King’s Jewelry: The Rewards of Small-Town Retailing

Family values and hometown virtues. Suddenly, they’re in the spotlight as politicians and social critics rediscover and reaffirm them.

But for King’s Jewelry of New Castle, Pa., they aren’t new or trendy. This unabashedly small-town regional chain of 31 stores in northwest Ohio, western Pennsylvania and West Virginia has thrived on family values and hometown virtues for eight decades.

New Castle, a city of 28,000 people in the western Pennsylvania hills between Pittsburgh and Youngstown, Ohio, is the quintessential all-American town. Church chimes play at noon. A Civil War monument graces the town center. Neighbors stop each other on the street to chat. (New Castle does have some problems, of course, including a changing economy and empty storefronts downtown.)

All of this makes New Castle an apt location for the headquarters of King’s Jewelry, which has long catered to the needs of small-town shoppers.

Most King’s stores are in shopping centers and malls; their main competitors are big chains such as Zale, Sterling and Service Merchandise. A new mall being built outside of New Castle will house the latest King’s store, as well as a new competitor: Wal-Mart, the nation’s largest jewelry seller. But King’s President Dale Perelman isn’t worried about the competition. “It makes us sharper,” he says. “We compete successfully against catalog showrooms, discounters and warehouse clubs.”

Indeed, King’s is the dominant jeweler in most markets it serves (excluding cities such as Cleveland and Pittsburgh). “We out-merchandise the larger chains in smaller towns; we tailor our stores to their markets,” he says. “For instance, half our stores carry Gucci watches, but our downtown New Castle store, a ‘working class customer’ store, doesn’t.

“We work like mad to get it all – product, service, price, quality – just right for our customers.”

Origins and growth: Jacob Perelman, the current president’s grandfather and a banker with a sideline in retail, started the jewelry store in 1914. His first store was in Wheeling, W.Va. He added another store in New Castle a year later and a third in Youngstown in 1936. Lawrence Perelman, son of the founder and father of the current president, took over during the Great Depression; his brothers Mark, Charles and Albert came on board after World War II. Though now retired, all are involved with the business; Lawrence, 84, still works six months a year at headquarters.

Dale Perelman joined the company in 1970 after a successful stint with a Cleveland sports apparel firm. When his father and uncles wanted to slow down, says Perelman, he became president and his brother John became executive vice president and gold buyer. (Another brother is a college professor in California.)

Though family-run, King’s isn’t family-owned. In 1981, Lawrence and his brothers sold their controlling interest to The Renco Group, a private holding company in New York, to provide for their retirement. The relationship with Renco has been amiable.

Perelman declines to give specific figures. But he says King’s stores average just under $1 million each in annual sales; overall, the company has annual sales of $20 million.

Customers: This kind of success is based on knowing what King’s customers want and giving it to them. Small-town customers are “less ostentatious and more basic [in their buying choices],” says Perelman. “They like things they can wear every day: tennis bracelets, balanced ring designs [a diamond on each side of a center stone, etc.]. They’re also sports-minded, buying sports charms and watches with team logos and high school team numbers on gold neck chains.

While these customers want quality and value, they aren’t necessarily stingy when buying. While King’s average sale is $110-$115, the top-seller in terms of dollars is a $2,499 diamond ring.

Being a small chain has advantages when it comes to merchandising, say King’s employees. “We’re behind the times; 14k slides and omega chains are just now hitting King’s markets,” says Susan Ecola, merchandise manager and diamond buyer. “But that benefits us because we can wait until prices drop and ‘buy smart.'”

Perelman agrees that King’s isn’t fashion-forward. “But we are forward in marketing [and have] the flexibility to adapt and change at lightning speed,” he says.

Reaching out: The company’s marketing strategy features an extensive direct mail program that accounts for more than 50% of the annual advertising budget. Eight times each year, King’s sends a catalog, a newsletter or other promotional piece to everyone on its 60,000-name mailing list, says Leonard Paskevich, marketing director. The response rate averages 6%-8% (3,500-5,000) yearly, though it has reached as high as 24% for some individual mailings.

King’s also sponsors several activities to keep its name in front of the community. Examples include Mother-of-the-Year contests, mini shows at local companies (workers can view and buy jewelry) and design-an-ad contests in which children can win coupons for use at King’s.

