Chapter 3 - The Jewellery Shop

In terms of jewellery retailing, a bricks and mortar shop on the high street is the most difficult, the most time consuming, and the most expensive sales avenue to get off the ground. It is also the most expensive by far in terms of operating costs. This, of course, would be perfectly acceptable if the gains were commensurate with the initial outlay and the ongoing commitments. But are they?

What is involved in setting up a Jewellery Shop?

1. Premises and Location

First of all, you need to find premises, and this premises needs to be in a location with a steady and impressive footfall. There is no point in locating your new shop down a side street or in an out of the way location, as you will get no customers. Retail establishments along the lines of jewellery and accessory shops rely on passing trade. Unlike with the Post Office, customers will not be prepared to leave the main shopping area to come find you. You need to be where they expect you to be, which is where all the other shops are. And this does not come cheap.

Yes, it is possible to find perfectly respectable premises for a fraction of the busy high street price, but it will not be located in a major shopping district. It will be over the bridge, around the corner, next to the gas works. In short, it will be somewhere nobody ever goes, where passing trade is nonexistent.

We've all seen the lonely jewellery shop in just such a location. If you've lived in a town all your life, you will no doubt have been surprised one day to stumble across just such a shop, tucked away down the end of a street you haven't walked in ten years. But you had better hurry, because the shop will only be there for six months. After six months it will be boarded up, awaiting the next failed retailer who thinks they can do better. There is no end to the delusion of the start-up retailer, in particular the start-up jewellery retailer.

Shoppers go to shopping districts to shop. Never forget this. No matter how much you love your jewellery and your new shop, it will not be unique or special enough to make shoppers change their most basic shopping behaviour.

So your new shop will need to be on the high street or in the shopping centre. And that is going to be expensive. It will be expensive in terms of monthly rent, it will be expensive when it comes to business rates, and it will be expensive to run.

And most importantly, it will be expensive in terms of commitment. Most commercial rentals come with minimum leases of at least one year, which means you are committed to paying the set monthly rent and business rates for twelve months or more, irrespective of how your business might be performing. This lack of leeway cannot be over stated. For a new business, this sort of commitment seriously restricts your actions and your ability to change direction in response to your market.

2. Setup Costs

Empty shops are just that - empty. They have no display cabinets, no furnishing, no curtains on the windows, no payment till, in many cases, not even a toilet seat. That's if they even have a toilet. All of this needs to be built, bought, or fixed before you can open your door and serve your first customer.

You will need to hire a decorator, buy furnishings and fittings, and outfit your new premises so that it does not look like a charity shop. Not only will this cost a lot of money, it will take time. You should allow a number of days or weeks to prepare your new premises - days when you will be paying rent for your prime location, but will not be taking in any money.

3. Employee Costs

It would be impractical to open a shop in this day and age with only a single employee - yourself. Most shopping districts are open six, or in many cases seven days a week. You can't close for lunch anymore, as lunch time is one of the busiest times of the day. You can't close early to go the bank every day, and you most certainly should not close on Sundays - often the busiest day of the week.

This means you will need at least one employee to work alongside you - either full time or part time. Either way, this is a huge cost for a start-up business unsure of its ongoing and future earnings. You may be earning so little that your own income is in doubt, but you will always need to find the money to pay your employee. I am familiar with jewellery businesses where the minimum wage employee is taking home more than the business owner. And this is far from uncommon.

4. Additional Costs

On top of your rental costs and employee costs, you will have a host of additional costs to pay each month. There will be gas and electric bills, advertising bills, cleaning bills, merchant banking charges, credit card machine hiring costs, insurance, both liability and contents, losses through shop lifting and employee fraud. The vast majority of employee fraud is carried out by employees of small businesses, usually trusted employees. The primary criteria for fraud and theft are the ability to carry out the crime without getting caught (not difficult when they are left alone in the shop for one or two days a week), and the ability to rationalise the action. It's remarkably easy for a trusted employee paid minimum wage to feel entitled to something more.

So what can be drawn from this?

The setup and running costs of a shop in a busy part of town are huge and ongoing. Your jewellery business would need to have strong sales throughout the year just to break even, not to mention earning you a healthy profit and allowing you to grow your business over time. The problem is not that your business will not achieve this, though for most jewellery businesses this is indeed the case, but that you have no way of knowing in advance if your business will be sufficiently strong to prove viable. And with the kind of financial outlay necessary just to be in a position to open your doors on Day 1, not having a good idea if you will be successful enough to keep your doors open (the lowest level of success) is a dangerous position to be in.

How do you measure the potential of your shop before you open?

There are many business advisers who will tell you how to do this. They will instruct you to stand across the road from your future premises with a clicker and count the number of people who pass by. They may even tell you to count the women, which would be more useful than counting all the passersby - as it is women who predominantly buy jewellery. Once you've totalled up these figures for different times of the day and different days of the week, you project how many of these people would typically enter your shop as they passed by. This figured could be anything from 1% to 5%, or more depending on how optimistic you might be feeling. From this figure, you extrapolate what proportion would buy something from your shop once they entered: 10%, 20%, whatever.

And it is this figure you then use to project your turnover.

There is a problem with this. The problem is not to do with the percentages, though their accuracy is certainly open for debate. The problem is that you have no way of knowing in advance how your jewellery will be perceived by your potential customers. They may find it unfashionable. They may find it more suitable for their grandmothers or for their young daughters with dyed black hair. Or they may find it too expensive or even too cheap (this can happen).

What this means is that your entire financial projection for your first year of business will quite likely be based on figures that are wildly inaccurate. Your financial projection includes such things as ability to pay rent, utility bills, employee costs, and most important of all: future stock updates, upon which the ongoing success of your business depends.

So if your first jewellery retail venture entails opening a shop in your local town, you will have no idea going in how successful or unsuccessful you will be. You will have no real idea if you will be able to afford all the costs associated with opening that shop, and no idea if you will even be able to keep the doors open for those first few months.

There are plenty of negatives attached to opening a jewellery shop, as we've seen, but are there any positives?

Sure there are. You get to put your name over the door, and you might even get a write up in the local paper. And of course, your Mother will be proud of you.

But seriously, there are success stories on the high street, and they are not all chain stores. There is a place for independent jewellery retailers, but without a huge amount of experience in the jewellery business, you would be foolish to consider this route as your first entry into jewellery retail. For now, let's look at a different model of jewellery retailing, one that is never glamorised and comes with only a fraction of the start-up costs of a bricks and mortar shop: the Market Stall.