Holiday Outlook: Great Expectations or Hard Times?

Anxiety over terrorist threats, mixed reports about consumer confidence, and wild gyrations in the stock markets are making holiday-season planning a difficult proposition for many jewelers.

Nevertheless, at least one expert is optimistic about the coming holiday season. "The latest data from the U.S. Census Bureau reveal that jewelry store sales through April 2002 are up 1.7% over the previous year," says Pam Danziger, owner of Unity Marketing, a market research and consulting firm in Stevens, Pa. "That may not sound like a big increase, but when you consider that the first quarter of 2001 started off with a bang, up nearly 6% over 2000, you can see that the retail jewelry market, especially jewelry stores, are coming out of this economic slump stronger than ever."

Danziger's optimism is tempered with a modicum of caution: "You just don't know. If there's another terrorist attack, things could change. It's a terrible wildcard. I just feel that there is pent-up demand because we really lost a lot last year."

Scott Hoyt, director of consumer services at economy.com, a West Chester, Pa., company that provides economic, financial, and industry research, also has a positive outlook. He warns, however, that if stock market volatility and general economic uncertainty continue into the holiday season, consumers may cut back on spending.

"What we're looking at is modest growth," he says. "The assumption is that by the time of the holiday season the economy will pick up some steam, and there will be some employment growth and income growth.

"Hopefully, we'll be past the accounting scandals," Hoyt adds. "They're adding a risk to the outlook right now. The risk is, if they continue, corporations will cut their spending and hiring plans."

Hoyt also worries about consumer confidence. "It has held up pretty well despite the scandals and economic worries. If it fell, it would clearly have a negative implication for the spending outlook," he says. "Our forecast is that we will muddle through the holiday season."

Consultants say that, so far, business in jewelry stores hasn't been affected by Wall Street's woes. Merchandising consultant Terry Ianuale, for example, says her clients are reporting better-than-expected business. "They are rather surprised that they're doing good business based on what's happened in the market," she says. "They are frightened, of course, about buying for the Christmas season, but they are finding that business is better than we thought it would be. And some of my clients are optimistic about the fourth quarter."

"We have stores that are doing 16% to 18% over last year and stores barely making last year's numbers," adds Dan Askew, a partner with Vantage Group, a retail management-consulting firm based in La Costa, Calif. "We're seeing June sales figures turn back around from last year. But in June we were going up against softer numbers to begin with."

Give customers what they want. Abe Sherman, CEO of Buyers International Group, a Ringoes, N.J., company that provides merchandising and consulting services to retail jewelers and jewelry manufacturers, has a different take. He looks at the numbers and sees trouble. In times like these, he says, it's best to service your customers with quality products that are affordable.

"Consumer confidence has taken it on the chin," Sherman says. "When you examine the demographics of the marketplace and you take off the car payments, home payment, college payment, there's not a whole lot left over for jewelry in the average household.

"[Jewelers] need to concentrate on developing a very strong core of basic inventory and then make sure that stuff is on the shelf all the time," he advises. "Don't buy fashion—especially at Christmas."

According to Sherman, most jewelry store owners view their businesses as operations that sell high-end jewelry to an affluent clientele. But the affluent consumer represents only about 5% of the marketplace. Sherman argues that instead of chasing that affluent consumer, retailers should stock plenty of items priced under $500 that will appeal to a broader base of customers, which he says in most cases are the jeweler's core clientele. This is particularly true during the holidays and times of economic uncertainty.

"Jewelry is certainly a want, not a need," he says. "Jewelers should not focus on what they want to sell; they should be focused on what the customer wants to buy."

Stick to the basics. Other consultants agree, at least for this season. They're telling their clients that this is not the year to get fancy: Stick to sure sellers at price points that will make people feel comfortable.

"What we recommend at times when there is uncertainty is to keep in stock your basics," Askew says. "And we caution them to be very sensitive to their price points. This is not the year to go way out and buy additional products that you have never sold before."

"I tell them not to go out of the box unless they have their basics covered, and go into the right price ranges," Ianuale adds. "It's basically normal strategy, but I think this year they should be a little more cautious."

Automation. Jeff Buzbuzian, owner of the two-store Knar Jewellery in suburban Toronto, says that knowing your customers and having inventory in stock to quickly meet their needs is not only good business year round but also serves as a hedge during times of economic uncertainty. He says one of the best ways to achieve this is to automate your retail operation.

Buzbuzian, who also markets a software program for jewelry retailers, introduced automation to his retail operation 15 years ago. He maintains "image inventories"—images of customers' purchases dating back at least a year. That allows him to stock products based on a customer's previous purchase or design something similar—and he can do it quickly.

"During the holidays, being able to print out hard copies of past sales and things like that has been invaluable," Buzbuzian says. "It allows you to forecast and monitor trends in client behavior, whether they are active or inactive. Often, what we do when we get into the busy season is really analyze our client list. With an automated system you're able to give better service "

Few real trends. Buzbuzian says he hasn't seen any particular trends for this holiday season. "Silver has been very popular," he notes. "Diamond anniversary rings have been very, very popular. But as far as anything else goes, there just don't seem to be any major trends going on. It's basically because there's been lots of diamond jewelry sold during the boom of the past five years, and people are looking for companion articles for those things.

"Our big goal this year is to look after the top 500 customers efficiently," he adds. "If a lot of jewelers focused on their top 500 customers, they'd be shocked what kind of dollar value they'd bring to their business. Often it's 60% of total sales."

Ianuale says diamond pendants, diamond and gold earrings, bracelets, and charm bracelets are strong and will remain strong through the holiday season. "Religious and spiritual symbols will play an important part in what's trending this season," she adds. "John Hardy has come out with a symbolic charm bracelet, and I think more manufacturers and designers will probably follow suit. That will be one of the trends for the holiday season."