Jan Bell Marketing, Inc., a jewelry manufacturer and distributor, is one of the best players in the low-price game. Low prices and cost control are essential to Jan Bell’s success, given its primary customer base–most of the nation’s wholesale clubs. The company manages to sell gold chains and earrings, tennis bracelets, and rings to these wholesalers for about one third of what other manufacturers charge. Instead, at every step of the manufacturing and distribution process, the company does at least one little thing to keep costs down.
For instance, when buying raw materials, Jan Bell purchases in bulk directly from the source. The company bypasses middle people to minimize the prices of gold, silver, diamonds, and other precious stones. In addition, Jan Bell always pays cash for its purchases. “If you don’t ask your suppliers to be your banker, they will be willing to shave somewhere between 3 percent and 5 percent off the purchase price,” says cofounder Isaac Arguetty.
Jan Bell also spreads its purchases throughout the year, unlike most jewelers, which concentrate their purchases in August or September in anticipation of the Christmas holiday season. We’re probably able to save 10 percent or 15 percent by being in the market year round,” says cofounder Alan H. Lipton. The company also strives to minimize its inventory costs by manufacturing jewelry that will sell quickly and not just at Christmas.
There are no one of a kind items sitting in inventory pumping up carrying costs. “We’re going for tonnage,” says Lipton. The decision rules out much of the jewelry market, so Jan Bell concentrates on high-volume consumers. Sam’s Club, Pace Membership Warehouse, and other wholesale clubs make up 80 percent of the company’s sales. Jan Bell also strives to keep overhead costs low. The business contracts out about 92 percent of its assembly work. “By doing some of the work ourselves, we know what it costs to produce the product,” says Arguerry.
“This way we know exactly what outside contractors should be charging us.” In addition, the company maintains no trucking fleets. Finished goods from contractors are logged in, inspected, and shipped out by Federal Express within forty eight hours of their arrival. Any raw materials that pile up are sold quickly to other jewelry makers at cost plus 15 percent. What are the advantages of Jan Bell Marketing, Inc. pursuing a successful low cost strategy? What are the disadvantages?
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