01 Every extra kilogram of gold counts

Investing in inventory has to be done wisely. If a jeweller needs just 50 kilograms of gold, and he has over stocked by 20 kilograms, it will cost him heavily. Every jewellery retailer has to pay attention to how much of inventory he really needs. “Inventory management is mastered over time. But the intention to learn from past mistakes has to be there. Conversion rate remains constant, irrespective of the kilograms of gold jewellery one has in stock. Dead inventory has to be defined wisely. For every business owner this definition will be different,” says Himanshu Shekhar from Manohar Lal Sarraf & Sons Jewellers, Delhi. For some, unsold inventory for over a year will be considered dead for some others it could be 3-5 years of unsold inventory. Every business has overheads like EMI, rent, loss of interest on inventory; therefore one has to ascertain exactly how much inventory has t o be stocked.

Some jewellers compare year on year value of gold, this is not profit. Appreciation of gold is not profit. Unless you sell that stock you are not going get profit. Unsold stock which needs to be returned or remade will bring in losses only. A jewellery retailer makes real profit only with a sale Himanshu Shekhar, Manohar Lal Sarraf & Sons Jewellers

02 Don’t let debt do you apart

In simple terms, don’t chew more than you can swallow. Debt often tricks you into thinking you actually have more, but you really don’t. Don’t use credit to make expenses, especially the regular ones, because the next thing you know, they all snowball into one huge debt. If you are not able to pay them this month, it is likely that you won’t be able to pay them next month or the month after– till you are caught in a rut of paying off huge amounts of debt along with interest, not to mention your ongoing expenses.

03 Appreciation of gold doesn’t mean profit

Some people compare year on year value of gold, and this does not amount to profit. Some jewellers compare year on year value of gold, this is not profit. Appreciation of gold is not profit. Unless you sell that stock you are not going get profit. Unsold stock which needs to be returned or remade will bring in losses only. A jewellery retailer makes real profit only with a sale.

04 Maintain bookkeeping every, single day

Financial discipline involves writing books of accounts each day. “If I have inventory worth Rs 10 crore, and I have made sales worth Rs 7 crore fifty lakhs – profits are accounted for on the latter amount not on the total stock. Income tax, salaries, EMIs, rent and payments to suppliers all are regular overheads, so your gross profits needs to first cover all of those and then leave you with a decent net profit,” adds Himanshu.

05 Invest in an all-comprehensive accounting system

Maintain bookkeeping every, single day Financial discipline involves writing books of accounts each day. “If I have inventory worth Rs 10 crore, and I have made sales worth Rs 7 crore fifty lakhs – profits are accounted for on the latter amount not on the total stock. Income tax, salaries, EMIs, rent and payments to suppliers all are regular overheads, so your gross profits needs to first cover all of those and then leave you with a decent net profit,” adds Himanshu. This is an important aspect in running a jewellery business. Pay attention to every detail in your business and find out if your software is generating the kind of data you actually need. “Jewellers are contented with making sales alone. They do not pay attention to managing funds, and detailed optimized accounting systems which will help you cut your superfluous expenses and book you good net profits,” says Shekhar.

6 Cut corners where you really have to

Many jewellers have gone on for months without any business, still having to pay overheads. So, cutting back on expenses will help ease the losses. But one also has to be wise when cutting back on costs. “As a team of partners, we have decided to postpone the purchase of a gold testing machine and a CNC machine, both together worth Rs 18 lakhs. We realised that we can repair our old machines,” says Shreyansh Kapoor from Kashi Jewellers, Kanpur. Most retailers have realised that newspaper advertisements are big drainers, especially during this lockdown. “We have completely gone easy on our marketing and advertising spends and we have increased our social media spends because it is more cost effective. Newspaper advertisements are drainers,” says Manish Gupta from Alankar Jewellers, Patna.

As a team of partners, we have decided to postpone the purchase of a gold testing machine and a CNC machine, both together worth Rs 18 lakhs. Do not over stock. Credit is cheap now, but you also have to repay it, whether it is with bankers or personal lenders.Suppliers will easily give you jewellery on credit because they know they are making a sale. But if you get into the rut of not paying your supplier back, then you eventually can’t go back to the same supplier. Shreyans Kapoor, Kashi Jewellers

07 By the same token, laying off is not always a smart move

For retailers, the main expenses includes inventory. Upkeep of the store, staff salary or even marketing does not make up for a sizeable percentage of the turnover. So when you are cutting corners, be wise about it. “You may lay off employees today to save money, but tomorrow when the customer returns, you will not have that manpower to handle the customer. It takes years to invest in an employee and train them, so laying off will have a direct impact on your sales. Human capital can be developed only over the years. You have to be sensitive towards the brand you are building. In good times, you have spent a certain amount of time and energy in building your brand and sticking to a standard, and if during tough times you are not able to sustain that standard then that means you are not running a deeprooted
business, you are running a very shallow business. If in 3-4 months time, you are questioning the existence of your business, then your finances are not really in place,” asserts Raghava Rastogi from Jugal Kishore Jewellers, Lucknow.