The company also encourages its employees to get involved in their hometowns. Perelman sets the example. He is past president of the local Chamber of Commerce, a member and past president of the community playhouse, a former volunteer firefighter, a member of the community credit bureau and a member of a local bank’s board of directors. He’s also the author of two books on diamonds and a new one on a local murder case.

“In small towns, people are more involved with each other than in cities,” he notes. “That personal touch is important in retail; it’s always easier to deal with friends than with strangers.”

Many King’s customers seem to agree. Though the chain has won a variety of retail and industry awards over the years, the ones Perelman enjoys most are the many newspaper “Reader’s Choice” and “Best of Mall” citations based on independent polls of consumers.

Conservative approach: In addition to knowing customers’ needs, Perelman attributes King’s strength to its conservative approach to business. While many other retailers sank in red ink after the loss of the area’s once-mighty steel mills as well as numerous other major employers, King’s remained healthy financially. “Many [retailers] who grew dramatically in the ’80s paid for it in the ’90s,” says Perelman. “We may have missed a few opportunities, but we didn’t get hurt, either.”

Today, King’s plans only moderate growth in its market (adding two stores this year and renovating two others) and has no plans to expand beyond its current territory. “My goal is to stay a profitable, regional chain and grow by one store a year and close one a year, if necessary,” says Perelman.

King’s also keeps debt low. “I review our figures every day,” says Perelman. His position as a bank director also helps to keep him and the bank informed of each other’s concerns.

Even the company’s recent decision to move to larger corporate offices shows a conservative nature. Instead of building a new headquarters outside of town as have many other companies, King’s is moving a few blocks down the street to a former J.C. Penney building it has owned since the 1950s. The move will recoup King’s investment in the building and rescue an empty storefront.

Hands-on management: Maintaining King’s as a small regional chain that serves small towns keeps the management and staff close – figuratively and literally – something not possible with bigger chains. “We know our people better than they know theirs and we listen to them,” Perelman says.

He visits all 31 stores an average of twice a year, more often for those closer to headquarters. He makes a point of speaking with each of the 300 employees during the year, including part-timers; at Christmas, he telephones each store to wish staffs happy holidays, a tradition his father began.

“Our corporate culture is very close-knit,” he says. “There’s a commitment by our people to the company and by us to them.” For Perelman, an important part of the commitment to employees is “constructing a career path and creating opportunity to help them, and us, advance.”

Training: Essential to that path is training. In their first month, new employees come to New Castle for a day of basic training, then go back to their store for a more detailed 10-day training course given over several weeks. Later, they participate in periodic in-store sessions conducted by regional directors, Operations Manager Robert Weber or Vice President John Perelman.

Employees are encouraged to take courses offered by the Diamond Council of America (no one becomes a King’s manager without a DCA diamontologist diploma) and the Gemological Institute of America. Those who complete the training are reimbursed and given a bonus. Employees also are urged to attend “King’s College,” a series of introductory and advanced courses that Weber gives every other Thursday at New Castle’s public library.

King’s also enrolls its managers in Jewelers of America’s Certified Store Manager program and plans to add JA’s new entry-level training program to its instructional menu.

Flexibility: Another key to King’s success is its willingness to change and adapt, says Perelman. For example, the company’s long-time downtown New Castle store will close when the new mall store is ready. “We locate our stores to follow the customer traffic,” he says.

King’s also is renovating its stores and slightly upgrading pricing, partly to further distance itself from TV shopping and low-price retailers. “It’s more effective to upgrade than to fight them head on,” he says.

Other aspects of King’s operations also have changed:

  • The revenue mix has shifted from two-thirds credit/one-third cash a decade ago to two-thirds cash/one-third credit.

  • 14k gold jewelry comprises an increasingly larger share of total sales.

  • The average diamond sale is $500, up from $400 two years ago, thanks to more sales of baguettes, tennis bracelets and 1-ct. anniversary bands. Diamonds now comprise more than 50% of the merchandise mix (up from 40% a couple of years ago). “We’d like to see that climb higher,” says Perelman.

