By Russell Shor with Dr. Vilma Vallillee

Russell Shor Photo by Melissa Jacobs/GIA

Vilma Vallillee Courtesy of Vilma Vallillee

Even more important, the trust you've earned over the years will pay you back because consumers are much more careful with their money.

To address these issues, I have enlisted the collaboration of Dr. Vilma Vallillee, an associate professor in the GIA School of Business, who offers several tips to help jewelers weather times that are certain to grow more challenging.

First: Free up cash.
This means looking at old inventory – how old depends on your average inventory turn and how many customers looked at a particular piece and passed on it. Then blow out all the slow sellers at cost or a slight profit. Here, inflation can work in your favor. High-karat gold items that have been sitting in your safe for a few years may bring more in melt-down than their original cost.

Take the cash from your blowout sale to bring in new merchandise – especially staples. In a recession, where many retailers want to stretch payments, paying cash up front can help you drive some very good bargains with your suppliers. Cash-and-carry can knock 10-15 percent off the price of many items, particularly loose diamonds, which most retailers want on memo these days.

Second: Think complements.
Take a careful inventory of complementary pieces that can be bundled together, then lower the margin and promote the bundle as the best deal. Matching earrings and necklace or a bracelet and ring are perfect examples. When consumers purchase luxury items during a recession, they want to feel they are getting more than just a product: They want to believe they are getting a deal.

Third: Be conservative in spending, but try something new.
Review what your best customers (your target market) have bought over the years – beyond the staples – and find something that would present a good fit for those pieces. Before you commit, check the Internet to see whether similar pieces are being offered at aggressive discounts. If so, then go back and keep looking.

Customers need to be tempted with something new and interesting. And they won't know what tempting products you have unless you tell them.

Fourth: Don't be shy.
Hit the phones and e-mail lists to let customers know you have these new or complementary pieces. During a recession people are more cautious, but not necessarily less wealthy – unless, of course, their own business or employment situation suffers a downturn.

So take the initiative. If there's ever a time when you must show what you and your store stand for – quality, value and trust – it's now. Customers want to see you, deal with you and know that you're still the trustworthy jeweler they can purchase their jewelry from. Let them know you are there to serve and assist them in any way possible. Your customers will appreciate it.

Fifth: Check out substitutes.
While many jewelers have taken the panic route and stopped buying anything because of the rising price of gold and diamonds, others are turning to a more productive and profitable path: substitutes.

Every industry has its less-expensive substitutes, such as natural gas for heating petroleum, margarine for butter, or MP3 downloads for CDs. So, for example, as many consumers are turning away from high gold prices, some are choosing less-expensive alternative metals. The key is to identify your target market's acceptable substitute for high-karat gold. This concept is simple, really. For some, the substitute may be vermeil, silver, or a new alloy. For others, it may be a lower karatage of gold: 14K rather than 18K, 10K rather than 14K. And, many gold jewelry manufacturers have quickly adapted to creating lighter but durable pieces.

Likewise, while bridal pieces demand diamonds, there are still many beautiful, yet relatively inexpensive, colored stones for other occasions.

Sixth: Hire a bench jeweler.
Customers who are wearing the same pieces for longer periods of time are more likely to bring them in for repairs and cleaning. These services not only generate revenue, but they also bring foot traffic and new customers into the store. Investing in a bench jeweler can pay off in both the short and long run. And there is flexibility in terms of the investment required, as there will be some benefit whether the person is employed on a part-time, full-time or contract basis.

Today's uncertainty summons one eternal truth: When people are faced with it, they go back to what they trust. That's why the venerable names in jewelry retailing have remained in business a century or more, and why diamond manufacturers and gemstone dealers who forgo the quick deal in favor of long-term relationships suffer least when the market goes south. You must keep this in mind when negotiating the deals mentioned above.

And everyone must keep the importance of relationships in mind as we prepare ourselves and our businesses for the certain obstacles and challenges that lie ahead.