“May you live in interesting times,”says an old Chinese curse.Right now, many independent jewelers—buffeted by contrary economic winds—would say the times are a little too interesting.
“Jewelers are getting hit from every direction,” says jeweler John Anthony, president of the Pennsylvania/Delaware Valley chapter of the Gemological Institute of America’s alumni association and a director of the Pennsylvania Jewelers Association. “Everything is going up so fast, they’re getting clobbered. But their sales aren’t escalating.”
Industry experts agree. “I’ve never seen an economy like this in all my years [in the jewelry business],” says Brad Huisken, president of IAS Training, a sales training leader. “It’s tougher now than ever, with gold at an all-time high and rising prices of gas, electricity, and utilities all affecting business costs.”
“It’s virtually a pandemic,” notes veteran jeweler and educator David Peters, longtime director of education for Jewelers of America. “Too many things are converging all at once, creating challenges that independent jewelers have never faced before. Consolidation of the industry; rising prices on commodities our industry uses; the recession; threats from new and emerging delivery channels, with many ways people can buy jewelry that circumvent the independent jeweler—all these are coming together simultaneously. We’re looking at multiple threats all at the same time. That’s unique.”
Independents are coping in various ways. Some are forgoing trade shows and depending more on vendors’ sales reps or Web sites to see new product. Many jewelers are buying old gold jewelry for scrap. “In two days, I’ve purchased over 200 dwt of scrap at what will be a good profit as soon as I ship it,” said one Midwestern jeweler, who didn’t want his name used. “It sure will be a good boost of cash without even advertising.”
Some struggling older jewelers are taking advantage of high precious metals prices to sell their old inventory for scrap. “It’s the younger guys, though, who are in deep trouble,” notes Anthony. “They don’t have anything like that to fall back on. They don’t own their inventory; most of it’s on memo.”
“This [multiple-threat situation] isn’t permanent,” says Peters, “but it could last long enough to threaten the operational viability of a lot of independents. For many it will be too much to deal with, if they don’t have the resources.”
The thing to remember, says Huisken, is that “things are tough on the entire industry. I know of independent jewelers who are having sizable increases, and I know chain stores that are struggling. It’s the consistent application of successful business principles that determines a company’s success.”
Starting this month, JCK will present interviews and essays from industry experts on successful business principles that independent retailers can use not only to survive but also thrive in these economically troubled times.
First up is David Peters, JA’s director of education. In an interview with senior editor William George Shuster, Peters, a 35-year jewelry trade veteran, offers advice that independent jewelers can use immediately in these “interesting times.”
First, Mr. Peters, thanks for sharing your expertise with us.
Well, let me say first that I don’t want to give readers the impression that I think the average jeweler can’t be highly successful in today’s market. The opposite is true: Most independent jewelers have done a good job in the past and will continue to grow their businesses, given the right tools, information, and resources.
The real problem is that skills that offered success in the past are no longer as effective in today’s insanely competitive and shifting market. So, jewelers today must be willing and ready to acquire new skills and make changes necessary to ensure continued profitability.
So, what shouldn’t independent jewelers do in these challenging times?
Don’t cut investments in store branding, marketing, promotions, and advertising. A recession is the worst time to do that. Everyone is desperate for customers, and visibility is key to getting them. If you shrink the dollars you invest in what makes you most visible, you’re giving up market share to competitors who do invest in branding, marketing, and advertising. And if you lose visibility during this crucial time, when visibility is critical, you may lose it forever.
But a jeweler might ask, How can I be visible in the face of advertising by larger retailers and national chains? You have to know who to compete against—and who not to compete against. A mistake many independents make is using the same business model for 20 or 30 years against new competition. The reality is, you can’t compete against Wal-Mart or Costco. They have too many advantages on too many levels. So, you must find a level where they don’t play. That’s why it’s critical for independent jewelers to maximize their strengths. And before that, they must identify those strengths.
How do they do that and how do they recognize real competition?
Define your turf. Clarify for yourself, as a business: Who am I? What can I do best? What market can I serve most effectively? You can’t be all things to all people. So, defining your turf very clearly—who you are as a business and the kind of customers you want and can serve well—will help you know who the competitive enemies are you should take a hard look at.
Aren’t all jewelry sellers competitors?
Certainly anyone selling jewelry can be labeled a competitor. But the reality is that real competitors are those trying to steal your customer base and demographic.
What’s next after a jeweler defines himself, his customers, and his competitors?
Get behind enemy lines. Take a hard look at what your competitors are doing and learn from them, both the good and the bad. Shop them regularly, at least once a month. There are many ways to do that today without actually walking into a competitor’s store—though you should do that at least once a year. The Internet, especially, provides all kinds of ways for surveillance of competition. Visit their Web sites. Subscribe to their newsletters, both e-mail and print. Look at their newspaper ads. Have someone on staff constantly clip every ad of every competitor in town, and create a scrapbook. Assign this on a rotating basis, so no one gets burnout.
