Hallstead Jewelers free essay sample

Report for Hallstead Jewelers Hallstead Jewelers is a jewelry merchandiser, which sells range from fine jewelry, gems to tabletop gifts. It has been established for 83 years and once has become one of the largest jewelry retailers in the past. With the changing of retail jewelry industry, it has appeared two competitive competitors: Tiffany amp; company, which was the largest diamond seller in the US and be known as their â€Å"blue box†, and Blue Nile, which found online and was the second diamond seller in the US. However, unfortunately the sales and profits of Hallstead have been fallen since 1999. Moreover, they experienced losses in the 2006 although they have taken the action to expand their business and moved to the principle shopping area. The reason for the losses is that by adopting actual costing system, Hallstead had never budgeted their fixed-cost which should be allocated. From the Exhibit 1, we can see that the rent and salaries are increased significantly compared with the figure in last two years. We will write a custom essay sample on Hallstead Jewelers or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Especially the rent already doubled compared with last year. Whereas other figures like advertising and administration fee almost the same as the prior year. This implied that these two fixed-cost are the main contribution to the losses. In fact, moved to the new location cannot boost the enough profits. From Exhibit 2, in the 2003 and 2004, the sales space is 10230 square feet, and the sales per square foot are $839 and $729 respectively. However, in the 2006, the sales space increased to 15280 square feet but the sales per square foot decreased to $701. It means that there is more space than they needed. In other words, the space cannot make profits they expected but increased the fixed cost. At the mean time, with the expansion of space, the more staff or sales person are needed. Thus the salaries expense has been raised near to 50%($3215). This causes that the gross margin has to cover more fixed cost. In total, the contribution margin is not enough to cover the extended salaries expense and rent fee and thus Hallstead jewelers encounter this difficulty The solution for Hallstead jewelers is to budget and allocate all the fixed cost. The first should take into consideration is salaries expense and rent fee. If possible, the manager should lease a portion sales space of store to decrease rent expense. At the same time, the number of staff can be eliminated. This action can save fixed cost in a large extent. Apart from that, eliminating sales commission and increasing advertising fee seem to be a possible method to boost sales. Although commissions have been the appropriate action for past success, Hallstead still has to change this strategy and use another to boost sales. This is because with the increasing commission in 2006, the sales seemed not increased considerably. On the contrast, increasing advertising fee might bring more customers and can competitive with internet jewelry retailer. Assume eliminate all the commissions, but sales and other fixed cost remain the same, the advertising fee can increased by $130 000 and still keep break even (use the figure in 2006). To summary, the way to reduce the losses in the Hallstead is allocate the fixed cost and budget it.