The nitty gritty of profit
Bear with me as we delve into some technical business terms. The reason you might choose to stock semi-mounts is to avoid having to carry a brand’s feature diamonds in inventory. Since you are not bearing that cost as an asset, when you sell a semi-mount, you can credit the gross profit of the sale—including the ‘on-demand’ feature diamond—against the cost of the semi-mount alone. This boosts and accurately reflects the economic impact of a branded semi-mount on your inventory investment.
For example, take a $1000 semi-mount with a $3000 diamond you brought in on memo to make the sale—which sits for an entire year before you sell it. The entire cost of the ring was $4000, but you made that sale with only $1000 invested in your store’s inventory. With leverage like that, you don’t need to turn over your semi-mounts two or three times per year for them to be profitable. However, don’t forget a lower turnover means fewer new styles coming into stock.
For the real hardcore inventory analysts, consider the following. If you carry an inventory of loose diamonds to go with your semi-mounts, the more diamonds you have, the less leverage you can claim from your semi-mount program. If you have enough diamonds to fill all of your semi-mounts, then you gain nothing. This means if you have enough diamonds to fill half of your semis, you should attribute half of the diamond markup to your semi-mounts when considering their profitability. Mind blown? Nobody said being in business in 2018 was going to be easy!