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Long’s Jewelers

Longs
Jewelers

Introduction

Bob
Longs of Longs Jewelers returned to his store in the spring of 20×5 angry and
depressed. “We just lost our lease; I
don’t see how we can make it now.” It
had been seven years since Bob and his wife, Bonnie, moved their business to
Spartanburg, South Carolina. They had
struggled, and sometimes excelled. But
primarily, through sheer determination, they just survived in the jewelry
business to this point. The loss of
their lease and prime location could be the final blow that would destroy their
business. Bob needed to decide, and
quickly, either to fold the tent or give it one more shot.

York Operations

Longs
Jewelers originally started in 1978 as Able Jewelry and Music—a pawnshop in
York, South Carolina, purchased by Bob’s parents from other family
members. Bob helped his mom in the
business after his graduation from the University of South Carolina with a
major in business in 1989. Wanting to
gain more business experience, Bob earned his MBA from Regent University in 1993
and, with Bonnie, assumed ownership of the store on July 1, 1993.

Bob
and Bonnie met at the University of South Carolina. She graduated in three years with a major in
foreign politics and a minor in Spanish.
After college she was also able to get a Para-legal degree in business
and real estate law and bankruptcy. Her
legal training made it easy for her to find work with a law firm while Bob
completed his MBA.

Even
though the store was a well-recognized landmark in York, it initially had
trouble earning a reasonable profit.
After about three years, Bob saw the 80-20 rule in action. The pawnshop generated 80% of the headaches
and 20% of the revenue. Bob wanted the
store to be more upscale; he eliminated the electronics and musical equipment
inventory associated with the pawnshop and changed the name of the store to Longs
Jewelers. Over the next four years, sales and profits grew.

Bob
and Bonnie lived in Spartanburg where Bonnie grew up, about 30 miles west of
York on I-85. Through their associations
and church activities, they established a loyal clientele in their hometown who
would travel to York to shop at Longs Jewelers.
Many of these customers often encouraged Bob and Bonnie to open a store
in Spartanburg.

In
York, however, Bob had the only jewelry store that catered to a middle-class
market. Unlike in Spartanburg, where
there were several similar jewelry stores already established, he did not have
to worry about competition. The store’s
roots were in York with a long history and a devoted following. Even though the drive to work sometimes
seemed long, the York site was doing well.

This
situation changed about ten years ago.
Video poker was the new craze, and numerous people in the York seemed
addicted to it. While illegal in South
Carolina, it was legal in North Carolina.
Many York citizens frequently drove north a mere 10 miles to the next
state to spend their discretionary income on these games. Bob saw a change in his customer spending habits
as they bought less jewelry, and some even said they or their spouse used the
money instead to gamble and “hit it big.”

At
the same time, York’s Main Street was going the way of many small towns without
a strong economic base. Downtown
businesses were shutting their doors as shoppers drove to new malls or
superstores like Wal-Mart. The only
stores that seemed to be opening on Main Street were loan companies, which
offered high interest rate loans to consumers and businesses. Within two years, this combination of events
took Bob’s operation from being profitable to barely surviving.

Relocating to Spartanburg

Bob
and Bonnie had to decide if it was worthwhile to continue their jewelry
business. They had two young children
and roots in Spartanburg. With Bob’s MBA
and business experience, the possibility of a job at a company in Spartanburg
was attractive. Bonnie could stay home
and raise the kids, and they would be free of the pressure of ownership and the
worry over cash flow.

It
was evident that Longs Jewelers in York would not survive. Persuaded by friends
and motivated by his entrepreneurial spirit, Bob developed a business plan and
sought financial assistance to move his operation to Spartanburg. To his surprise, local banks were not as
supportive as Bob thought they would be.
Longs Jewelers’ current financial condition did not help to qualify for
a loan; it seemed too risky. The
financial institutions denied funding.

Bob
liked the idea of being his own boss, enjoyed the jewelry business, and felt he
had some expertise in the area. So he
kept looking for financial assistance.
Eventually, he returned to his old bank in York. Even though he was leaving town, based on the
relationship he had established with the bank and with their assistance, he
qualified for a Small Business Administration loan of $60,000. Bob and Bonnie sold their house in Spartanburg
and used the equity to add another $20,000 to start over in Spartanburg. Upon the sale of their house in Spartanburg,
Bob and Bonnie and their two children, Hannah and Jonathan, moved from a
3,200-square-foot home into a 1,200-square-foot apartment.

