Southern Jewelry News
  • Featured
    • All
    • Featured
    • Featured Retailers
    • Retailer Roundtable
    • Sponsored Content
    • Supplier Spotlight
    Corinth Jewelers opens fabulous standalone store
    Positive Outlook for Holiday Sales
    Riding the Wave with Essential Lab Grown Diamonds in a Changing Market
    Saban Onyx helps independent retail jewelers get fancy
  • Latest News
    • All
    • COVID-19
    • Furry Friends
    • Industry Awards
    • Industry Events
    • NRF
    • On The Move
    • Other News
    • Tradeshow News
    • Video
    • What's New
    JA members push for security, credit reform in D.C.
    Columbia Gem House opens raffle to support Sea Turtle Rehabilitation
    CD Peacock partners with Foster Love to support Chicago’s foster youth
    NDC and Lorraine Schwartz announce the 2023 Class of Emerging Designers
  • Podcast
    Episode 44 -John Carter, From Small Town to Big Dreams of Jack Lewis Jewelers
    Episode 44 -John Carter, From Small Town to Big Dreams of Jack Lewis Jewelers
    Dangers of Jewelry theft and how to prevent them 350
    Episode 43 -Kenny Mullins, Dangers of Jewelry Theft and How to Prevent Them
    Inside the Generational Legacy of David Douglas Diamonds
    Episode 42 -Doug Meadows, Inside the Generational Legacy of David Douglas Diamonds
    An-Inspiring-Tale-Behind-50-Years-of-Jewelry-Design-and-More
    Episode 41 -John Atencio, An Inspiring Tale Behind 50 Years of Jewelry Design and More
    Episode 39 -Brittany Jones,95 Years of Excellence and Legacy of JF Jones Jewelers
    Episode 40 -Brittany Jones,95 Years of Excellence and Legacy of JF Jones Jewelers
    The Rise of Luxury Handbag Trend in Jewelry Stores
    Episode 39 -Frederick Mannella, The Rise of Luxury Handbag Trend in Jewelry Stores
    Episode 38 – Kevin Patton, Gem-preneur Family Legacy of Pattons Fine Jewelry
    Episode 38 – Kevin Patton, Gem-preneur Family Legacy of Pattons Fine Jewelry
    Technology Meets Our Values
    Episode 37 – Kyle Bullock, Technology Meets Our Values
    A Pandemic-Born Success of Two Jewelry Visionaries
    Episode 36 – Brooke and Chase Brinson, A Pandemic-Born Success of Two Jewelry Visionaries
  • Columnists
    The Story Behind the Stone: Just Jewels
    Safeguarding High-Value Retailers: Unveiling the cyber risks and effective countermeasures
    4Cs of Diamonds? Here are the 4Cs of Jewelry Marketing to help you sell them
    Applied Marketing 101: The Next Big Thing
    Applied Marketing 101: The Asteroid Approaches
    The Story Behind the Stone: Oops there it is!
    Image of Chuck Koehler
    Cool New Things from the Atlanta Jewelry Show
    Image of Chuck Koehler
    The Retailer’s Perspective: It’s Springtime in September
    Barbiecore Bling! Are you in?
  • Classifieds
  • Subscriptions
    • Newsletter Signup
    • Print Subscription
  • Digital Magazine
    • Southern Jewelry News
    • Mid-America Jewelry News
    • Archive
No Result
View All Result
Southern Jewelry News
  • Featured
    • All
    • Featured
    • Featured Retailers
    • Retailer Roundtable
    • Sponsored Content
    • Supplier Spotlight
    Corinth Jewelers opens fabulous standalone store
    Positive Outlook for Holiday Sales
    Riding the Wave with Essential Lab Grown Diamonds in a Changing Market
    Saban Onyx helps independent retail jewelers get fancy
  • Latest News
    • All
    • COVID-19
    • Furry Friends
    • Industry Awards
    • Industry Events
    • NRF
    • On The Move
    • Other News
    • Tradeshow News
    • Video
    • What's New
    JA members push for security, credit reform in D.C.
    Columbia Gem House opens raffle to support Sea Turtle Rehabilitation
    CD Peacock partners with Foster Love to support Chicago’s foster youth
    NDC and Lorraine Schwartz announce the 2023 Class of Emerging Designers
  • Podcast
    Episode 44 -John Carter, From Small Town to Big Dreams of Jack Lewis Jewelers
    Episode 44 -John Carter, From Small Town to Big Dreams of Jack Lewis Jewelers
    Dangers of Jewelry theft and how to prevent them 350
    Episode 43 -Kenny Mullins, Dangers of Jewelry Theft and How to Prevent Them
    Inside the Generational Legacy of David Douglas Diamonds
    Episode 42 -Doug Meadows, Inside the Generational Legacy of David Douglas Diamonds
    An-Inspiring-Tale-Behind-50-Years-of-Jewelry-Design-and-More
    Episode 41 -John Atencio, An Inspiring Tale Behind 50 Years of Jewelry Design and More
    Episode 39 -Brittany Jones,95 Years of Excellence and Legacy of JF Jones Jewelers
    Episode 40 -Brittany Jones,95 Years of Excellence and Legacy of JF Jones Jewelers
    The Rise of Luxury Handbag Trend in Jewelry Stores
    Episode 39 -Frederick Mannella, The Rise of Luxury Handbag Trend in Jewelry Stores
    Episode 38 – Kevin Patton, Gem-preneur Family Legacy of Pattons Fine Jewelry
    Episode 38 – Kevin Patton, Gem-preneur Family Legacy of Pattons Fine Jewelry
    Technology Meets Our Values
    Episode 37 – Kyle Bullock, Technology Meets Our Values
    A Pandemic-Born Success of Two Jewelry Visionaries
    Episode 36 – Brooke and Chase Brinson, A Pandemic-Born Success of Two Jewelry Visionaries
  • Columnists
    The Story Behind the Stone: Just Jewels
    Safeguarding High-Value Retailers: Unveiling the cyber risks and effective countermeasures
    4Cs of Diamonds? Here are the 4Cs of Jewelry Marketing to help you sell them
    Applied Marketing 101: The Next Big Thing
    Applied Marketing 101: The Asteroid Approaches
    The Story Behind the Stone: Oops there it is!
    Image of Chuck Koehler
    Cool New Things from the Atlanta Jewelry Show
    Image of Chuck Koehler
    The Retailer’s Perspective: It’s Springtime in September
    Barbiecore Bling! Are you in?
  • Classifieds
  • Subscriptions
    • Newsletter Signup
    • Print Subscription
  • Digital Magazine
    • Southern Jewelry News
    • Mid-America Jewelry News
    • Archive
No Result
View All Result
Southern Jewelry News
No Result
View All Result
Home Columnists

