10 Things Retailers Need to Know in 2011

If the events of 2010 are any indication (gold madness, discount mania), prepare yourself. Changes in technology, pricing, and ­distribution—along with the havoc caused by the ­ever-changing economy—will require some incredibly innovative thinking.

Left: G-Frame Gold watch with diamonds on techno satin strap, $2,750, Gucci, 800-456-7663, guccitimepieces.com; Ophelia shoulder-duster earrings with multicolored diamonds in 18k yellow, rose, and black gold, $6,300, Paige Novick, NYC, 516-458-0748, paigenovick.com; silver and 14k gold bracelet with 3.5 cts. t.w. rose-cut diamonds, $2,200, Sutra Jewels, Houston, 713-988-8210, sutrajewels.com;  18k gold and diamond Cage ring, $9,740, 18k gold and diamond Palazzo cuff, $32,400, Faraone Mennella, NYC, 212-752-5990, faraonemennella.com; vintage gold cuff with signature affair diamond button, $12,000, Phillips Frankel, Miami Beach, Fla., 305-604-5656, phillipsfrankel.com

1. The paradox of gold

Printing the price of gold is a risky endeavor. In 2010, it broke record after record, including $1,400 at press time, and economists expect the price to keep rising in 2011, due to the continued weakness of the dollar. That spells good news for retailers buying from the public, but not necessarily for gold jewelry sales. And therein lies the rub. “Many jewelers are looking at alternative metals,” notes Jeff Taraschi, president of Interactive Group, a St. Petersburg, Fla.–based industry strategist. But he warns this could affect the perception of the retailer’s brand. “The more you move into silver, steel, and less precious metals, what does that say about how customers look at your business?” he asks. Navigating the divide between buying and selling, and weighing short-term gains against long-term positioning…well, it’s about as tricky as trying to predict tomorrow’s price of gold. —Rob Bates

2. Distribution in the era of going direct

Sport Sail diamond garnet alligator chronograph with 96 diamonds and enamel dial; $1,195; Michele, Richardson, Texas; 800-522-TIME; michele.com

At the Centurion jewelry show in 2009, retailer Chip Davis found himself surrounded by suppliers such as Hearts On Fire and Michele watches, and begrudgingly came to a realization: He couldn’t avoid buying product from companies that sold directly to consumers. The owner of Skaneateles Jewelry (with locations in Skaneateles and Fayetteville, N.Y.) decided to embrace, not fight, brands that were also his competitors because it was the way of the future. Business, he says, “is survival of the fittest. I don’t need to outrun the bear; I just need to outrun the guy behind me.” Consider the competition from websites like Silpada, Etsy, Gemvara, Blue Nile—all outlets angling to snag sales from the same consumer base. As brands interact with customers via social media forums (think Twitter, Facebook, and Foursquare), this trend can only continue. Says Davis, “This is how shopping will be done in the future.” —Jennifer Heebner

3. The looming specter of e-commerce

Brocade heart pendant in 18k gold with 0.35 ct. t.w. diamonds on 32-inch adjustable heavyweight cable chain; $3,600; Hearts On Fire, Boston; 617-912-5300; heartsonfire.com

As changes in distribution channels throw the traditional supplier-retailer business model out the window (see No. 2), online selling is drawing most of the scrutiny. To wit: Retailers weren’t exactly cheering “Hearts On Fire!” when the company announced in October that it would be selling to consumers over its website. And even though a brick-and-mortar jeweler will receive 15 percent of every online sale, some wonder if the company will eventually cut them out of the mix altogether. While that seems unlikely, HOF isn’t the only brand going this way. In May, Swiss watchmaker Bell & Ross opened its own e-boutique. John Hardy has an online shop. TAG Heuer sells men’s accessories at tagheuereboutique.com. And of course, many brands have sold via Gilt Groupe and other flash sites, even though they may not want retailers to know it. The question remains: Will consumers trade the comfort and care provided by their local jewelers for the ease of buying online? That all depends. “If Rolex starts selling direct,” says Buyers International Group president Abe Sherman, “there will be 5,000 good retailers left in the country, not 25,000.” —RB

4. Discount: the new retail

Red Velvet Luxe in Ridgewood, N.J., sells a rotating selection of discounted high-end brands.

In the September 2010 issue of JCK, Michael Schechter, a founding member of Gen-Next Jewelers, declared that online sale and coupon sites like Rue La La, Gilt Groupe, and Groupon were “not the devil.” Many retail jewelers would disagree, but Schechter’s point—“We need to find a way to make these sites work for everyone”—was valid nonetheless. Flash sites have trained consumers to shop for deals. In order for brick-and-mortar store owners to compete, they must tout online specials and publicize their Internet presence within local communities (check out Ylang23.com’s special savings section and JBHudson.com’s clearance items) or employ a hybrid strategy, like Red Velvet Luxe, a new discount store featuring a daily-changing assortment of high-end brands. Located in Ridgewood, N.J., the store is the brainchild of luxury veteran Randi Shinske, who’s headed up both Ebel USA and Maurice Lacroix. A good sign she’s on to something: Investors have already approached her about expansion. —JH

5. Tender is the sight

Courtesy of De Beers Group
Rough diamonds: now available online for participating sightholders

De Beers’ decision to open its Diamdel e-auctions to sightholders struck many as a sign of things to come. The company says it remains committed to its 100-year-old sight system, but the new sales channel makes some sense, especially in light of strong results. In the third quarter, for example, 99 percent of Diamdel’s lots were sold on first presentation, while only four failed to meet their reserve price. Rival miner BHP Billiton already “tenders” a good deal of its goods; it’s also the method of choice for many smaller producers. Advocates say the tender system is more transparent and better reflects market demand. But detractors say throwing everything up for grabs can only increase volatility, such as when prices plummeted at the BHP Billiton auction at the onset of the financial crisis. —RB

6. Technological revolution

Courtesy of Holition
A woman “tries on” a Tissot timepiece at an augmented reality window display at Selfridges in London.