When the gold rate goes down, people out of aspiration, stock up more goods for the coming season. That sometimes becomes a problem. When you overtrade because of the relationships you have established with your suppliers, you tend to lose sight of what your end goal is. A lot of people do not calculate the cost of their capital, it could be owned or owed capital, but in both cases there is a cost to it, and this has to be extrapolated from the existing inventory Raghava Rastogi, Jugal Kishore Jewellers

08 Software can make or break your finances

Rely on good, credible software that can give help you in data mining. Do not rely on your manpower alone to understand what you need and don’t need. “Essentially, it all boils down to the weight range that sells the most and you have to plan your inventory based on that. We have software that shows us what goods are fast moving, in what weight range and which vendor is supplying the same and we plan our buying based on that. You have to rely on efficient data to streamline what you need. Software will give you that direction, after which human intervention is definitely required. It will definitely show us where we are lacking and how we can be more relevant with our inventory,” adds Manish Gupta.

9 Overtrading & outstanding are taboos

You don’t want to be in a situation where you have to sell your inventory to pay off your debts. Try to clear your debts within the business cycle and only then indulge in any kind of purchasing. “We don’t have credit balances with our vendors; we make sure we pay all our dues. Buy only when you have cleared your dues with one vendor. Don’t try and reach out to another vendor when your dues with a vendor have still not been cleared. This way you don’t get caught in a vicious cycle. Controlling your hand in terms of buying is very important ,” adds Manish. As a rule of thumb, don’t overtrade as this could eventually lead you into a bottleneck situation. “When the rates go down, people out of aspiration, they stock up more goods for the coming season. That sometimes becomes a problem. When you overtrade with the relationships you have established with your suppliers, you tend to lose sight of what your end goal is. A lot of people do not calculate the cost of their capital, it could be owned or owed capital, but in both cases there is a cost to it, and this has to be extrapolated from the existing inventory,” says Rastogi. Be ethical, period. Pay your dues. If you are short on funds, then get yourself in a position where you are financially comfortable and then purchase. “You cannot have too many debts as you may not be able to repay them on time. The lockdown has stopped inflow of revenues. Do not buy inventory against bank loans. But for capital investment you can take bank loans and always consider your repayment overheads before you take the loan. Bank loans are always wiser than private money lenders,” adds Vaibhav Saraf from Aisshpra Gems and Jewels.

We have software that shows us what goods are fast moving, in what weight range and which vendor is supplying the same and we plan our buying based on that. You have to rely on efficient data to streamline what you need. Software will give you that direction, after which human intervention is definitely required Manish Gupta, Alankar Jewellers

10 Don’t underestimate the power of a solid back office staff

Having a solid back office is of utmost importance and not too many people pay attention to this. The buck doesn’t stop with good sales staff alone. A jeweller needs to invest in a proper back office team who can assimilate the data as far as inventory goes so that sales happen smoothly. “Your back office team needs to be efficient enough to track the movement of goods and give support to the sales staff – they are fundamental to any jewellery business. You can have the best, cutting edge software, but you need an able team that can exploit the software. The back office team should be able to give you information like why customers return, where we are lacking etc; so that we can focus on improving those aspects at the store,” adds Manish.

11 Less is really more

Gone are the days where more was considered more. Purchase exactly what you need. “There are SOPs in place where every store which we operate has a minimum inventory requirement, which has been further bifurcated based on variety, weights and sizes. We keep a 3-4 day lead period, and in that amount of time we can replenish the inventory, because the logistics services are very fast these days,” says Rastogi. Inventory planning is usually a result of mutual understanding between you and your supplier. Keep a small stock of every item and talk to your supplier about return policy. “Keep stocking in such a way that you do not over stock or under stock. Revamp your inventory time and again. So that you can show your clients newer items each time. Just before a wedding season or festival you need to anticipate the kind of demand you will have. Before the pandemic we never bothered much about inventory management. However the pandemic has forced retailers to pay attention to inventory management. Price is something that many jewellers are not willing to compromise on so you need to adjust your inventory in such a way that clients will buy at the price you have quoted ,” adds Anil Thacker from Radhika Jewellers, Gandhidham.

Keep stocking in such a way that you do not over stock or under stock. Revamp your inventory time and again, so that you can show your clients newer items each time. Just before a wedding season or festival you need to anticipate the kind of demand you will have. The pandemic has forced retailers to pay attention to inventory management. Price is something that many jewellers are not willing to compromise on so you need to adjust your inventory in such a way that clients will buy at the price you have quoted Anil Thacker, Radika Jewellers

12 Less is really more Build a sales forecast

Sales forecast is very important and easy to create and maintain. “You can collect all the invoices you have made in the last 12 months. You can analyse in which months, what type of sales you are making and sales of which types of products you are making. This way you can form a pattern and procure your goods according to this pattern,” says Rastogi.

