7 Ways to be Effective in a Bad Economy
While cutting costs in a bad economy is prudent, sacrificing quality is not. Vijetha Rangabashyam talks to four jewellers about cutting costs without compromising on quality and maintaining staff morale when the market is underperforming Bad economy, cash crunch and a reluctant consumer – these don’t exactly add up to a situation that one is happy about. Over the last two years, things haven’t been peachy for the jewellery fraternity. Policies haven’t really been conducive, demonitisation has put a lot of businesses under the pump and jewellers are in what seems to be a perennial recuperation mode. Now the economy is in a flux and inflation is making the average consumer think twice before making a spend, especially where high value goods are concerned. Though weddings are an important aspect in this business where jewellery is a nonnegotiable purchase, the kind of jewellery people are opting for has changed over time. Heavy sets and chunky gold jewellery are seeing lesser
demand as opposed to pieces that are wearable and can be worn in more than one ways in the future. All these factors just mean one thing – sooner or later, business owners need to think of tightening their belts, meaning ensure that they keep their costs down so that there isn’t too much disparity in the balance sheet.
Cost cutting doesn’t conjure a happy picture, because the minute you think of dialing back there is the question of quality compromise. As business owners, especially in this sector, quality is the one thing we don’t want to negotiate on. The bad news is in a bad economy cutbacks are inevitable but the good news is it doesn’t always have to translate into the cheapening of your brand.
1. Channelise your marketing spends wisely
In a bad market, everyone is thinking of ways to tighten the purse strings when it comes to advertisements. Instead of cutting back altogether on advertisements, see how you can prudently allocate funds for the same, as you still need to reach your potential consumer. Anand Prakash, Director, Abhusan Jewellers says, “These decisions also have to be taken keeping in mind the customers we cater to. We have cut back a lot on print media spends and instead we have increased our budgets in social media because we have the opportunity to target people one-to-one. We are focusing on direct emailing as well as telecalling. We are participating in a lot of social events where we get brand visibility as well. You can’t stop innovating and stick to your core strength.” Focusing more on BTL (below the line) activation like merchandising, brand promotions, telemarketing and exhibitions where the communication is two-way is proving to be more effective. “We have revamped our ad strategy and have reduced ad spend. Our ads don’t focus on discount but target the decision makers and end users (like to-be brides). Increasing spend in BTL activities and social media spends while reducing spending on traditional ad media like hoarding and newspapers helps in maintaining the marketing strategy,” says Vaibhav Saraf, Director, Aisshpra Gems and Jewels.
2. Retaining vs acquiring customers
As retailers we are constantly trying to court customers and forge relationships in an effort to reach a wider audience, but how many of us actually think of retaining existing customers? Take the restaurant business for example – people who are more likely to spend more money on food are the ones who have been going to the restaurant repeatedly. This holds true to any kind of business. Bain & Company in its report “Prescription for Cutting Costs says, “In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit. Why? Return customers tend to buy more from a company over time. As they do, your operating costs to serve them decline. What is more, return customers refer others to your company. And they’ll often pay a premium to continue to do business with you rather than switch to a competitor with whom they’re neither familiar no comfortable.”
3. Retaining vs acquiring customers Combine Incidentals
Let us not delve on cutting back when it comes to employees, instead we should think of ways to keep their spirits up in a smarter way. Let’s be honest, a degenerating morale is the last thing we want. “Monetary cut backs are hard for employees to digest because they earned it while non-monetary cut backs (extra facilities) are even harder to digest because they think they deserve it and get used to it. Cutting back on both fronts might not work in the best interest of the organization. While downsizing, total continuous communication with the staff is a must. Sometimes talking to them about their problems solves more issues than monetary help,” says Vikram Talwar, Managing Partner, Talwarsons. In our line of field, staff training is so important, as is the occasional entertainment. Hence combine training days with offsite into a single event – this way you are effectively cutting back on costs without your employees having to suffer.
4. Sit back & audit
The good old, traditional way of looking at where your money is actually going and analysing how much of what your spending you actually need works like a charm. Let’s face it while some costs are essential others are just something we’ve been habituated to and can definitely live without. Can we have energy saving lighting, is there an additional fee that one has to incur on credit card spends, can we think of ways to spend less on packaging without compromising on quality – these are all questions that seem obvious, but still need asking.
5. Cautious inventory
As the adage goes, don’t put all your eggs in one basket. This has to be the mantra for retailers in this sector. In an uncertain economic climate where consumer preferences are changing every day, make sure you have something of everything and by the same token, make sure that you don’t have excess of anything. “Stock on inventory according to season,” says Saraf. With limited cash flow, tying up funds to jewellery pieces that are not fast moving at any given season can affect the brand’s overall growth. Also remember, if you have excess inventory, that means you need more manpower and space to manage it.
6. Rent out & rent in
If you have a big store, there is always ways in which you can bring in more money by renting out a certain portion for events, exhibitions etc. Remember, this can also draw more footfalls to your store. Big brands with a large retail footprint have also resorted to shop-in-shop model as a means to implement a cost-effective business model. “So far we were using the traditional retail method and have spread across 24 locations with company owned company operated format. With ecommerce foray, we have now also become e-trailers. With IZAARA on the other hand, we are using COCO model, shop in shop concept by being present at places like Shoppers Stop as well as online presence to ensure more and more consumers can access the unique jewellery line the brand has to offer,” says Aditya Pethe, Director, WHP Jewellers.
7. Play to your strengths
No matter how bad the economy is, if you have a niche product and you don’t have too many people selling it in the market, consumers are eventually going to come to you. In the fear of losing business, don’t switch to products that you are not used to. “My core strength is diamond jewellery and solitaires and I won’t stop selling them just because the situation is bad. Make yourself indispensable in the category you are known for so that the customer has no choice but to come to you,” adds Prakash.