Ideas: To stay fresh and competitive, King’s officials meet each Tuesday in New Castle for several hours. “We talk about possible opportunities and new ideas, and hammer out concepts,” says Perelman. “And we keep an open mind.” Recent endeavors:

  • A 2% rebate per purchase to customers who use King’s credit card. In October, they get a “King’s Check” (not redeemable in cash) that can be used to buy anything in a King’s store.

  • A new store in an outlet mall in Grove City, Pa. “It’s wonderful for old or close-out merchandise,” says Perelman. More outlet stores are possible.

  • A new store in the revamped Pittsburgh International Airport. King’s lobbied hard to be part of a strong retail presence established by British Air, which has the commercial franchise at the airport. The store is open from 6:30 a.m. to 10 p.m. 365 days a year. “Business is great,” says Lynn Bartlett, the store’s manager. “A lot is repeat – from airport employees, businesspeople and frequent flyers. We also get attention from foreign travelers, some who assume it’s a duty-free shop!”

Other ideas under review by King’s are CD-ROM catalogs and selling via computer. (Not every idea works, of course. King’s was the first jeweler in the area to try its own TV shopping show three years ago, but the returns didn’t justify continuing it.)

Looking ahead, Perelman’s goals are clear and specific: “I want to stay a profitable regional chain, to continue to upgrade operations, to quantify the relationship between our stores and people [such as sales per salesperson per hour per store] and – our biggest challenge – to maintain opportunities for our people so they, and the business, grow and prosper.

“We have a winning formula here. All we need to do is refine it.”

AS JA PRESIDENT, PERELMAN TO FOCUS ON COMMITMENT

You know that Dale Perelman, 53, is deeply involved with his community within minutes of meeting him. As you walk with the president of King’s Jewelry along the side streets of New Castle, Pa., he chats about the city’s history and points out sites of interest.

People often stop to say hello, talk about business or simply chat. But this is more than small-town neighborliness. It’s a response to a man who has spent many hours getting to know his town and is well-known for his commitments as a businessman, civic leader and neighbor.

Now Perelman brings his zeal and commitment to a new position: president of Jewelers of America. Perelman takes the two-year job at an important moment. JA just welcomed Matthew Runci as executive director, replacing longtime Chairman Michael D. Roman; has hired Wil liam Edwards, formerly with Tour neau Watch Co., as membership director; and is adding some important member services, including a page on the World Wide Web of the Internet and possibly a credit card for independent jewelers with one or two stores.

It’s a new era filled with opportunities for JA, says Perelman. He credits Roman and Lee Michael Berg, immediate past president, for creating the opportunities. And now he looks forward to working with Runci, formerly president and chief executive officer of the Manufacturing Jewelers and Silversmiths of America, on realizing the opportunities. He calls Runci “extremely organized and focused” and says he “great ideas and a very firm association and academic background.”

JA moves into this new era with significant funding. Perelman describes JA as “the best-heeled organization in the industry,” with some $60 million in the bank, much of it from the sale of the JA shows to Blenheim Group PLC of Great Britain four years ago. Perelman says the money should be spent on JA’s own services to the industry rather than given away to other groups, as some have suggested.

Perelman’s agenda for the next two years can be summed up in what he calls a “SMILE” and the “5C’s.”

SMILE is an acronym for service, marketing help, information, lobbying on behalf of the industry in Washington and education.

Education will be the top priority for Perelman, who is a former education chairman of JA and the Diamond Council of America. He plans to visit state affiliate conferences more often than past presidents and will urge members to take advantage of JA services and programs. These include the Certified Manager program, the Michael D. Roman Center for Business Studies and the new bachelor’s and master’s degree programs in jewelry business and jewelry design that JA is developing with Pratt Institute in New York City. “I’d like to see the Pratt association grow so we develop more professionalism both among JA members and in the jewelry industry as a whole,” he says.

The 5 C’s – like the 4 C’s defining diamonds – are characteristics of JA and its members that Perelman wants to strengthen: cooperation (among members and between JA and its members and other industry associations), communication, commitment (members to JA and vice versa), creativity (in establishing new services) and certification. “Consumers want the certainty [of certification] so they can believe in the professionalism of their jeweler,” he says. “That brings us back to education and the need for more professionalism in the industry.”