Spartanburg Operations

Bob
secured a lease for almost 3,000 square feet in a prime location in west
Spartanburg on a busy main street across from a large shopping center. This section of Spartanburg was experiencing sustained
consumer consumption since it had easy access to I-85, and new upper-income
home developments were opening on a regular basis. The rent for the store was $3,000 per month.
The strip shopping center included some other fine stores, including an upscale
women’s fashion store and a quality shoe store.

Unexpectedly,
Bob learned that the landlord charged him an additional $40,000 to “up fit” the
store before the first sale was even made.
In some of the other lease contracts they considered, “up fitting” was
already provided, and he wrongly assumed those lease stipulations were included
in this current lease. Bob learned the
importance of “buyer beware.” He regretted not getting professional guidance
before signing the lease, but he was trying to save money and time. On top of that, Bob later learned that his
share of the property tax for the facility was also charged to him at the end
of the year as an additional expense versus being part of the monthly
rent. Already cash poor, Bob used his
remaining $40,000 in funds to acquire inventory.

With
limited working capital, a discretionary income type product with low turnover,
and a seasonal business, Bob continually had cash flow problems. Jewelry was expensive, and the store needed
significant inventory to display in showcases in order to attract
customers. He bought lots of silver,
which was relatively inexpensive, to supplement gold and diamonds.

Bob
maintained a credit purchasing relationship with many of his suppliers, but
when sales did not achieve anticipated levels, Bob quickly found himself past
due on many accounts. It was not long
before some of these suppliers wanted cash up front for purchases. Conditions seemed to go from bad to worse as
debt mounted. In the first year, the business
lost over $108,000.

Bonnie
and Bob both needed to work in the store because at least two people had to be
around to prevent theft. With their
responsibilities as parents, family activities, commitments at church, working
six days a week at the store was demanding and there was little down time. They
even had to give up attending or watching the games of their beloved University
of South Carolina football team—an activity that in the past often gave them
much-needed relaxation from the stress of running your own business.

Fortunately,
the clientele from Spartanburg remained loyal and frequented the store even
more now that the business was more conveniently located in Spartanburg. Store hours were 10:00 a.m. to 5:30 p.m.,
Monday through Saturday. Bob believed
that the customers he was trying to reach, primarily non-working women who
enjoyed shopping and socializing would shop during the day. These women
generally entertained, wanted quality family time, and had other obligations in
the evening. Also, this was more of a
destination location as opposed to a mall location where there would be more
walk by traffic in the evening.

Bob
and Bonnie practiced a high moral and ethical standard and understood the
importance of trust and honesty. They
were fair in valuing stones for both buying and selling purposes, which was
often a concern by less knowledgeable customers. They were also friendly and got to know their
customers on a first-name basis.
Customer service was highly regarded in all of their business
dealings. As it turned out, many
customers bought jewelry exclusively from Longs Jewelers. With over 15 years of experience, plus his
educational training, Bob felt he knew the jewelry business and how to make it
successful.

Additionally,
Bonnie, who was completely self-taught in the jewelry business, had a knack for
picking the right products. She had
always had an interest in colors and texture and was good at determining what
looked good on fashion conscious women. As
a teenager, Bonnie was paid commercial art work for the Governor of New
Jersey. Since their market was primarily
women in a middle- to upper-middle income bracket, it was important for Bonnie
to recognize trends and styles when purchasing inventory. She believed in her products and her
enthusiasm translated into sales to satisfied customers. Bonnie also learned to make jewelry. She
bought older jewelry from estate sales and other secondary sources at a
discounted price and used the materials to make new and more appealing jewelry
items. Customers adored these unique
items.

Even
though competition from other jewelry stores in the immediate vicinity was
fierce, Longs Jewelers effectively used good marketing strategy with ads in
popular publications, radio, store specials, and especially word of mouth primarily
catered to middle-income earners. They became active in the community and
supported charitable events, which helped to give the business
credibility. Also their products were
more fashion forward and seemed to have a unique appeal to their customers. Their target customers were women who looked
for something better than a run-of-the-mill Kmart or Wal-Mart type of product,
but not the exorbitantly priced products found at the really upscale jewelry
stores. Of course, many of the other
individually-owned stores were trying to capture the same market.

As
with many owner-run businesses, Bob and Bonnie focused on little, but
significant, services. They did
engraving, cleaning, and elaborate gift-wrapping at no extra charge. Their best promotion was word of mouth and
personal friendly service.

Still
with all the positive factors that Bob and Bonnie had going for them,
maintaining the financial viability of the business was still a struggle in a
very competitive market. There were an

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