13 Focus on niche rather than range

Reduce the number of variety and only stock what is selling. You don’t have to stock vast quantities of gold, diamond, platinum and silver – reduce range and increase quantity of products that are fast moving. “We have cut down on stocking plain gold jewellery because we found that the margin is very low. Instead we are focusing on antique and exclusive bridal jewellery. We have 7000-8000 clienteles – we don’t sell any plain gold jewellery, we have embraced a complete bridal, boutique concept and that is our niche ,” adds Ravi Kumar from Surya Jewels, Bengaluru.

We have cut down on stocking plain gold jewellery because we found that the margin is very low. Instead we are focusing on antique and exclusive bridal jewellery. We have 7000- 8000 clienteles – we don’t sell any plain gold jewellery, we have embraced a complete bridal, boutique concept and that is our niche Ravi Kumar, Surya Jewels

14 Build a monopoly

High-end, big ticket items are very slow moving as it is, because there are  not many customers. So then it boils down to finding your forte. “These days customers walk in with references from Pinterest and it is practically impossible for any retailer to have all the inventory. A customer might want a piece in the 20 lakh bracket. I might show him 20-30 pieces worth over 3-4 crores. So what we have to do right now in merchandising is to be very agile with the needs and identify products that will sell. So identify your niche, you can’t keep all the products in your store,” adds Rastogi. You need to embrace a boutique style of curating pieces, and ensure that you have a monopoly in the same. The mass, ordinary pieces don’t work anymore, because you can get them at any store. Find your niche and keep updating your products according to trends.

15 Even jewellery ages, so liquidating is okay

Every product is given an age, and if a product has not moved for more than 90 days, it will stop making you money and instead, you have to start putting money into it. To avoid this, you have to start managing your inventory properly. “At times, you have to make the tough choice of liquidating your stock and if you calculate your interest cost on inventory, it will be more than what you actually make from the product on a full sale. If the interest cost exceeds the sale price, then the wise thing to do would be to liquidate and put in that money into fast-moving products, to make up for your losses,” adds Rastogi.

16 Logistical cost Vs capital cost

Earlier, it was fine for jewellers to buy heavy quantities for the upcoming season, for 2-3 months. So the inventory bill would be huge, which they had to pay off soon. Now, given the market conditions, keep a buffer period for every category of jewellery, it changes category to category. So when your inventory is over in those days, then order more, even if it means that it is one piece. Your capital cost of keeping a surplus of jewellery will always be more than your logistical cost. So if you have to choose between getting multiple shipments versus overstocking, always choose the former.

17 Diversifying funds is financial suicide

If you are someone who tries to divert your earnings somewhere else, then you will find yourself in a soup. Try and put back what you earn into the same business. Your income only has to be for your business expenses and your inventory costs. Don’t try to channel the income towards buying a piece of land, etc. A portion of what you make through your business has to be deployed back to the business.

18 Graphs, charts and all things pictorial

Graphs are totally underrated. Graphical representation of all the data a store has is very important. “You can have any number of software to procure data, but we need to convert that into pictorial graphs so that it is easy for anybody in the store to understand where we need to focus on more. It will help you take the right decisions. Take the data, have someone put it into graphs and every month review the graphs. Most people focus on the data but not on converting them into graphs,” says Tilak Tholasi from Tholasi Jewellers, Mysore

You can have any number of software to procure data, but we need to convert that into pictorial graphs so that it is easy for anybody in the store to understand where we need to focus on more. It will help you take the right decisions. Take the data, have someone put it into graphs and every month review the graphs. Most people focus on the data but not on converting them into graphs Tilak Tholasi, Tholasi Jewellers

19 The big don’ts

Do not let your GST accumulate for a long time. Do not invest in capital which will not give you good returns. One has to be quite meticulous in managing funds. Do not over leverage. Do not get carried away by fancy ideas. Invest in ideas which will really bring you profits. ERP has to be utilized wisely. Tie up with a good ERP implementation firm. “ERP is a good book keeping tool. ERP should be integrated with your inventory management software,” adds Vaibhav.

20 Create a reserve for a rainy day

If you don’t have a reserve worth three-six months to fall back on, then it’s time to rethink your strategy. Savings is an important component of finance, not expenses. You need this reserve to be your cushion on a rainy day (think pandemic), so that you are not dipping into your savings. Wondering how to create this reserve? Start putting away at least 25 per cent of your earnings into your reserve, believe it is not yours and when the time arises it can do wonders to your business.

Do not buy inventory against bank loans. But for capital investment you can take bank loans but always consider your repayment overheads before you take the loan. Bank loans are always wiser than private money lenders Vaibhav Saraf, Aisshpra Gems and Jewels