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YEN GROWING MORE POPULAR

The Japanese yen is becoming more widely used in international transactions. This growth is due to its stable purchasing power and Japan’s increasing importance in the world economy. However, contrary to speculation, a recently released economic report says there is no indication the yen will replace the U.S. dollar as a key international currency.

Ramon Moreno, a senior economist for the Federal Reserve Board of San Francisco, reports Japan’s total share in world trade rose from 3% to 8% between 1960 and 1994, compared with the U.S. share of 14% in 1994. Japan also has maintained the lowest inflation rate among industrialized countries (2.5%) since 1980, making the yen popular for its stability.

This growth in world trade has not caused a correlating increase in the use of the yen. Several indicators show the yen is still not as widely used as the dollar or even the German deutschemark, though Japan holds roughly the same share in world trade as Germany.

For example, the yen’s share in invoicing Japan’s own exports was 40% in 1994 and in imports was 20%; this is well below the deutschemark’s share in Germany’s exports of 80% and in imports of 50%. The report also looked at the yen’s share in international financial transactions, which was 24% in 1995, compared with the dollar’s 83% share (shares total 200% because the measure totals sales and purchases).

Further, the factors that have stimulated international use of the yen may become less important in the future, the report says. Emerging market economies are increasing their own shares in world trade, which may stunt Japan’s growth. Also, East Asian countries (such as South Korea) that historically trade more with Japan are beginning to diversify markets – Japan’s share of South Korea’s trade fell from 24% in 1960 to 20% in 1994.

PLATINUM SUPPLY DECLINES IN 1996

While demand for platinum continues to increase in the jewelry industry, supply may not be able to keep up. The worldwide supply was expected to reach 4.85 million ounces at the end of 1996, some 140,000 ounces below the 1995 total. In the meantime, demand for the precious metal continues to rise in the jewelry industry.

The “Platinum 1996 Interim Review” by Johnson Matthey PLC, a major platinum refiner and supplier, attributes the 3% drop in platinum supply to a 14% decline in Russian exports (to 1.1 million ounces). In August 1996, the control over precious metal exports from Russia changed hands, from a special committee overseeing exports to the Ministry of Finance. The report speculates this change contributed to the decline in exports.

Supply of platinum from South Africa was expected to rise by about 2% to 3.42 million ounces, despite reports of tense labor relations and lower profitability. A sharp decline in the value of the South African rand will mean higher inflation in the long term, the report says, and producers are trying to control costs and raise productivity at existing operations instead of concentrating on expansion.

In the meantime, jewelry manufacturing took the lead among global industries in the demand for platinum. An estimated 1.84 million ounces of platinum was used worldwide in jewelry manufacturing.

Though use of platinum for jewelry was estimated to be 3% higher in 1996 than in 1995, the largest user, Japan, leveled off in its hunger for the metal. After a strong first half in Japan, many manufacturers reported a decline in orders from wholesalers and retailers, especially those selling midpriced jewelry. However, sales of jewelry over 500,000 yen (around US$4,800) rose by 6% in the first half of 1996.

Demand in the rest of the world continued to rise: by 5% in Europe, by 23% in North America and by 7% in the rest of the Western world.

The price of platinum fell to its lowest point since 1994 in the second half of 1996. The price of platinum was $368 per ounce at press time and is expected to range between $370 and $400 over the next six months.

SILVER TONES ARE WHITE-HOT

Design is universal. Rarely are trends confined to one country or product category. For example, current popular themes in jewelry, such as nature and celestial motifs, are also popular in home accessories. And the Art Nouveau and Art Deco movements spanned jewelry, furniture and architecture.

Such is the case with white metal, which has become a hot property here and abroad. Sales growth of platinum and sterling silver jewelry is soaring, and silver-toned hardware is a leading fashion story for shoes, belts and handbags.

Home designers like silver too. A recent article in The Philadelphia Inquirer says silver tones are showing up in home decor in more than just Grandma’s tea service. Silver is evident from metallic fabrics to mercury-glass candlesticks, from brushed aluminum bath accessories to polished pewter barware.

To John Loring, former design director of Tiffany & Co., silver is a way of life. He says silver is quintessentially American, evident in the Revere bowl, steel skyscrapers and sleek locomotives. Silver is less regal than gold – if gold is the metal of kings, then silver is for Everyman. Loring says not to wait until you drag out the good china to choose something silver. It’s fine to mix, match and defy tradition – and even to incorporate some gold in the mix.

INSURANCE TO KEEP UP WITH INVENTORY

If your holiday sales lived up to expectations, it’s likely your store’s inventory is fairly low. But with St. Valentine’s Day this month, followed by Mother’s Day and graduations, many store buyers are picking up their pens and preparing to restock.

With the same pen, retailers may want to take the time this month to evaluate their insurance coverage. A few hours with your insurance broker may save endless hours and headaches later this year when business heats up again.

During hectic times, inventory on display or in the vault is high and sales associates are busy. More items enter the store for repairs, and custom work often increases. To determine whether your insurance coverage is adequate for this increased inventory, look back at the recent holiday season. Did inventory ever exceed your covered value. If so, that value may need a second look.

While more than two-thirds of jewelers are cautious enough to enact “peak-season coverage” for the final three months of the year, many forget or ignore additional coverage during the first nine months – until a loss occurs. “Retailers need to check what they are receiving in the store and be sure their coverage is adequate,” says Ron Harder, president of Jewelers Mutual Insurance Co., Neenah, Wis.

JMI and other companies provide additional coverage automatically during peak months. Some provide a buffer any time of the year under certain conditions – for an additional premium.

