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Zale Jumps on the Brand-Wagon

By Rob Bates, Senior Editor

Posted on April 13, 2012

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It’s a significant shift: after years of the mall chains offering generic product that many slammed as “indistinguishable,” the big names are increasingly offering differentiated brands and exclusive lines.

Sterling has led the way here; some 26 percent of its U.S. sales now come from differentiated merchandise. And Zale increasingly sees it as a focus as well. It’s almost as if De Beers’ Supplier of Choice dream is coming true—a decade later.

“Branded proprietary merchandise will remain a key part of our merchandising strategy,” said chief administrative officer Matt Appel at a Telsey Advisory Group conference in late March. “[It] brings with it higher margins and exclusivity.”

Appel noted that both its Vera Wang and Persona beads line had performed “very well.” (Obviously, Jessica Simpson, not so much.) He said the company’s biggest lesson from Valentine’s Day was “how important the proprietary products are to our business.”

 Other interesting nuggets from the Zale presentation:

- Zale is moving its advertising away from television.

“We think television is going to be increasingly less important as a way to reach the consumer,” Appel said. “TV has been very expensive. The inflation there is significant. We don’t think that prime time television is the best use of our capital.”

He said the company was increasingly looking toward online advertising. “In this omni-channel world, people are accessing our brands differently,” he said.

Targeting online also seems to make sense given how much Sterling dominates television advertising, and how Zale appears to be aiming for a younger consumer than Sterling.

- The company is also beefing up its ecommerce division, which now drives 5 percent of its sales.  Senior vice president and CFO Tom Haubenstricker announced the company is working on a mobile app.

Appel said the company has had particular success with offering an online “ship to store” option.

“Customer have told us they want to buy online but pick up at the store,” he said, an interesting insight that seems to suggest even online consumers still want to see and feel of piece of jewelry before they take it home.

- As we have discussed many times, Zale’s brand recognition remains high, with surveys showing that more than 90 percent of consumers are aware of the Zale brand.

 - Finally, to really win investor confidence, Zale has to become profitable again. Appel indicated that was at least a few quarters away.

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