Zale CEO Neal Goldberg very generously took some time to talk with me today … As in the past, he didn’t mince words about what he sees as the industry’s problems, and what his company needs to do to turn itself around… Some highlights …
You seem to be reaching outside the industry for talent quite a bit. What is the thinking behind that?
Let me be clear: I am not seeking out people with no industry experience. I am seeking out the best retail talent. I believe in finding the best talent and putting the best talent in the game. We have some very experienced diamond experts and a sourcing team with years and years of experience.
Retail is retail. The people who win are those that make the shopping experience compelling and make the merchandise compelling.
As a relative outsider yourself, how have your years at other retailers shaped your view of the jewelry industry?
I have been blessed to work with some great retailers and some really talented people. Those people always think about the consumer. They think about what the consumer wants. As I mentioned at Rapaport, what I see in this business is a sea of sameness. It’s all about price and there is no romance to it. The way the goods are presented is very flat. I was never inspired walking into any jewelry store to say: “Wow. Look at this presentation.” You go into other retailers, other commodities and you do go, “Wow.” Apple is probably the pinnacle of that. But there are others.
So what should people expect if they go into a Zale’s store in two or three years?
We will have different product from the competition. There will be a lot more newness. Part of the “Celebration” theme is to create a sub brand that has more of a lifestyle focus.
We will use our creative abilities to do creative presentation of product. You will have people selling our product that are friendly and knowledgeable and not giving a hard sell – but really want to help educate people.
It’s a lot to do. A lot of people ask, and I’ve seen you write: Is this doable? My question is: What’s the alternative? Right now we have one company that says let’s do “Journey” and then every company does “Journey.” I believe each company has to create its new product. We will miss on some; we are not looking to swing for the fences every time. I think that most people say if we don’t have new, compelling product the industry will die. You will end up having one retailer.
I don’t think these thoughts are radical. They are business 101.
Does the $100 million in clearance you’ve done take away from the message of emotion?
We had to get out of a lot of product. Part of the whole clearance strategy is that it lets you create fresh assortments. The woman who is walking by the mall doesn’t want to see the same thing every day. If we have quicker turnover and better visual presentation of the product, then you have twice as much chance of selling than you did before.
We have a lot of years of cleaning up to do. In mid-October, the new product will start arriving in stores and that is when the campaign will really begin and you will start to see the message: “Zale equals love.”
I enjoyed your Mother’s Day commercial.
Then just wait until you see our other commercials. Our advertising will be much more about product supported by price. It’s not going to be the “Crazy Eddie” advertising of the past.
With your new focus on sentiment, does that mean that Zale will be more of a bridal store and less fashion-oriented?
No, I would say we are going to be about diamonds and emotion. I would disagree with the [premise of your question.] I don’t think any other business has a product that evokes more emotion than the jewelry business — whether it’s solitaires or even watches. I get a nice watch and it makes me emotional.
We are the diamond store. We are going to be focused on diamonds. But our pricing will be competitive. We are about value. We are not going to give that up.
You said at Rapaport that you don’t have any control over the macro environment. Obviously, that’s true. But is it changing how you do business?
I just got back from India and China and even there you are inundated with CNBC. So clearly the macros are scary. That said, I still think people are going to buy jewelry and the customer still wants a great assortment of product and great customer experience. We just want our unfair share of the business.
We have taken about $100 million down on our inventory. We have made the business more efficient and we will keep on looking for ways to make this business more efficient. That better positions us for the macro economy.
There are winners and losers in all economies, including bad economies. I can’t help but think that someone who has compelling product and offers a compelling experience will be a winner.
As long as Zale is rethinking things, will Zale have less memo?
Personally I don’t like memo. Whether it’s memo or asset, you still have the product. Memo’s not free. I am not a believer in it.
We have reduced our vendor base by over two thirds so we can better partner with our vendors. There are people who say that Zale equals memo, but a lot of people say things about Zale that are simply memories from the last 20 years.
Is there anyone in the jewelry business who you think is a role model for what you want to do?
I am not comfortable talking about the competition. I am in malls a lot. I will tell you there are a lot of exciting retailers in the mall. You go to Apple, you go to Crate and Barrel; I am a big Crate and Barrel fan.
When I was thinking of coming into the business it was Black Friday last year. I was in a mall in Louisville, Kentucky. All the jewelry stores had holiday decorations. I walked into Zale; it had no holiday decorations. Many retailers had lines of people for door busters, but not jewelry stores. The jewelry stores all had the same product. No one had anything different. You couldn’t tell them apart.
In our “Pace Setter” stores, we are seeing an energized store team. I have visited hundreds, if not thousands of stores. I believe in listening to our associates; they have to tell us what to do – not the other way around. I am constantly getting feedback from our people that they feel we are making progress.
This is a marathon. We are on mile three. We have a long way to go. We have got the best name there is. According to your surveys, we have the most recognized name in the jewelry business. A lot of the things we are doing are not rocket science. They are basics that I’ve learned in retail: Give the customer a great customer experience. Those are things maybe we did not demonstrate in the past
Can you talk about the financial health of Zale? There is some nervousness given the recent retail bankruptcies.
We are extremely financially healthy. We throw off a lot of cash. Our liquidity is very strong. We are looking to grow this franchise, whether organically or otherwise down the road. Everyone who looks at our financials will see a lot of cash. We just did a massive buyback of stock. You don’t do that unless you feel positive about the future.