1.) Break-even ticket sales increased from 4533 in 2003, to 4998 in 2004 and 7491 in 2006. Break-even point in Sales Dollars has changed from $7,285 in 2003, to $7,617 in 2004 and $11,634 in 2006. (Table 1) The margin of safety has changed from $1,298 in 2003, to $485 in 2004, and a loss of $923 in 2006. (Table 2) There is a decrease from 2003 to 2006. Fixed cost per month attributed to stores relocation and subsequent renovations caused a decrease from 2003 to 2006. Other factors contributing to the 2003-2006 decrease are as follows: • 1% increase in Cost of Goods Sold (COGS) totaling $81,000 • Decrease in sales of $481,000 • Increase in salaries totaling $60,000 • Increase in miscellaneous expenses of $40,000. (Table 3) 2.) If prices were reduced by 10 percent, Hallstead’s total income would decrease to $1,111. This would change the break-even point for ticket sales to 9,637, and significantly change the overall sales figure to $13,473 (Table 4). 3.) Gretchen’s idea would effectively eliminate sales commissions. This would reduce sales volume by 1,143. This would decrease ticket sales to 8,494 and compromise the break-even. Sales dollars would reduce by $1,598 to $11,875 (Table 4). 4.) Michaela’s suggestion to increase advertising by $200,000 is sound: The increase accounts for 2% of sales and 4% of 2006 sales. Both figures are comparatively low for a retail business. This increase would change the break-even point from 7,491 to 7,790 ticket sales (Table 5). 5.) If fixed costs remained static from 2006 to 2007, average sales ticket would have to increase from $1,553 to $1,690 in order to break-even. (Table 6). List of recommendations for Hallstead Jewelers are as follows: Evaluate the number of sales staff needed and consider reducing the number of FTE’s and/or PTE’s. When reducing staff and/or operating, make sure that the best sales associates are receiving the number of hours they desire and then allocating the remaining part-time hours available in a similar fashion. Since it’s impossible to please all of your employees when revising operating hours, it becomes imperative that Hallstead retains their high producers. Per Michaela’s suggestion, Hallstead should increase the advertising budget by $200,000, with a focus on creating a new website. Developing a website that combines attractive aesthetics and ease of navigation for consumers is paramount for on-line sales success. Hallstead should invest in a web 2.0 platform that allows for high resolution detailed images, interactive design studio function and secure on-line payment application. Consider live/on-line consultations for customers that purchase over a pre-determined price point. Pay for Google’s Ad Word (featured listing) to increase the sites visibility with consumers. To save costs, Hallstead should retain control over the content on the site, rather than submitting updates to the web designer to update. This will save money and allow Hallstead update prices, store hours and inventory without delay. Additionally, they should invest in targeted direct mail postcard campaigns to consumers within their primary service area. Hallstead should also continue with their commission based sales program. By doing so, they will retain their best sales associates. Additionally, higher paid sales associates are typically more consultative in their approach, as well as more engaged in industry trends. This should lead to more repeat business and customer referrals.
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