Find out who and what you are, and be that.

For Eisen, an El Paso native who majored in art metals in college and considers herself as much an artist as a business person, this means running a store with an attached gallery space, being open to the idea of crafting pieces from unusual and not-so-fine materials such as copper and turquoise, and not spending every day staring at and fretting over her store's financials.

The real key, she says, is for retailers to figure out what works for them. For Eisen, that means breaking out of the mold of "typical jeweler" and not being timid about trying new tactics.

"I'm not afraid," Eisen says. "Artists take risks."

Getting personal, being flexible

One area that requires an artful approach, especially lately, is selling diamond jewelry--at least beyond bridal.

When asked to record sales in 14 different product categories, diamonds came out on top among survey-takers, hogging up 39.5 percent of sales volume, including diamond jewelry (28.2 percent) and loose diamonds (11.3 percent). Colored stone jewelry was next, commanding 7.8 percent of the median sales volume, followed by appraisals at 7.1 percent and karat gold jewelry at 6.8 percent.

Those pegged in the survey as high-profit have apparently found a way to sell more diamonds, despite recent challenges.

High-profit stores experienced a 6.8 percent median increase in loose-diamond sales between 2007 and 2008, compared with a median decrease of 5.3 percent for low-profit firms.

Diamond jewelry sales increased a median of 0.8 percent for high-profit firms, while low-profit firms saw them slip 14.6 percent.

ABJ winner Tyler Klima of Tyler's Gold and Diamonds in Manchester, Iowa, attributes his diamond jewelry sales increase in 2008 to increased advertising.

"I got very aggressive in my marketing," says Klima, who wrote radio spots for his store in which he reveals personal details--such as the fact that he's the youngest of three boys--but avoids crowing about sale items, or calling out specific product.

"I think that's made a lot of difference," Klima says. "People want to associate with the individual they're going to do business with. It makes me more human, more personal in their eyes."

Though radio equaled big business for Klima, he's an anomaly among top scorers. Only 38.9 percent of high-profit firms reported putting radio commercials on the air, compared with 62.9 percent of low-profit firms.

The most popular forms of marketing among all stores were direct mail, used by 71.8 percent of all stores, followed by non-partner in-store events, used by 60.5 percent, and magazine ads, employed by 55.6 percent of all stores.

Also interesting is that while Klima avoids discussing promotions while he's on the air, 55.6 percent of high-profit firms use marketing to promote specials and sales, compared with just 31.4 percent of low-profit firms.

Emerson Robbins, an ABJ winner who operates E.E. Robbins stores in Seattle, Tacoma and Bellevue, Wash., has tuned into price issues by adjusting his diamond sales to suit today's frugal consumer.

While Robbins used to avoid diamonds below SI1 clarity, he is now pushing SI2 goods with aplomb, finding new cuts, such as the Passion Cut diamond, that better hide inclusions.

These stones still look good but don't carry the hefty price tag that can come with a higher clarity rating.

"To the eye, they're still beautiful stones," Robbins says. "They just don't cert as high. I feel the industry has really done itself a disservice by selling based on certificates rather than on the individual beauty of the diamond."

A third-generation jeweler, Robbins was one of the co-founders of Robbins Bros., alongside brother Steve, but eventually opted to branch out on his own.

Today, Robbins says he still considers his operation a family business, just like 89.4 percent of survey respondents.

One good turn

In addition to having a knack for selling stones, high-profit firms managed to turn inventory more quickly than their low-profit counterparts, reporting a turn of 1.2 versus 1.0.

The median age of inventory for high-profit firms is 12 months compared with 18 months for low-profit firms, and high-profit firms say 10 percent of their inventory is more than three years old, while 16 percent of low-profit firms say the same.

Both high-profit and low-profit stores reported returning 3 percent of inventory to vendors but, when they do sell stubborn merchandise, high-profit firms do so without selling out, selling only 1 percent of merchandise at less than market value, compared with low-profit firms, which unloaded 3 percent of merchandise at cut-rate prices, the survey found.

At Duncan and Boyd Jewelers in Amarillo, Texas, ABJ winner Ronald Boyd advocates using a good inventory management system to help turn merchandise over faster. He uses ARMS software with the training provided by Focus Management.