Survey everyone selling jewelry in your market—especially operations similar to yours—to see trends, where your market is moving, and, at a glance, what everyone else is advertising, discounting, and featuring. You must do this surveillance on more fronts than ever, because we’re fighting on more fronts than 20 years ago. Check Web sites, catalogs, ads, e-newsletters, and similar things.
And the result?
With knowledge you gather, you can make smart strategic business decisions like Do I want to compete with them on price or style? Do I want to even compete against them at all? And in your ads, focus on what differentiates your store. For example, what independent can compete against Wal-Mart, which is price, price, price? It’s smarter to compete on style. If Wal-Mart advertises an incredible price on three-stone rings, piggyback that with your own three-stone ad focusing on value, quality, luxury, and permanence.
Talk more about using the Internet.
The Internet’s fastest-growing users are people aged 50 years plus. So, jewelers who say “My customers don’t use the Internet” miss an opportunity. E-mail newsletters. E-mail reminders of anniversaries or birthdays. Put banner ads on noncompeting retailers’ Web sites. (Putting ads on each other’s Web sites costs nothing.) Most independents now have some kind of Web presence—but it isn’t enough to put up a Web page. Today requires more. It doesn’t cost much to improve one, or hire someone to do it.
Are there other useful but neglected tools?
Jewelers don’t pay enough attention to trade magazines—not only the editorial, but the advertising, open-to-buys, and new products—in which they can identify trends and the next best sellers. I also think every independent jeweler should subscribe to at least one European fashion magazine, like European versions of Elle or Vogue, because Europe is still the trendsetter for jewelry. You don’t have to understand the words. Just looking at the pictures—the colors, the jewelry models wear, vendors’ advertising—will give you a snapshot of what’s going to happen in the United States in eight to 12 months.
What other smart business tactics can independents use?
Partnerships. These are critical now. Independents should focus on partnerships with vendors, noncompeting retailers, and their community. With vendors, make friends with them and their sales reps. The closer you align yourself with them, the more interest they have in making you a success. They’ll be more likely to give you first pick, better terms, faster delivery, and even an occasional cost break. Whether a vendor is small or big, its sales reps can do things for you. Develop a strong relationship with them. Show them the respect they deserve, and they’ll return it.
Does “strong relationship” mean placing more orders?
No, it means keeping lines of communication open. Listen to the vendor, in exchange for the vendor listening to you. But, if you discover a vendor who’s concerned for your continued success and follows through with some kind of help, you probably will spend more with that one.
What about retail partners?
From a business perspective, this is a perfect time to form relationships with noncompeting retailers in your community and figure out creative ways to pass your customers back and forth between each other. Look for high-end retailers with the same core business strategy and demographics as yours, like bridal shops, florists, dress shops, electronics, car dealers, and so on. It can be any kind of store. You’re only limited by your imagination.
And community partnerships?
The independent must get out of the store and get involved with community organizations and groups, especially those matching his or her store’s demographics, like the local garden club, Lions Club, local charities, the local women’s business association—a powerful, emerging group of customers—or the museum guild.
Talk at their meetings. Sponsor their events. Provide door prizes for their charity raffles. Send goody bags to their annual banquets. Put in those bags items to bring them to your store, like jewelry cleaner or a percentage off on jewelry repair.
Make friends, too, with your local newspaper and other media. See if they need an “ask the expert” column. Use “Penny Shoppers,” which are amazingly effective in reaching customers.
What’s the biggest challenge to independent jewelers’ operational viability?
Understanding the financial aspects of running a store. Not enough of them invest the time or effort to understand their numbers, what they mean to their business, and how to react to them. This is more crucial than ever. If you own a jewelry store, you must be a savvy businessperson. That means understanding those financials and being able to track and relate to them—hopefully proactively, rather than reactively. If necessary, the jeweler should take a basic finance course at a local school or college.
This is also why industry events focusing on hard business education for store owners and managers, like the Jewelers Executive Conference, or tools like Jewelers of America’s annual Cost of Doing Business Survey are more important than ever. The CoDB is a benchmark to gauge your performance, compare it with others, and see what very successful companies do.
What are some of these numbers you mention?
There are 11 key measurements I cover in one of my seminars that jewelers must review daily, weekly, or monthly. The most basic are for your store’s actual performance in volume vs. your goals. These must be reviewed regularly. So do numbers relating to cash flow, and others like employees’ gross sales per hour and the profitability of those sales. Compare part-time and full-time people, and factor in things like time of day and weekends.
In tough times, is it reasonable to focus on price?
