Spence Diamonds has long been one of the more intriguing companies in the industry. Here is how an e-mailer described visiting a store in Toronto:
Guests are greeted at the front desk, which is like an office reception area. We were unable to proceed into the showroom until an associate walked us in.
Here is where it becomes very different to a traditional jewelry store. The associate tells us a little about how Spence works: All the showcases are located in a circle in the center of the room, they have open fronts you can stick your hands in and pull out as many rings as you want to try on. That’s a lot of fun for a customer that may feel intimidated about asking to see a lot of rings.
Once the guests have finished trying on lots of different types of mountings they are invited to sit with a consultant to select their diamond.
Last month, the seven-store Vancouver-based retailer was purchased by Lion Capital, the British private equity fund. George Jones—a former CEO of Borders and Saks Fifth Avene, and head of minority shareholder IVEST Consumer Partners—is now executive chairman; another retail veteran, Jim Schneider, will become CEO. Schneider replaces longtime CEO Sean Jones (no relation to George), who will join the board and remain a company investor.
George Jones tells JCK he is not approaching this like a typical chairman: He intends to spend a lot of time at the company during this initial period, and following that, he will be heavily involved in strategy.
Here, Jones talks about Spence’s plans to enter the United States, why its past U.S. efforts didn’t work, and why it’s not a problem that some people hate its ads.
JCK: What interested you in Spence?
George Jones: I have to tell you, when I first heard about this, I was not really interested at all. I had never heard of Spence. I thought the world doesn’t need another jewelry store. You want something you can grow or expand.
When I was in Vancouver at our firm’s office, I thought I would pop in to the store. I saw it was something special. It’s a brass-and-glass model with some live goods. They are totally focused on diamond engagement rings. Sean Jones has approached the building of the company with a real quality approach in terms of training and attention to detail. I came out of running big retailers. This was a small company, but it was run really professionally. Sean saw the opportunity to expand but didn’t want to put in the foot leather, and do all the travel, to be able to do that. We intend to take what is very successful and replicate that in other markets.
JCK: Do you plan to grow it in Canada?
Jones: Our initial expansion will be in Canada, but we plan to go to the U.S. as well.
JCK: Do you have any timetable on the U.S. expansion?
Jones: For us, the pace of the expansion will depend on having all the pieces in place. We want to be as good as our best Spence stores. We don’t want to sacrifice anything in the translation.
JCK: Where would it expand in the United States?
Jones: We are not ready to talk about that yet. We still have a lot more work to do before we decide on that.
The first new store will be in Canada. There are still opportunities for more stores in Canada. The key is to make sure we have the formula right. If it works in Canada, there is no reason why it shouldn’t work in the United States.
JCK: Spence had tried to expand into the United States twice before, in Minneapolis and, a few years back, in Houston. Why didn’t those work?
Jones: The stores in Minneapolis in the 1990s were in low-rent strip centers. They made money but [founder] Doug Spence decided he wanted to concentrate his efforts in Canada.
The stores in Houston got a little ahead of themselves. It was the worst time possible to do anything . They felt they had an opportunity, but they weren’t ready for it. They took the name off the Robbins Brothers stores, but they weren’t really Spence stores, they were Robbins Brothers with the name change. They went from Robbins Brothers stores carrying a whole range of products to Spence just carrying engagement rings. Someone would come in for a watch and find out it didn’t have any watches.
You got into a market like Houston, which has six million people, and you have to do enough marketing so that people know you. The amount of money they spent on marketing was a fraction of what they needed. Before they got out of the starting gate, Robbins Brothers solved their problems and bought the stores back. Houston wasn’t an ideal market for the company; it is a big market and it costs a lot for marketing.
Jones: Spence is a well-run company. We are trying to be careful not to fix something that is not broken. Sean has agreed to continue to do the ads. Some people like the commercials. Some people don’t like them. But people remember them, and they work.
JCK: Will they be broadcast in the United States?
Jones: That is premature. To come into the U.S. you need a strong marketing strategy because people don’t know who you are. That, like a lot of things, is yet to be determined.
JCK: What do you think is Spence’s leading asset?
Jones: The people. Sean has done an amazing job with the company. I am glad he is staying on as an investor and a minority shareholder.
I have had situations when I came into a company that was well run, and the question was, how do you keep it growing? I have come into companies where it’s complete chaos. They have all managed to be successful. The common denominator: If you have the right people, all headed in the right direction, then you can win.