The future of retail will hinge on technology. First up: augmented ­reality, or AR for short. In September, Holition, a U.K.-based leader in 3-D and AR solutions for luxury brands, created an AR campaign at Selfridges in London where people could try on Tissot watches virtually. ?(“Sales went up 85 percent in those two weeks,” says Holition CEO Jonathan Chippindale.) Bridal brand Tacori staged a similar event at New York City’s Bloomingdale’s in early December. Significantly more present-day are the marketing wonders enabled by QR codes, barcodes readable by scanners and smartphones. Fred Meyer Jewelers has led the way with two successful QR campaigns, including one that took users to a dedicated bridal website. Says Anita Loomba, the company’s e-commerce assistant manager: “QR codes have become integral to our mobile marketing campaign.” —Paul Holewa

7. Prototypes: Better than the real thing?

When inventory grows pricier by the day (see No. 1), maintaining showcases full of merchandise can be terribly cost-prohibitive. As a result, many store owners are increasingly relying on prototypes, as opposed to “live goods.” At present, prototypes are heavily skewed toward bridal rings with semi-mounts. “But surprisingly, customers are responding to prototype eternity and anniversary rings, with earring and pendants not far behind,” says Jay Gerber, sales and marketing vice president of W.R. Cobb, a jewelry manufacturer. “This will continue to trend upward in 2011.” Prototypes do more than address vital operational issues such as cash flow and inventory management. Store owners, even smaller independents in rural markets, can effectively compete with big players by becoming the bridal authority in their respective areas thanks to the virtually limitless selection that prototypes afford. “The average cost of 96 pieces of 18k gold bridal jewelry is around $60,000,” says Gerber. “That same number of pieces of alloy jewelry set with CZ is roughly $2,400.” —PH

8. The fading distinction between fine and faux

Neo Deco gunmetal clustered gem flower pin; $395; Alexis Bittar, New York City; 877-680-9017; alexisbittar.com

The only question that has ever mattered in jewelry is a simple one: Is it real or fake? That is, is it fine jewelry—characterized by classically styled pieces made of diamonds, platinum, and gold—or is it costume jewelry, the affordable, trendy, but ultimately disposable baubles scorned by serious connoisseurs? For most of history, never the twain did meet. The boom years, however, changed all that. Fine jewelers, envious of their churn-and-burn counterparts in fashion, began to produce trendy, price-point–focused collections designed to appeal to self-purchasing women. Meanwhile, fashion brands threw their hats into the fine jewelry arena. Then came the economic crisis, and fine jewelers, constrained by the price of gold and changing spending habits, realized their embrace of affordability was quite likely saving them from ruin. Fueled by the high-low style promoted by Michelle Obama, whose passion for Alexis Bittar’s faux flower pins seems to know no limits, the fading distinction between fine and costume ­jewelry has forced the trade to reassess the very meaning of value. When low-priced bead bracelets are helping keep retailers afloat, where does the line separating fine and faux fall? —Victoria Gomelsky

9. Jewelry and the new minimalism

The jewelry trade would mostly like to forget the 1990s. In the run-up to the new millennium, fashion designers championed a minimalist, unadorned look, the antithesis of the preceding go-go years. Things changed—and how—by 2000, when a fresh injection of money and savoir-faire permeated the industry. But the pendulum has always threatened to swing back. While fashion circa 2011 has returned to neutral palettes, clean lines, and fuss-free clothing, jewelry remains a key part of the ensemble. “There’s a real feeling for structural, hard-edged, polished metals with a futuristic bent,” says Claire Foster, accessories editor at trend-forecasting service Stylesight. “It’s quite aggressive, and contradicts that whole Mad Men thing.” Foster cites cuffs, collars, chokers, elongated earrings, and oxidized metals as defining looks for the year. “We’ll be wearing a lot more jewelry than we did in the ’90s. Like stacked bangles—simple and pared down yet quite effective.” —VG

10. The next big idea

If the 3 B’s (buying gold, bridal, and beads) saved scores of retailers from the fourth B—bankruptcy—in 2010, what form will the cure-all of 2011 take? We asked the jewelry trade’s best-known talking heads for their advice. There was the sensible approach: Don’t miss “the soon-to-explode mobile device shopping party,” said Milton Pedraza, CEO of the Luxury Institute. “Tiffany’s recently launched mobile application for finding your perfect engagement ring is a good example of a simple and practical innovation that seeks to serve its customers.” The future-oriented slant: Mind the Millennials, urged Ken Gassman, founder of the Jewelry Industry Research Institute. If they “continue to shop frequently, their lifetime value to a jeweler could be multiples of the value of the Boomers.” And the downright philosophical: “It’s not over yet,” said Unity Marketing president Pam Danziger. “But if you’ve survived this far, that’s saying something.” —VG