For many retailers, the 2007 holiday selling season wasn’t jolly—and jewelers were among those taking a hit as consumer spending tightened up from the previous year.
Not all was doom and gloom, as a significant number of jewelers reported holiday sales either on a par with—or significantly up from—2006 figures. Others registered a decline in 2007 holiday sales but acknowledged it came off a record season in 2006.
“I feel real fortunate this year,” said Becky Whelan, owner of Cecil’s Fine Jewelry, Little Rock, Ark. “Christmas was very good. We did not surpass last Christmas, but for the year we did well. We sold a ton of diamond studs, mainly half-carat to one-caraters (t.w.). We had to reorder several times. We had steady traffic throughout. … We’re very pleased with the stability of the season, and looking forward to a good January.”
In a JCK staff poll of jewelers across the United States, some common themes emerged:
The ultrarich kept spending, but the merely affluent reined in. Jewelers catering to top-tier customers reported a very strong holiday, with big stones and high-end watches among the favored selections. Said Matthew Bogosian, vice president of Matthew’s Jewelers in Studio City, Calif., “The customer who used to have $10 million now has $20 million, but the customer making $100,000 is no longer coming in.” He reported typical sales between $20,000 and $30,000.
“We’re selling to high-net-worth [individuals] and focusing on the high-end bridal market where $50,000 is nothing,” he adds. “But what middle-class person is jumping up and down to spend $4,000 to $5,000?”
Gary Gordon, president of Samuel Gordon Jewelers, Oklahoma City, reported selling several large diamonds, including a 5.00 ct. princess cut F/VS1, a 1.50 ct. fancy pink, and a 4.00 ct. round F/VVS1. David Fineblit, president of Pearson’s Jewelry Inc., Manchester, N.H., reported high-end Swiss watches such as Patek Philippe and Corum as best sellers, while John P. Kuehn, owner of John P. Kuehn Fine Jewelry, Morgantown, W.Va., said, “The rich were spending money; the poor weren’t. The little guys who spend $300 to $600, only half of them came in. The number of bigger items [sold] was the same but [the items] cost more.” He estimates his holiday sales fell about 30 percent from last year, though business through October 2007 was strong.
Many other luxury labels whose mainstay is the “striver” level of affluent consumers, also took a hit. Leather goods maker Coach expects its smallest fourth-quarter sales gain of the past six years, and upscale department stores Saks Fifth Avenue and Nordstrom both saw sharp cutbacks in spending. Even Starbucks, whose pricey lattes are the poster child of little luxuries anyone can afford, experienced a slowdown in spending. And American Express—whose cardholders tend to be affluent—said in a Jan. 14 New York Times article that overdue payments are rising.
Jewelers catering to aspirational consumers also struggled. Both Tiffany and Birks & Mayors reported comparable-store sales declines for the holiday season. At Tiffany, comp-store sales at U.S. stores declined 2 percent, although total U.S. retail sales for the season rose 4 percent, and international sales rose 18 percent, for a net increase of 8 percent over 2006 figures. According to a report on its investor-relations Web site, in the United States the firm saw fewer transactions but an increase in spending per transaction.
Birks & Mayors, a 68-store chain with headquarters in Montreal and Florida, saw a 10 percent decline in its American stores and a 5 percent decline in Canadian stores, for a net decline of 7 percent.
Among jewelers who reported a strong holiday season, virtually all attributed it to increased advertising and promotion or proactive selling—or a combination of both.
Britton Moseley, co-owner of Galloway & Moseley, which has two stores in South Carolina, reported increased sales in both locations. “The reasons why they’re not down is just the fact that we worked and marketed the best we could.” he said. “You cannot sit back in this economy and think it’s going to come to you. You have to work for it.”
Dale Ferber, owner of Ferber Jewelry in Jackson, Miss., attributes his 30 percent sales increase to both online selling—he has three Web sites—and more advertising, including “quite a bit” of radio, and direct mail.
