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USA Industry Report for GN Diamond

David Brown from the Edge Retail Academy comments on the state of the industry in the US

Much has been written already about the economic situation the country currently finds itself in. Certainly the average jewelry store, both independent and chain, has been through one of the toughest trading periods for several years. The big question has to be "is the end in sight?"

At the Edge Retail Academy we gather data from a large cross section of stores throughout the United States. Much of this information is used for benchmarking store performance and providing management advice for our clients on how they can improve their store performance relative to industry norms. We also analyse it to determine industry trends and a very clear pattern has developed:

The above graph shows the average store sales for over 200 stores in our survey group based on a rolling 12 month average (Feb reflects the 12 month period ended February, March reflects the 12 months ended March and so on).

The rolling twelve month annual sales trend since March of 2008 indicates a drop in average store sales from just under $1.1M to a little under $950000. Hardly a surprise given the economic circumstances. What is pleasing to see however is that although the trend is still heading down the rate of decline has slowed compared to around November/December when the drop was at its steepest. Of the $147000 that annual sales have dropped per store over this period, almost none of the decline happened until October.$102000 happened in November and December alone. February saw a drop of $24000 per store with March only falling by $5000. The decline appears to be showing signs of leveling out.

Surprisingly during this period the number of items sold per store has maintained or increased, going against the predictions that many would have expected at times like this. The drop in store sales has come largely from a reduction in average sale per customer as the graph below illustrates:

US Average Store Average Sale

Rolling 12 Months

The above graph shows the average sale per item purchased by customers during the last twelve months. The blue line is an annual rolling figure with the red line reflecting the monthly average for individual months. The drop in the blue line shows that, although customers are still spending as often they are spending less each time they buy. This is understandable as they still have birthdays and anniversaries to celebrate. But the lack of economic confidence may be steering them towards the $299 chain rather than the $399 one. The big concern is the red monthly line which has hit an annual low in March –the longer this stays below the blue line the more likely the long term trend is to continue down. Although store sales have dropped an average of 13%, the average spend per customer has dropped 17% and looks like falling further. Unless steps are taken to increase this average sale then selling more items is the only way to combat this drop – not an easy thing to do.

Gross Profit has taken a drop of 13% in line with stores sales falling showing that, despite the tougher times, most stores are maintaining their margins at present. This is perhaps the upside of selling more items at lower prices as generally they will attract better mark up than more expensive pieces which may be getting discounted more heavily at present.

Have we neared the bottom of the cycle? The above graph measure the percentage monthly drop in average store sales for the preceding twelve months and has some interesting data. March shows a drop of less than half a percent in sales for the twelve month period compared to the twelve months ended February. Compare this with November , which had a decline of nearly 4% compared to the twelve months ended October, and December which had a year on year drop of 6% and it seems that the downward trend, if not reversing, has definitely slowed.

What does this mean for your store? Sales overall within the industry are still on the decline but, importantly, the rate of the decline seems to be less than it was. In plain terms the typical store can expect to generate less revenue than it did for the equivalent month last year, but the amount that it will be down by is not nearly as bad as it was for November and December. In a nutshell we may be nearing a bottom in the cycle. Whether it is a false bottom is hard to say!

The important thing is to be positive and not let economic gloom color your stores performance. This data reflects and industry average only-many good jewelers are still enjoying growth at present, particularly in diamond rings. Assuming that customers don't want to spend will only compound the problem. You need to take steps to ensure your staff stay positive, your inventory is looking good, and your store portrays the right image.

Do you need help getting that average sale higher?

Is your business suffering from cash flow problems?

Would you like more information on how your store performance can be compared with others?

Then contact:

• lynn@edgeretailacademy.com (Lynn Baldwin)
• darci@edgeretailacademy.com (Darci Aselage)
• david@edgeretailacademy.com (David Brown)

Written by: David Brown