Typically, coverages increase during specified periods by 25% to 30%. Major insurers say about 60% of jewelers who are insured have automatic seasonal coverage. Of the rest, 10% to 15% call their insurer at the time the additional coverage is needed. The others either forget or choose to retain their standard coverage.

“Jewelers who don’t feel they need the coverage are likely taking a large risk for what is really a small addition to their premium,” says Gary Drawheim, vice president of underwriting at JMI. He cites a fairly typical example: a jeweler covered for $1.1 million in inventory is covered for an additional $350,000 during October, November and December at an extra fee of $289. Coverage for a single month (May, for example) would add about $100 for a store of this size. Of course, rates vary by individual store, location and loss history, but a premium increase of 2.8% to about 5% is not unusual, he says.

“Many jewelers feel they will never have a ‘total’ loss, requiring the additional peak-season amount,” says Karen Watts, customer group manager at Great American Insurance Group, Cincinnati, Ohio. “But they should be aware that a fire, hurricane or tornado could very well put them in this situation.”

‘WORD-OF-MOUTH’ SELLS FINE JEWELRY

Almost any jeweler will agree “word of mouth” is the most powerful form of advertising.

The recommendations of family and friends have long been a vital – if uncontrollable – marketing technique for retailers. Since 1990, however, a Tucson, Ariz., jewelry company has been specifically profiting from the concept.

JewelWay International, founded on the “network marketing” idea, was rated the 29th fastest-growing private company in the U.S. in Inc. magazine’s 1996 annual business survey. Since its inception seven years ago, the company’s total sales of fine jewelry have increased 4,677%.

The company’s three founders were previously involved in less successful networking marketing ventures, and they carefully studied what worked and what didn’t to create a unique structure for their new company. Beginning in a single office with a handful of employees, they launched a business based on a quality product, relaxed expectations for sales representatives and a debt-free financial operation. In five years, JewelWay – a name derivative of its household products counterpart, Amway – grew to include a 31/2-floor facility at the company’s headquarters; offices in Canada, Australia and the United Kingdom; and more than 400 employees and 100,000 independent sales representatives worldwide. The company’s projected earnings for 1996: $130 million.

While many customers comfortably buy such merchandise as cosmetics and vacuum cleaners from independent salespeople, selling fine jewelry this way is more unusual. “Our sales reps start by selling to friends and family and branch out from there,” says Timothy Gassen, corporate communications editor for JewelWay. “They have the ability to match the right product with the right person.” This kind of personalized attention appeals to consumers of an emotional and personal product such as fine jewelry, he says.

The company offers a catalog of jewelry ranging in price from $100 to several thousand dollars. JewelWay tries to stock hard-to-find product lines and carries the Lorelli line of watches, which is manufactured specifically for the company. For the first time in its history, JewelWay began a national advertising campaign for Lorelli watches with a full-page ad in Town & Country magazine in August 1996.

The ad promises increased recognition of the company name, but the primary method of sales remains one-on-one contact. Here’s how it works: An interested salesperson applies to be a JewelWay representative and buys products from JewelWay at his or her leisure. The sales rep then makes contacts by holding jewelry parties, approaching friends and family for gift-giving occasions, and networking to make new contacts. There is no fee to become a JewelWay representative, and salespeople are not obligated to buy products. The freedom to sell at an individual pace has developed a wide spectrum of sales reps, from the full-time traveling salespeople to those who sell in their spare time. JewelWay sponsors weekly training sessions in locations worldwide, wherever representatives sell the JewelWay product.

A network marketing organization continues to grow by offering bonuses to representatives who bring other people on board as reps. Most of these companies encourage reps to recruit as many friends and family members as possible. JewelWay, however, offers the “bilateral sales compensation plan.” Reps each recruit two people, who in turn recruit two people, and so on. Representatives then receive weekly bonuses based on a percentage of total sales made by the network of reps who “branch off” from them.

According to the model, the result is profit based on an individual’s sales and the sales of the force the individual has created. It also means a booming sales team for JewelWay. “It’s like having 100,000 jewelry stores globally,” says Gassen. “That’s a substantial marketing effort.”

BIG BUCKS BARBIE

At this rate, the dream house will cost you about $10 million. That’s right, this absurdly proportioned perennial favorite of preteen girls, Barbie, has gone upscale. Way upscale.

The FRED Joallier “J’adore Barbie,” carrying an estimated price of $9,900, is turned out for a elegant evening in a black velvet gown set with 3.6 carats of diamonds. Her accessories include a tiara, earrings, necklace, bracelet, ring, purse and shoes totaling 4.65 carats of cabochon emeralds, 3.35 carats of cabochon rubies and a .33-ct. pear-shaped ruby. And if she gets cold, she can wrap herself in her faux mink stole. Or she could if her arms could bend.

“J’adore Barbie” took her place among other similarly adorned high-society Barbie and Ken dolls to raise funds for AIDS and cancer research. Some of the biggest names in jewelry and fashion created designer dolls that were displayed by Rodeo Drive merchants in Beverly Hills, Cal., as part of a silent auction in December.

Other creations included a Bulgari Barbie in a velvet gown with 18k gold-and-lapis choker and belt; a Cartier Barbie with a custom designed belt with an 18k gold buckle, Cartier travel case, Trinity ring, rolling ring and diamond solitaire ring; and a Gianni Versace Barbie wearing an Atelier dress handsewn with gold sequins and beads draped by a leopard print chiffon fabric. She was escorted by Versace’s Ken, wearing a tuxedo with a black tiger print jacket and velvet evening trousers.

Proceeds from the “Barbie on Rodeo Drive” silent auction benefited the Children Affected by AIDS Foundation and the Amie Karen Cancer Fund for Children at Cedars-Sinai Medical Center.