Jewelers across the board said the onslaught of negative reports about the economy instilled fear into their customers and drove demand down. As Caroline Hill, manager of Van Scoy Jewelers, Reading, Pa., put it, “I think the economy hurt sales. Gas prices were shooting up right before Christmas, and it didn’t help that every time you turned on the news all it was was gloom and doom about retail.” At her store, sales came very late. “The Saturday before Christmas was probably the biggest day we’ve ever had,” she said. But it wasn’t enough to offset the rest of the season, and the store posted a 19 percent decline over last year’s holiday sales. Popular price points this year were modest: under $500, with silver and basic diamond stud earrings and solitaire necklaces the best-selling items.
There was no set pattern to sales, but many jewelers reported good sales through November but a sudden sharp decline in December. Trey Bailey, director of operations for Bailey’s Fine Jewelry, a three-store operation in North Carolina, said business hummed along until December. He noted that the company’s flagship store in Raleigh was up 20 per-cent for the first 11 months of 2007, and December was up 5 to 10 percent. The Greenville store was up 30 percent through November, but December was so slow it might break even for the year. December sales at the Rocky Mount location were flat compared with 2006. Still, he said, he fared very well compared with peers in a jewelers’ group, many of whom were down this year.
Some stores reported that holiday sales came early—particularly Hanukkah-driven sales—while others such as Van Scoy reported a last-minute surge. Still others, such as Marc Aronstam, owner of Aronstam Fine Jewelers in Indianapolis, reported a strong start, weak middle, and stronger finish to the season.
Chains down, online up
It was a tough holiday for the majors. Sterling reported an 8.1 percent decline in holiday sales, while Zale reported a 9 percent drop. Sales in the upscale Bailey Banks & Biddle division—which was sold in November to Finlay Enterprises—were excluded from comparison in both years. For Seattle-based regional chain Ben Bridge Jeweler, with 79 stores in 12 states, the holiday started well in November. “We were very encouraged,” said Steve Devolt, vice president of marketing. “Then in December it slowed down, and we didn’t meet our expectations.”
He says sales were hurt by electronics. “If it had a battery, it was selling well. Laptops, iPods, HDTVs, BlueRays, all of those types of things were in demand. That affects everyone—like travel, automobiles, retailers—who are competing for that discretionary gift dollar.”
Devolt has a point. Electronics, especially GPS navigation devices and flat-panel television sets, were a bright spot in holiday consumer spending. Both categories saw a sharp increase in sales over the past three months, prompting some economists to suggest the slowdown in spending is not purely economic.
Stephen Baker, vice president of industry analysis for NPD group, a research firm, said in the Times article that the robust sales of these items suggest there still is enough purchasing power for consumers to acquire what they want.
If there was a bright spot for jewelry sales, it came from the Internet. Fourth-quarter revenue for online retailer Blue Nile rose 24 percent, the company said in a statement released Jan. 14. In the statement, Blue Nile CEO Mark Vadon said, “2007 was a great year for Blue Nile, and the holiday quarter was no exception. While we have not previously released our fourth-quarter sales results in advance of our earnings announcement date, we felt it was important to share this information, given the industry data that has been released recently.”
Even some independent jewelers found the Internet to be a saving grace. Isaac Gottesman, owner of Chicago-based Dimend SCAASI, said, “In-state sales declined 8 percent, but out-of-state sales increased 10 percent, due to a process I’m patenting that enables live diamond sessions magnified 300 times. Customers log in to our server and have a live session on their browser. This boosted sales and helped us reach remote areas outside of Chicago. The last quarter of ’07 was not glamorous to us, but we were able to keep sales stable. We’ve already seen an increase for sales in January.”
And while increased advertising helped, Ferber attributed his firm’s 30 percent holiday sales increase largely to online sales. The firm operates two e-commerce Web sites and has a store on eBay, which account for approximately 15 percent of sales. “All three of those sites did exceptionally well,” Ferber said.