Luxury Jewelers: Still Growing Strong

While luxury jewelers keep an eye on consumer trends, business philosophy dictates their operating decisions. For many, in terms of inventory control and working with suppliers, it's been business as usual.

By Anthony DeMarco, Senior Editor -- JCK-Jewelers Circular Keystone, 8/1/2003

Bill Underwood of Underwood Jewelers, Fayetteville, Ark., has plenty of inventory, but he's not complaining: Some of the stock has increased in value based on the rise of the euro compared to the dollar.

"We're fat on inventory, but we always have been," Underwood says. "I'm not too unhappy with that. It's a good place to keep your money these days. A lot of what we purchased in Europe last year and the year before has turned out to be a complete value.

"There has been a trend for jewelers to order things as needed and to use just-in-time so the retailer has less money tied up in inventory," he adds. "We just haven't embraced it as much as others have."

Underwood says he has modified his ordering somewhat, but that has more to do with the scheduling of several major shows and his inventory system than with business needs. The store's fiscal year ends June 30, and several shows, such as Basel, occur earlier. When Underwood orders pieces at spring shows, he has the items delivered after June 30 to keep inventory and finances better organized. "It's good to keep that balance," he says.

Jim Clark, president of B.C. Clark jewelers in Oklahoma City, says his inventory is significantly greater than it was five years ago. "Sometimes our buyers get a little over-enthused in buying," he says. "But we're in a position where we can carry more inventory. We're carrying more lines than we did before," he notes, citing Roberto Coin and Leslie Greene as two new ones.

Clark says he's gradually trying to incorporate just-in-time inventory practices into the operation. "We always try to do a better job reordering," Clark says. "That's a constant discipline for us. We're much better off if we can turn over [an item] immediately, and it's something we can do a better job at all the time."

For Alpha Omega, a high-end watch retailer in the Boston area, a well-traveled and better-educated clientele has meant a dramatic increase in upscale watch sales. "The inventory in my company has tripled from what it was five years back," says president and CEO Raman Handa. "The end business has been phenomenal for us during the past five years. The more we stock, the more response we are seeing."

The company has added more stores in the past five years, including its new flagship location, a 6,100-sq.-ft. store in Harvard Square. It has also added new lines of watches and jewelry, including Bulgari, Blancpain, and Piaget.

Allan Schulman, owner of B. Alsohns Jewelers, Palm Desert, Calif., said his inventory has increased by about 10% in recent years. "We don't like selling out of catalogs," he says. "We want to have items on hand for immediate sale."

Memo and givebacks. Luxury jewelers prefer to own the items they carry rather than rely on memo. Most said it provides savings that can be passed on to the customer. Some said they just feel better when they own the product.

"We probably buy less off of memo than we did in past years because we are in a position to own our own inventory," Clark says. "We don't depend on any memo programs. This enables us to offer our customers a better value."

Donnie Thompson of Windsor Jewelers, Augusta, Ga., says he, too, gets far less on memo than he did a few years ago. "Lately, if you want a good price, and the consumer is shopping hard, you need to get a lot of it."

"We choose to buy," Toby Joseph of S. Joseph and Sons, Des Moines, Iowa, says. "That's just the way we run our business." Joseph says he doesn't use vendors' giveback programs, but he likes having that option.

Ronda Daily, owner of Bremer Jewelry, Peoria, Ill., says a very small percentage of her inventory consists of memo because she prefers the pricing of the products she buys back. In addition, she says, if she doesn't like a vendor's buy-back program—for example, a forced three-for-one exchange—she won't work with them again.

"My buyers and I work very diligently with suppliers to have good relationships," she says. "There are times when I traded back and bought five pieces. I may buy 10 to one. If that vendor won't work with me, I won't work with them. I'll take their stuff and never work with them again."

Like their multi-store counterparts, luxury jewelers also are paying attention to their relationships with suppliers. "I look for great vendor relationships," Daily says. "If I create some new ones, great. If not, I work with the ones I have. I work with people I like, and that's how I do business at the retail level. My sales staff's job is to create relationships. It's not to sell jewelry. Anybody can sell jewelry. Wal-Mart sells jewelry. Do you care?"

Daily's bottom line: "I'd rather make a friend than make a sale."

Luxury Market Trends

Here are the key buying and selling trends of the past five years among upscale and luxury jewelers:

Keeping more items in stock. only under rare and unusual circumstances.
Adding new lines.
Steady growth, despite the economy.
Growth in high-end merchandise and no significant drop in high-end business.
Sharp increase in bridal business.
Finding new ways to attract clientele who aspire to be luxury buyers.

Luxury Business and the Economy

Optimism among retailers in the upscale jewelry sector is high. According to Jim Clark, president of B.C. Clark jewelers in Oklahoma City, business is booming and the local economy is strong.

"Our business is up considerably compared to five years ago," he says. "I think our local economy hasn't suffered as much in recent years. We had our slowdown in the 1980s and early '90s. Things have been quite good all around." Among his top-selling lines are David Yurman, Rolex, Roberto Coin, and Mikimoto, he says.

Ronda Daily, owner of Bremer Jewelry in Peoria, Ill., says her store enjoyed significant growth in 2002, and sales so far this year are up 18%. She attributes this to more advertising and better staff training.

"Here's the weirdest thing," she says. "We're stocking things that are more expensive than we used to sell and stocking things that are less expensive than we used to sell. You try and figure it out."

Best sellers range from sterling silver jewelry for $100 to high-end fashion pieces worth $20,000. Among the new lines are Roberto Coin (a favorite among other jewelers interviewed), Bergio, and Scott Kay.

"Bridal is doing awesome," she adds. "That's keeping us going, along with three-stone jewelry and Nomination bracelets."

Several jewelers said that they've had to become more creative buyers to attract people who aspire to be luxury consumers. Donnie Thompson of Windsor Jewelers in Augusta, Ga., added products from overseas that are well designed but made with semiprecious stones and less-expensive metals. "The middle-of-the-road stuff that we used to sell a lot of has been soft," he says. "It's been replaced with less expensive design lines that we import. They are nicely made and look like designer-quality jewelry."

Raman Handa, president and CEO of Alpha Omega, a high-end watch retailer in the Boston area, says the high-end business remains strong, but lower-end watches have taken a hit. "Where we are hurting is at the mall stores. The kid who used to come out of school and get a $150,000 job and fancy stock options—that isn't happening anymore," he says. "That buyer and his friends have disappeared. That segment of the population is hurting."

Toby Joseph of S. Joseph and Sons, Des Moines, Iowa, also has the bridal business to thank for numbers that are comparable to 1999 and 2000 levels. "We've sold a lot more engagement rings in the past two years—and I mean a lot more," he says. "In 1999 and 2000, we sold more big, important pieces of jewelry. I remember saying in 1999 that we don't have enough time to sell engagement rings because an engagement-ring customer took so long [to buy]. Now I'm glad we have so many engagement-ring customers."