August 19, 2015 @ 10:47 AM

Polygon is a popular jewelry network that has had a recent discussion how many large branded companies are closing up smaller accounts and opening their own stores. Pandora has been doing this. They’d close a retailer and in a mall across the street open up a Pandora store only. I know some retailers who own a Pandora store only and easily do millions a year.
  
My understanding is some watch companies do this as well.
 
Some jewelers have complained that they were closed up after doing pretty well with a line like this, Pandora is an example, while the wholesaler opened up company stores. In many cases they close up the lower sales stores while keeping high performers. Not always but most times.
 
 
On Polygon a few jewelers who never carried the Pandora line ditched it or “Poo-Pooed” selling this product and were glad they never did.
 
  • “Looks like people selling Pandora won’t be doing that much longer”
  • Geez, the retailer builds the brand once established the company axes the most profitable stores and open their own.”
  • “A wedding band company closed a lot of large accounts then a year later came back begging to come back into the same stores.”
  • “I can’t recall a customer asking me for Pandora nor anyone bringing them in for cleaning or repair.”
  • “Ugly stuff, clunky, cheap bracelets on a beautiful woman looks ugly to me.”
  • “Takes ½ to 1 hour for a woman to choose one darn bead!”“Glad we didn’t get on the bead wagon.
  •  Sounds like a hot bag of crap someone will be holding”
 
Doesn’t sound very appealing does it? Another jeweler wrote about his experience with Nomination. Remember that flat looking bracelet line? He got stuck with a lot at the end of the selling cycle. Sold some remaining stock to another retailer and sold some on Ebay for 15 cents on the dollar. Lastly he mentioned “could scrap it but with silver at $15 an ounce, well you do the math.
 
 
Well let’s do some math and chat about the weather, shall we?
 
It’s August and in Atlanta it will be 89 degrees. Next Saturday will be 90. California has fires because of the extreme heat.
Who would think of fall and winter clothing when everyone is wearing short sleeves and polo shirts?
 
Smart retailers!
 
Land’s end is advertising while I'm in shorts to buy winter clothing and there is no discount offered on new stuff.
 
  
Meanwhile they are advertising 65% off on swimwear. To get rid of IT! They'll lose their shirts selling the remaining stock.
 
  
It's called Riding The Wave, Make the money and dump it when it's over. 
 
It's just simple math. On the jewelers network there is a jewelry store doing multiple millions a year selling everything. In Pandora alone they will do about a million dollars in sale this year
 
If she is selling $1,000,000 a year (profits are 47%, about $470,000) and she’s been selling it for 5 years here's her math. 
 
Let's assume she didn't sell a million first year. Let's assume it went this way:
 
Yearly Sales
1. $100,000
2. $200,000
3. $400,000
4. $700,000
5. $1,000,000
 
Total 5 year sales: $2,400,000
Gross profit over 5 years @47% = $1,128,000
 
It does have a turn of 1 or BETTER which means his inventory level each year is equal to or less than his gross profit level each year. So he never has "too much Pandora" in dollars. Yes he might have some ugly styles that don't sell but make up for it in others that have a FIVE TIME TURN.
 
So this year she probably has $450,000 in inventory and for some reason let’s assume the Pandora Company folds/goes bankrupt on Monday.
 
No more sales, no more advertising co-op. You're high and dry. The question is what to do with the $450,000 of inventory?
 
1. Some of it will sell for sure
2. To get out of it he might discount it to move it, make less money
3. After 6 months he might melt the silver for scrap or even smarter use it as a promotion "Buy some of
   my watches and get 3 free "Pandora beads. Selection is limited"
 
So let's say after all is said and done his $450,000 of Pandora inventory in 2015 just tanks and he tally's up unloading Pandora and he only received $300,000 on his $450,000 of Pandora inventory. Bummer. No profit, just a $150,000 LOSS and some had to be thrown in the trash.
 
Now let’s trash the Pandora Company, their reps, their contracts and even the damn ugly beads. We lost $150,000 and had to throw the remaining beads in the trash plus we are left with Pandora displays/boxes, even a show case. AM I MAD NOW?
 
Not if you look at the numbers:
 
Five year gross profit: $1,128,000 (the inventory paid for itself with a turn and GMROI greater than "1")
 
This year’s loss:
 
Net gross profit for 5 years
$1,128,000
-$150,000 take out the loss this year
Net gross profit: $978,000 for a product that gave us millions in sales; over a million in gross profits to play with and easily 1000 new "younger" customers"
 
What the heck, let's just take the last year as a loss altogether
 
5 year gross profit:
$1,1128,000
subtract the remaining inventory altogether - $450,000
 
Net, net profit dealing with this ugly crap:  $678,000.00!
 
If the jeweler had not bought into Pandora's cool-aid?
He would have had lower sales, almost 3/4 of a million less in gross profit with a profit that never went into his checking account.
 
The Pandora salesman can have him sign a bad document, flog him in the public square and anything they can do ON THE LAST MONTH of selling this product. For the 47 months prior all it gave him was lots of cash and repeat and new customers.
 
Being 100% of the people responding on Polygon to this subject were men I'll put Pandora in perspective for us men.
 
What if I got you this woman to marry you five years ago?
 
  
1. She's beautiful.
2. She loves to cook, in her undies.
3. She loves you and makes love to you at any time.
4. She has her own job and every Friday brings her pay check home. 
    She divides her paycheck up this way: She only keeps her cost of living there. 
    She pays for her own clothes, doesn't ask for any money from you. 
5. She pays for her own car, food, clothes, medical expenses, hair salon and even pays
    YOUR way to Vegas every year (Vegas-show)
6. She only keeps 53% of her paycheck to pay her own way. She DEPOSITS THE 
    REMAINING 47% of her pay check into YOUR CHECKING account to be used any
    way you wish and never complains about it.
6. This year she'll earn $1,000,000 as a model and gives you $470,000 of it and she has
    done this for you religiously for the past 4 years.
7. She's introduced you to all of her friends, 1000's of them and some of them have just
    put money in your coat pocket as they pass you by.
8. Did I mention that she has paid for your yearly vacations? You have to take vacations
    because you're exhausted making love to this woman 7 nights a week. 
9. This year she buys you this car but you feel so taken back and grateful that you 
    actually pay for a portion of the car yourself.
 
A $470,000 Rolls Royce. It's a real beaut! You paid the dealer $350,000 and this 
    lovely lady chipped in $120,000 for her share. 
   Net result is the $470,000 car now cost you $350,000.
 
But now in year five, something happens. Kind of like a bad magic spell.
 
This lovely woman:
  
Turns into THIS
  
And now can she ever whine. Her cooking is like eating at the soup kitchen. She doesn't make love to you at ALL and you’re grateful. The modeling agency fired her so no more income. All of your friends tell you how ugly and clunky she is and would never have her in their store/home. Life is turning to crap THIS YEAR.
 
But here's the last straw. She's told you she's leaving you, getting a divorce; you'll never have to look at her face again (thank the lord) and the worst part is the b**ch takes your brand new Rolls that you paid for most of it. Subtracting the $120,000 she gave you towards the car prior you’re out $350,000 for the car.

Damn her to hell! Just get out!
 
 
 
Here's my question. Knowing this now would you wish you never had the first 4 years? The fun, beauty and lots of cash she gave you? Don't be so short sighted.
 
David Geller