Is your inventory what you need for your long term goals?

David Brown by David Brown
April 2, 2014
Share on FacebookShare on Twitter
Reading Time: 5 minutes

In our last article (find it at www.southernjewelrynews.com) we focused on the GAP in sales figures required and the level of gross profit needed to achieve your long term financial goals.

If you have completed these steps then we are ready to answer the question, “how much inventory do I need to achieve my sales budget?” … otherwise referred to as the optimum inventory level (OIL).

A definition of OIL is:

Enough inventory to give your customers the best possible choice, to give you the best possible return on your investment and to allow for sustainable growth.

The objective here is to help you understand and calculate your own OIL, however because this is a complex and highly important process it will be broken into smaller steps.

When calculating your OIL it is important to take into account other business circumstances such as:

1. Is your business growing, static or declining?

2. Are you intending to include new product ranges in your ‘buying plan’ to boost certain areas of your business?

3. Are you planning to drop certain product lines that no longer fit your business model or market position?

4. Categories which may show a below average gross return on investment (GROI) but deliver a high return on effort (ROE) … more on this later.

Having taken these factors into account, you are now ready to calculate your OIL, but do so understanding that GROI is not an exact science, but rather a “Rule of Thumb.” 

Also, remember that it is difficult to sell what you don’t stock – in other words investment precedes dividends.  You don’t get interest from your bank until you deposit some money, and so it is with retailing.

