Once in a while jewellery sales dip due to circumstances beyond the control of a business. One such time is when gold prices skyrocket. Yet the jewellery business can continue by working around a slump in sales. Instead of fighting shy, business must bring in out of box solutions to circumvent the problem and ensure sales momentum continues…..
Slump in jewellery occurs occasioned by rising gold price or falling real income or smouldering crisis of political, economic or social nature. Perhaps, a mixture of two or more could cause fairly deep slump. The speeds in which these causes impact sales vary. For example spike in the price of gold is reflected in plummeting sales in a medium pace whereas declining real income takes its toll on spread out basis. Crisis of political, economic and social nature is an enigma. Faced by such a crisis the sale of gold jewellery ranges in the spectrum of buoyancy to slump. Let me take the rise in gold price scenario and see how a business can work around slump in sales.
For the last five years gold price is on upward trajectory; on average the price is lifted 25% year on year basis. When gold price soars it means jewellery business has two set of results. Whatever the business holds as bottom stock in display or in store need to be adjusted for the upward price revision, leaving the cost of manufacture unchanged. On the other hand entry stock price has to be worked out with both increases in gold price as well as any additional cost of manufacture.
How to work around the slump?
1. Concentrate on cosmetic changes and tactical measures first. Look at your line of products and value addition. Value addition ladder goes one step above from mass jewellery to designer jewellery thence to branded jewellery. Leave branded jewellery out; you have two options left. Get customer feedback on designer and mass jewellery and chalk out a scheme of passing the benefit of discounted prices. Give more to the retailors if you have them; if you adopt direct sales ensure customers get deduction in price without fail. One caveat: your net margin on the product line must be at-least equal to your cost of capital
2. Review your product line once again. I have already said something about cost of capital. Extend that to the operating profit. Promote product lines that give you a healthy operating profit and phase out the laggards for the time being
3. On the same page of costing, assess the behaviour of direct and indirect cost; you cannot do much about direct cost. Still you can control the overheads and how these are absorbed into the price of final products. Sometimes reduction in absorption rate of indirect cost can help keep you float
4. Invigorate your customer relationship by re-focussing on items like personally assisted sales and third party promoted sales. Your selling people must be geared to explain the salient features of the jewellery products to the customer in a convincing manner and to do three things as Sanjay Kothari Chairman of Gem & Jewellery Export Promotion Council of India (GJEPC) urged: create emotional connect between customer and product, inspire customer confidence in the product and afford the customer a new experience in buying. Let me pop in with a quickie: look into aspects of rewarding sales people who sell line of products that have higher operating margin
5. Go extra mileage in sale promotion. Undertake customer presentation outside your store; allow customers to touch, feel and wear your jewellery products and get the spark of life and luxury. Capitalize on events, festivals and remembrance days during which sales are generally at peak levels
6. Finally, never forget to milk the existing customers who come for repeat orders; more precisely screen the wealthy amongst them and expose them to designer and branded products that you can sell these replenished with gift items. Equally, you must go through your buyer list and get in touch with those buyers who are in vicinity but have not visited your store lately.
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