The key to succeeding in business in the years ahead is not skills but strategy, price sheet publisher Martin Rapaport advised retailers at a seminar at the JCK Show in Orlando.
“We used to have a skill-based industry,” he said. “Today, I can hire skilled people relatively easily. But if you don’t have the strategy, you are dead meat.”
The key to developing a strategy, he said, is merchandising.
“If you don’t merchandise, you can’t make money in this business” he said. “A merchandiser puts a package together, understands the needs of the consumer and goes from product to need. The problem with this industry is we are basically lazy and we wait for people to come in the door. We are getting better but there’s a long way to go.”
He said the best merchandising understands the needs of both buyer and seller.
“Merchandising is wiggling and waggling with what you have to meet the needs of your customer,” he said. “A lot of merchandisers are meeting the needs of customers-sometimes blindly-but not the needs of suppliers. Marketing should create new demand, not just meet the demands of consumer. If you want to get filthy rich in the diamond industry, find out what products everyone’s choking on, and find a way to sell them.”
He said that, while many retailers were scared of the concept of branding, it’s an idea that applies to everyone.
“You have to brand yourself whoever you are,” he said. “It can be a local brand, a baby brand, a brand that’s only valid in half of Trenton, New Jersey. I’m freaked out when I go to a show and see so much generic product. Not everyone can be Rolex, but you have to know why you are different from everyone else. Do a strategic analysis, find your niche, figure out why you’re here, and stick to it.”
He noted that, as a whole, the industry was moving from being supply-driven to being demand driven.
“It used to be that a manufacturer used to see a good business of rough, buy it, and then figure out how to get rid of it,” he said. “That’s not going to work anymore.”
Among his other points:
* The after-effects of Sept. 11 have had a profound effect on the national psyche, and retailers must respond to it.
“People have more of a need to relate to each other,” he said. “If you are selling a gift of commitment, you are in. If it’s just flash for cash, you are out. Same ring, same diamond. It’s how you sell it.”
* Retailers shouldn’t just sell a diamond, but the idea behind it.
“You have to tune into the psychology of the product,” he said. “Giving a diamond is a symbolic act, and the woman projects the value of the diamond onto herself. Pity is the man who tells his wife he got a good deal on his diamond. That’s a dumb thing to do. Nothing makes a woman happier than hearing her fiancé overpaid for her stone.”
There’s even a certain psychology behind female self-purchase, he noted.
“It’s confirming the independent status of the woman,” he explained. “She’s saying he doesn’t need a guy.”
* The industry has to focus more on this psychological aspect and get away from its traditional “trader mentality.”
“When you go into a store, and the retailer starts throwing all sorts of stupid depth percentages at you, the customer doesn’t want to hear it,” he said. “He has his mind on the girl. He doesn’t want to spend all day at your store. That’s why he’s coming to see you. Because you’re an expert, and can choose things for him.”
* The industry is not focused enough on profits.
“There’s a tendency to conduct what I can call busyness instead of business,” he said. “The problem is there’s no profitability. It’s better than choking on inventory but it isn’t something that gives me a lot of confidence.”
He noted that if jewelers tallied up the amount of time and investment they put into stores, and then calculated how much they took home, they may find their maid is doing better than them.
“Profit is not optional,” he said. “A lot of people think inventory is money and it isn’t. They just don’t have the guts to bite the bullet and get rid of it.”
* For the future, he predicted increased competition in the rough sector.
“There will be price wars over certain types of rough and it will drive prices down,” he said. “For many years, we believed that the diamond industry needs some rigid stability enforced by Big Daddy in London. I would welcome lower rough prices. It may help manufacturers make some money. The Indians make more money than the Israelis because there is competition on rough prices.”