Arguably, it is possible to achieve a GROI of 200, i.e. $200 of gross profit per annum from every $100 invested in inventory.  This should therefore be the basis for calculating your OIL if you are striving for “best practice.”

However, because most stores are achieving well below this, a more realistic “Rule of Thumb” for a growing retail business is that every $1 of well chosen, well managed inventory will produce between $2.50 and $3 of retail sales per annum (excluding repairs, custom designs and special orders). 

That means if your inventory level is $100,000, you should be achieving between $250,000 and $300,000 of retail sales. 

Looked at another way, using our example of ‘GAP’ sales of $1,062,265 from the last article the OIL would be between $354,088 ($1,062,265 ÷ 3 = $354,088) and $424,906 ($1,062,265 ÷ 2.5 = $424,906).

Brown-April

Important: Anything less than this level of performance and you are under performing which means you either need to address the lack of sales compared to the inventory you are carrying or you need to address the excess inventory.  Our preference is that you consider both before deciding on a strategy because often the inventory is not the real problem … a lack of sales is. 

Action Steps:

1. Note any changes to your business circumstances as outlined

2. Calculate your Optimum Inventory Level (OIL) as explained

3. Calculate your ‘Inventory GAP’  by comparing your OIL with your current inventory level

4. Based on your ‘Inventory GAP’ determine if your strategy moving forward will be to increase sales, reduce inventory or both

Next month we will explain GROI and how to calculate your OIL for each product Category.


David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact inquiries@edgeretailacademy.com or call 877-569-8657.

 

David Brown

David Brown

David Brown is the President of Edge Retail Academy, the leading jewelry business consulting and data aggregation firm, who provide expert business improvement plans, to help with all facets of your business including improved financials, healthier inventory, sales growth, increased staff performance, recruiting, and retirement/succession planning - all custom-tailored to your store’s needs. They offer Edge Pulse, to better understand critical sales and inventory data, to improve business profitability, benchmark your store against 1200+ other Edge Users, and ensure you stay on top of market trends with our $3 Billion+ of industry sales data. Contact David at 877-569-8657, ext. 001, Inquiries@EdgeRetailAcademy.com or www.EdgeRetailAcademy.com

Related Posts

The Story Behind the Stone: Just Jewels

October 1, 2023

Safeguarding High-Value Retailers: Unveiling the cyber risks and effective countermeasures

September 27, 2023

4Cs of Diamonds? Here are the 4Cs of Jewelry Marketing to help you sell them

September 25, 2023
Applied Marketing 101: The Next Big Thing

Applied Marketing 101: The Asteroid Approaches

September 18, 2023

Latest News

Other News

JA members push for security, credit reform in D.C.

October 2, 2023
Other News

Columbia Gem House opens raffle to support Sea Turtle Rehabilitation

October 2, 2023
On The Move

CD Peacock partners with Foster Love to support Chicago’s foster youth

October 2, 2023

Other News

NDC and Lorraine Schwartz announce the 2023 Class of Emerging Designers

Punchmark introduces new jewelry web technology features

GIA supports diamond traceability solutions

Corinth Jewelers opens fabulous standalone store

Positive Outlook for Holiday Sales

Riding the Wave with Essential Lab Grown Diamonds in a Changing Market

Southern Jewelry News

© 2023 Southern Jewelry News.

Additional Information

  • About
  • 2023 Jewelry Trade Shows & Events
  • Media Kit
  • Contact
  • Sitemap
  • Newsletter Signup

Get Social with Us

No Result
View All Result
  • Featured Articles
    • Featured
    • Featured Retailers
    • Retailer Roundtable
    • Supplier Spotlight
    • Sponsored Content
  • Latest News
    • What’s New
    • Industry Events
    • Tradeshow News
    • On The Move
    • Other News
    • Furry Friends
  • Podcast
  • Columnists
  • Classifieds
  • Subscriptions
    • Newsletter Signup
    • Print Subscription
  • DIGITAL MAGAZINE
    • Southern Jewelry News
    • Mid-America Jewelry News
    • Archives

© 2023 Southern Jewelry News.