No, that’s a mistake, and it’s a hard lesson for independents to learn. They’ve got to stop focusing on price, because there’s always someone selling cheaper. The independent needs to concentrate on quality and value. Focusing on price as a core business strategy can drive a struggling retailer into bankruptcy.
What if the retailer needs liquidity, quickly?
If a retailer gets in deep and needs cash, hold a sale. But that’s only a short-term fix, for two or three months at most. It can’t be the jeweler’s core business strategy. Generally, if you need a quick solution, it’s because you didn’t do the necessary strategic planning you should have six to 12 months ago. Needing a quick fix is usually a symptom of a problem needing a long-term solution or a long-term strategy to find one.
So, what should an independent do?
Focus on gross margins, and the only way to get that is to sell value and quality. I call it the value equation: A great product plus fair price plus exceptional customer service equals value. A salesperson must sell all three to customers, and that’s a problem with salespeople today in many jewelry stores. They focus on why it’s the best price for a product. They don’t focus enough on quality and value, although the right training can quickly change that.
How do you sell quality and value?
Tell customers the attributes of a piece that make it exceptional. The customer wants a fair price but really wants more to know its attributes and why it’s a good value. And in selling value, one thing most salespeople overlook is the store itself. In other words, what makes that jewelry more valuable because it comes from your store rather than a competitor’s? Instead of talking about “this ring,” salespeople should talk about “this ring from this store.”
Can you elaborate?
There’s a tremendous amount of value attached to a store, its people, and services. That story isn’t told enough at the sales counter. It involves what I call “the promise”: When you sell jewelry, it should come with a promise of customer and product support, the relationship and the service.
Let’s talk more about staff. What should an independent do?
In times like these, retailers must take a hard look at staff—not necessarily to cut back, but to ensure they have the kind of people to take them where they want to go, to do what needs to be done. Motivation and training are part of that. If a store owner isn’t good at those, he or she must hire someone who is—a professional trainer or consultant who’ll come regularly, at least two or three times a year, for in-store training.
A staff review might mean replacing underperformers, even Aunt Betty, with high achievers. But sales staff is becoming more and more critical to viability, as the market becomes more competitive. It’s so critical to a store’s success, a jeweler can’t afford to keep people who aren’t high performers.
By “high performance,” do you mean sales?
No, high performance is a combination of attitude, ability to deliver customer service, and a true concern for customer welfare, as well as sales.
What about business operations. What should jewelers be doing?
They must be smarter with inventory. Many could change their name from “jewelry store” to “museum,” because they have the same merchandise now that they had five, 10, or 15 years ago. It’s a more common problem than you’d expect. I did a seminar recently and asked how many there—about 20 people or so—have had the same diamond merchandise in their showcases for more than five years. Everyone except two raised their hands—and those two didn’t because they’ve been in business less than five years!
So, focus on inventory turn of each item, and focus on profitable items that turn faster. If merchandise doesn’t sell by the first holiday season, it’s suspect. If it doesn’t sell by the second season, get rid of it. This is where partnership with vendors helps. They can tell you what’s happening and selling elsewhere. If something you have isn’t selling, they may swap it out for you. Another idea for slow-moving items is to use association events to find noncompeting jewelers and memo each other.
What other areas in a store need attention?
Build your service department and service capabilities. A bench professional can provide a store with so many [competitive] advantages. It’s a little more challenging to have a watchmaker in store, but do what you must to offer watch service, even working with a trade shop.
Even with repair capability, are you truly a full-service jeweler? Do you do appraisals? Can you redesign a ring? Can you do casting in your store? Can you do simple hand sketching (or take a class to learn)? Do you have a CAD machine? A smart jeweler knows you can’t differentiate yourself anymore just by product, unless it’s handmade. So, the service department will be the key for survival for a lot of independent jewelers.
What about business costs?
Take a hard look at all operating expenses, like occupancy costs, including rental, utilities, insurance—the things that cost retailers to be in the location they are. If you’re an independent owner, for example, and not in a mall, you can control your hours of operation. Do you track traffic in your store well enough to make decisions, like opening an hour later to save payroll and electricity? Do you really need to operate every night? Do you need more part-time people or full-time people? These are all questions about operating expenses. But don’t arbitrarily do something without data to support it and how it could affect your operations.
Last question: What can an independent jeweler do today to be more successful?
Clean up your inventory. Focus on fast sellers, cut back on slow sellers, and get rid of no sellers. The key thing to remember with all these tips, though, is that they’re interdependent. With the Internet, for example, use it to build partnerships, for store branding, for advertising, to define your turf, to reach your customers. Everything has to be thought of strategically and in relationship to each other. And ask yourself, “How far am I willing to go to differentiate my store from my competitor’s and how can I do it?”