I often get asked by clients, “Why the pre-occupation with average sale?” As they rightly point out, increasing the average sale with the same number of customer transactions is the same as increasing the number of customer transactions with the same average sale.
I’m all for increasing both, but as most people know concentrating on one thing at a time is a more successful recipe for change than trying to do too much at once.
There are a couple of advantages to increasing sales by a higher average as opposed to getting more customer transactions. Firstly, it can (usually) be easier to get a better sale out of the customer who is standing in front of you right now than trying to get a new customer into the store. The first one is a warm prospect – your chances of an additional $100 in revenue is greater potentially once you have their interest than your chances of getting a $100 sale from a fresh prospect.
Secondly, the cost structure is noticeably different. Getting an additional customer has additional marketing costs (not to mention wear and tear on the carpet, more gift wrapping, etc.). With an increase in overheads it doesn’t normally end at the gross profit in terms of your return. An extra $100 from an existing add on however normally carries little extra cost other than the time of the salesperson involved. It offers a better return on your marketing outlay.
This takes account of add on or selling up opportunities of a certain percentage, but what about those larger “one off” transactions, say $20,000 or $50,000?
Often when a store has achieved a large “one off” sale and, when the discussion starts as to whether the budget should allow for a repeat of it, the owner or manager is often reluctant to include this in their figures, seeing it almost as good luck rather than good management.
This is an issue often debated amongst our mentoring team with mixed opinions. On the one hand, if a sale like this (let’s say $50,000) is a rarity for this store, or has never happened before, then it can be a tough ask expecting it to be repeated. A sale of this size can seriously distort a budget if it isn’t repeated.
On the other hand, if the store has been able to create that situation, then a new benchmark is often established – and why not set the goal of achieving it again? Whatever circumstances caused the first sale can be recreated to create the second.
When setting these figures it is often important to analyze the sale and what circumstances brought it about – chances are it wasn’t all about luck. If these circumstances can be repeated then there is no reason to assume that the result can’t happen again.
Improving your average sale is not just about achieving the big sales however – if every sale made by your staff was $10 higher, then your average would also improve by $10 – and over the space of a year this could make a substantial difference to your sales on a large number of transactions.
You can lift your average per item in a number of ways:
1. Invest time in staff training. Have you taken the time to discuss with the staff what’s expected of them? Have you sent them goals to achieve? Often staff don’t know the average store transaction and hence, have no benchmark to compare to.
2. Look to convert repairs into sales. Some items aren’t made to be repaired! It may be a better investment for the customer to purchase a new watch than attempt to keep the old one going.
3. Turn fashion sales into fine jewelry sales. Fashion items have done a lot to lift the number of store transactions in recent years, but they can also be used as a means to raise your average by selling up from fashion to fine jewelry or silver to white gold.
4. Look for an add on. Not exactly lifting the average per item, but it will result in a better average per transaction and who wants to split hairs when it comes to gaining more sales?
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 Carol Druan at firstname.lastname@example.org or call toll free 877-569-8657.