Locking the door behind him, a jewellery store owner starts his day. It is 7 AM and he doesn’t open for several hours but any later and he won’t be able to find a parking spot. There are more stores than parking spaces. But there is always work to do, emails to answer, bills to pay.
Every day he faces an up-hill battle to survive. His store is in a prime location on an island that is one of the busiest cruiseship ports in the region. His rent is staggering, in some cases as much as $20,000 per month for a 400 sq ft space (37 sqm). If you include all costs–labour, utilities, advertising, security, etc,–an average small, independent jeweller may have a few thousand dollars a day in overhead. Let’s say our jeweller needs $1500 a day in gross profit before he can break even.
He carries an inventory of over $10 million dollars but owns very little of it. He relies on memo to fill his cases. The downside of memo is that the bulk of the money from most of his sales goes to his supplier and not to paying his bills.
High season is only about four months long. During that time there may be as many as seven ships per day. A busy day brings over 18,000 new potential customers being dropped off at his doorstep. He has 250 other jewellery stores in competition with him, many carrying the same items from the same suppliers. He marks each piece at ten times his cost, knowing that cruiseship passengers have been told to expect 70% off.
The jeweller is ready to fight for each customer. He will always try to get as much as he can but is ready to go as low as needed to make the sale. On most items he manages at least 30% over cost but high ticket items often sell at single digit mark-ups.
The rest of the year the store will barely cover its overhead. At the lowest season, also about four months long, there may be only one or two cruiseship visits per week and a few weeks without any ships at all. To cover the slow times our jeweller now must profit $6000 a day in high season just to stay afloat for the year meaning our valiant jeweller must make at least $20,000 in sales to stay alive.
It becomes a game of chasing cashflow over profit; always paying yesterday’s bills with tomorrow’s sales. One jeweller told me:
“Cashflow is like a flowing river. All you can do is dip your hand in the water and hope to drip a few drops into your cup.”
For more than 30 years, this life-giving river of customers was enough to provide a good living for the retailers and their staff. Many of them became quite wealthy. Today margins are shrinking, the demographics are changing, and competition for each dollar is fierce. It can still be a rewarding business but it takes harder work than before.
But the ships keep coming and the shoppers keep shopping. That isn’t about to end anytime soon. It is still the hottest jewellery market in this part of the world.
Next: The machine in action.