"You need to be on some sort of inventory management system that works with you, gives you those reports and show you [what's turning]," Boyd says.

Another rule to live by: A few good vendors are better than a long list of mediocre ones. That rule is key to executing Boyd's No. 1 strategy for getting rid of aged inventory, which is trading it back.

"You have to have a relationship with your vendors," he says. "You don't need 100 vendors. You need 10 good ones."

A staff that stays together

Finding quality staffers, keeping them and training them is an issue that perplexes retailers, whether they have been open for less than 10 years or more than 40.

"Finding the right personnel and getting them trained is probably the hardest task of all," says Mark Clodius, who owns nine-year-old Clodius and Co. Jewelers in Rockford, Ill., with his wife, Monika.

Not surprisingly, high-profit firms have a better handle on human resources, survey results show.

The median annual labor turnover rate for all stores surveyed was 12 percent, but high-profit firms' turnover rate was 11.2 percent, while low-profit firms came in at 21.4 percent.

At Phil Jewelers in Anderson, S.C., owner Phil Silverstein hasn't lost an employee in three years. In describing his recipe for holding his happy staff family of six full-time employees together for so long, he sounds a bit like Dr. Phil giving advice for a happy marriage.

"We respect each other," Silverstein says. "We work things out. We ask each other questions--nobody knows all the answers. We get along every day."

Another secret to keeping staffers happy is to spread the wealth, a tactic that is apparently well-known to high-profit firms, which pay staffers a slightly higher hourly wage in every category analyzed in the survey, except information technology.

For example, the median hourly wage for managers at high-profit firms is $25.50, compared with $24 at low-profit firms. For salespeople, the difference is more dramatic, with high-profit firms paying $18 an hour to low-profit firms' $13.10.

"We go well above the [salary] norm for this area," Silverstein says. "If we didn't, we wouldn't have them. People are always wanting to better themselves financially, and we're a step ahead of that."

High-profit firms also seem to give employees a bit more freedom to make independent decisions. A total of 42.9 percent of high-profit firms let staffers make pricing decisions without a supervisor's OK, versus 27.3 percent of low-profit firms.

Learn to sell

Both high-profit and low-profit firms place similar levels of emphasis on employee training.

A total of 44.5 percent of all stores surveyed reported dedicating 21 or more hours a year per employee to training full-time employees, including 48.6 percent of high-profit firms and 47.1 percent of low-profit firms.

High-profits firms, however, seemed to place a greater emphasis on keeping training in-house.

A total of 94.1 percent of these firms ranked company-run, in-store training as very important, compared with only 79.4 percent of low-profit firms.

Low-profit firms seemed to prefer off-site external training, ranked as very important by 50 percent of these stores, versus only 41.2 percent of high-profit firms.

Mark Clodius uses a blend of both styles, conducting twice-a-week meetings in his store and bringing in outside experts, such as Harry Friedman of The Friedman Group.

Clodius says Friedman teaches the management to do statistical breakdowns detailing employees' sales weaknesses so that they can work on them.

"You don't really think about it [when you're a salesperson]," Clodius says. "You go out on the sales floor and try to help people. But if you're thinking, 'My boss tells me I should start selling more expensive merchandise,' then you're more likely to show more expensive merchandise."

How they operate

Here's a look at the vital statistics of America's Best Jewelers survey respondents.

41.5 percent are a Sub-S Corporation
89.4 percent consider themselves a family business
69.1 percent rent their facilities
79.8 percent operate just one store
30.6 percent run their only store, or their best store, in a downtown location
44.6 percent report total annual sales of $1.5 million-plus
39.5 percent of what these stores sell is loose diamonds or diamond jewelry

Source: The 2009 America's Best Jewelers Summary Data Report, Advantage Marketing Information, National Jeweler

About this survey

The 2009 America's Best Jewelers (ABJ) Benchmarking Survey was produced by Advantage Marketing Information for National Jeweler.

The survey is in its second year and is designed to identify best practices within the industry. It was conducted online between April and June and, for the first time, was done in conjunction with another industry benchmarking survey, Jewelers of America's (JA) annual "Cost of Doing Business Survey."

A total of 687 respondents filled out the JA survey while the ABJ survey garnered 124 complete responses.

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