Jewelry Retailers and Industry Pundits Look Ahead to 2013



Predictions, expectations, and concerns for the new year

A new year typically brings a mixed bag of emotions for retail jewelers. There is hope and excitement at the prospect of testing new initiatives, meeting new customers, and stocking new products. There’s also a fair amount of trepidation surrounding the fundamental questions that preoccupy most business owners: How to transcend the challenges of the past year? How to grow sales? How to earn more profits? As a counterpoint to our cover story on the 10 ideas, issues, products, and trends that will change the way you do business in the coming year, JCK approached jewelers, manufacturers, designers, and analysts and asked them to peer into their crystal balls. Here’s a sampling of what they told us.

Causes for concern: Our interviewees had a lot to say about technology. It’s here to stay so embrace it, invest in it, and know how to use it in order to grow your business—even beyond U.S. borders. Fact: Many jewelers still lack a website. Or they have overly complicated sites that leave a bad impression on first-time visitors. “Many jewelers don’t understand their site is a brand extension, and just as important—if not more—than their brick-and-mortar­ location,” says Ellen Fruchtman, president of Fruchtman Marketing in Toledo, Ohio. “Your digital presence should not be an afterthought.”

This sterling silver and turquoise ring fills the color quotient. (LAGOS, $495, lagos.com)

Adds Ken Gassman, founder of the Jewelry Industry Research Institute in Richmond, Va., “Independent specialty jewelers are their own worst enemy.” And they lack strategic competitive differentials. “?‘We’ve been around since 1890’ doesn’t mean a thing to today’s shopper. And too many stores have poorly trained salespeople who can’t relate to today’s young consumer.”

Plus, the outlook for those jewelers appears bleaker than ever. In the early 1970s, smaller independent merchants sold nearly three-quarters of all jewelry purchased by American shoppers. “Today,” says Gassman, “they sell just 43 percent.”

But that’s not all. The cost of raw materials like gold, reduced availability of gemstones (e.g., the ongoing ban on Burmese ruby imports), the tightening of credit and its effect on declining demand for rough diamonds, and lightning-fast fashion cycles fueled in part by short consumer attention spans are all weighing heavily on retail jewelers.

“The in-store cycle has become shorter,” says Steven Lagos, owner of LAGOS in Philadelphia. Nowadays, the marriage of price and product has to be just right. “The customer is definitely more discerning,” he adds.

To tempt the $500–$1,000 shoppers with “something different,” try this smoky pyrite bracelet. (Dana Kellin, $1,000, fragments.com)

Consumers also are comparing prices now more than ever, even when purchases should be about “the uniqueness of the jewelry and the service of the stores,” says Joanne Teichman, co-owner and managing director of Ylang23.com in Dallas.

Yet—opportunities await: At Style by Max in St. Louis Park, Minn., shoppers want to understand why they should spend money on pieces. “There’s a real opportunity here to educate,” says owner Ellen Hertz.

“Many shoppers will be looking for a reason to buy beyond the pleasure of ownership,” says Donna Baker, president and CEO of the Gemological Institute of America. “Beneficiation—bringing more of the value chain to producing countries—can help provide that incentive.” (That’s why the GIA has expanded its diamond beneficiation initiatives via classes in Botswana and South Africa and partnerships with government agencies and universities in Kenya and Tanzania, among others.)

This recycled 14k gold and silver necklace—with mastodon ivory, boulder opal, hemimorphite drusy, naturally shed antler, and turquoise—makes the perfect layering piece. (Melissa Joy Manning, $1,640, melissajoymanning.com)

In-store events are another effective way for merchants to communicate the creative process to clients. Hertz hosts about 10 a year, and also links sales to charity donations. ­“People say, ‘I saw you gave a gift at such and such benefit,’?” she says. “From an event standpoint and linking with others in the community, these are important.”

What’s trending—and what’s not: Margins will continue to erode, particularly for colorless diamonds, thereby positioning gemstones for increased popularity. “Major retailers are actively seeking out color—gemstones and diamonds—and other broader margin opportunities to replace the white diamond diminishing margin category,” says Marty Hurwitz, co-owner of MVI Marketing Ltd. in Paso Robles, Calif.

For Doug Hucker, CEO of the American Gem Trade Association, the fact that more jewelers are making their own pieces—and looking for better gemstones while they’re at it—is heartening. LAGOS is leaning heavily on color as well. “We’re focused on it for 2013,” says Steven Lagos.

And—no surprise—better-quality silver will also remain important. In fact, sales of lower-priced, mass-market product are what continue to decline. The GIA is addressing this changing landscape not only by grading larger stones, but also by testing smaller ones for treatments and synthetics.

To shore up sales of accessibly priced merchandise, jewelers should invest in appealing and innovative jewels at entry-level price points, say those interviewed by JCK. “I think there are plenty of people out there with a budget of $500 to $1,000, but they won’t spend it unless it’s for something different,” says Dione Kenyon, president of the Jewelers Board of Trade.

Another trend in the making: Clients are forgoing “little pick-me-ups every couple of weeks,” says Hertz, and instead “saving up to buy something really great and special.”

What’s more, retailers should be mindful of maintaining transparency (post your prices!), delivering exceptional experiences, and forming strategic alliances like cross­promotions with nonjewelers.

As for product and trends, opinions are as varied as the colors in the Pantone library, but there is some consensus. Bead ­jewelry is on the way out, but lighter, more delicate styles, layered looks, and one-of-a-kind pieces hold lots of promise.

Priorities for the year ahead: Jewelers uniformly agree: They need to focus on differentiating their stores, providing excellent customer service, obtaining product exclusivity, controlling inventory levels, and selling items with good margins. “Far too many family-owned jewelry retailers and manufacturers are stuck with producing or retailing low-margin product, which will not help them rebuild their savings fast enough,” says Liz Chatelain, co-owner of MVI Marketing Ltd.

Hucker also cautions against letting prices drop too low: “If you keep shrinking them, there’s no money to be made.”

And with the proliferation of deep-pocketed luxury ­fashion brands such as Dolce & Gabbana and Versace entering the fine jewelry space, retailers must carefully hone their own reputations in order to stand out. Proclaims Ruth Batson, executive director of the American Gem Society: “The riches will be in the niches!” (Additional reporting by Rob Bates)