Business Report

Lack of trust can be a big stumbling block for independent jewelers wanting to expand beyond their established customer base. In fact, as a recent JCK survey revealed, only 37% of consumers feel confident buying expensive jewelry (November 1999, p. 98). Less than half (47%) are confident that the jewelry they purchase contains the metals and gems advertised, and just 53% believe they pay a fair price.

Recognizing this credibility gap, organizations such as the American Gem Society and Jewelers of America tout the reliability of their members through national media ads. AGS has even arranged for its member jewelers to respond to jewelry-related questions posted on Martha Stewart’s Web site (

Now there’s another way to strengthen your credibility—with something akin to a Good Housekeeping seal of approval. It’s provided by a California company called ValueStar, which for a fee performs rigorous quality assessments and certification for all types of businesses, including jewelry.

Jewelers who use the service and advertise that they’re certified through ValueStar cite two major benefits. One is new customer referrals, via the firm’s Web site and city-wide directories published in communities where ValueStar has a significant presence. The other is better closing rates among customers wishing to have pieces redesigned, repaired, or custom-designed. In addition, the certification process yields useful customer satisfaction information at a much lower cost than other polling methods.

Value Star certification isn’t a substitute for the professional certifications (in bench jewelry, sales, and management) offered by Jewelers of America. “External certification should go hand-in-hand with internal certification so that consumers can measure the professionalism of the store,” says Caroline Stanley, JA’s director of marketing and communications. “In both cases what you’re getting is a third-party endorsement for the store, and it is very valuable for consumers to have someone from outside the store give their stamp of approval.” As for the merit of ValueStar’s approach, she says, “The more ways you can get your name in front of the consumer, the better.”

Tammy Grittani, owner of Tam’s Wholesale Jewelry, Dublin, Calif., estimates that her ValueStar certification generates at least $1,000 a month in new business. Customers who find her store through ValueStar’s Web site tend to be willing to spend more, too. Grittani places large banners in her store window advertising the firm’s ValueStar certification. “People are definitely aware of ValueStar, and they’ll come in just because we’re certified,” she says.

Diamonds & Designs of Arlington, Texas, became certified last September. Owner Dan Morales has seen sales rise as a result, but he can’t quantify the gain. “I thought this would be a good way to make customers feel more comfortable and have faith in me as a jeweler,” says Morales. Using ValueStar’s logo in his advertising has helped. “When customers ask about it, and we explain it, they feel we’re a jeweler they can rely on,” he says. He adds that customers are more inclined to leave pieces for repair or redesign. Morales even likes the pressure for annual recertification. “We can’t be complacent in the way we operate our business. There’s an ongoing goal for quality,” he says.

Even jewelers who can’t yet attribute sales gains to ValueStar certification endorse the service. Geoffrey Stern, owner of Geoffrey’s Diamonds & Goldsmith, San Carlos, Calif., which became certified two years ago, says, “I like the idea because the Internet is so popular around here [Silicon Valley], and this is another way of screening us. I think it has potential for the future, and that’s why I’m sticking with it. The independence of it appealed to me, too. I thought this would appeal more to the masses than industry certification.” He also has used survey feedback to tighten up turnaround time for custom design.

Ted Mitchell, owner of Plaza Jewelers, Santa Rosa, Calif., has maintained his certification for two years simply for the survey information. “Being a small-business owner, your best barometer in gauging your success is to be able to question your customers about their satisfaction levels. We didn’t have the resources or time to do that, and that’s what ValueStar does. Customers nowadays are so shrewd, you really have to be on your toes to deal with them.”

Initial fees for ValueStar certification, annual recertification fees, and monthly fees for use of the ValueStar symbol in marketing materials vary from city to city. For information, call (800) 310-6661 or visit The Oakland, Calif., firm, in eight cities last year, plans to go nationwide this year.

Both ValueStar and the Better Business Bureau (to which it is often compared) monitor complaints and offer consumers help in handling complaints, but ValueStar says it differs in several important respects. It requires firms to earn top satisfaction ratings in annual customer satisfaction surveys with 400 randomly selected customers, verifies business license and insurance coverage, and offers marketing support to listed companies. The firm claims that less than half the businesses that apply for certification actually pass.

If your store doesn’t offer a private-label credit card to consumers, it’s worth considering, for both the financial and the marketing benefits.

Average ticket prices on private-label cards are generally much higher than those on VISA, MasterCard, or other traditional bank cards. In fact, jewelers who signed up for the recently launched Jewelers of America private-label credit card program saw their average ticket rise to $1,451 on the cards—more than five times the average ticket ($277) charged to other credit cards.

Additional benefits of the JA program include full funding of all sales within two business days, point-of-sale terminals for each store, in-store promotional materials, electronic data capture of all sales, and rapid credit approval. No wonder JA’s private-label card, “Jewelry Accents,” offered exclusively to current JA members through GE Card Services, attracted more than 2,400 jewelers in the first three months after its launch.

Private-label cards also can pull in the repeat customer. That’s an important consideration in light of JCK’s Jewelry Consumer Survey (JCK, November 1999, p. 108), which revealed that jewelers ranked last in the number of repeat jewelry purchases compared with other venues where consumers bought jewelry. Kate Peterson, a management consultant with Performance Concepts, contends that customers often make repeat purchases at other types of stores precisely because those stores offer private-label cards, and many jewelers do not. Why? Because consumers are drawn to the perceived economic benefits of private-label cards: low monthly payments, discounts, “free” financing, and the psychological factor of consumers’ trying to keep debt off their primary credit cards.

“Customers with private-label cards are more impulsive spenders, because it doesn’t encumber their credit limit on other charge cards,” says Ed Fechner, a senior vice president with Shoppers Charge Accounts Co. (SCA) of Mahwah, N.J. The firm administers private-label credit card programs for a wide range of retailers, including 12 jewelry chains, and recently signed H. Stern, a 10-store chain based in New York, as a client. The average ticket on these private-label cards runs 20% higher than on other charge cards and is often 50% to 60% higher, Fechner says.

Acquiring customer segmentation data—without the cost of maintaining records—is another benefit of private-label accounts, says Fechner. Jewelers can market directly to customers by printing messages on credit card statements or including inserts with bills. They also can retrieve data needed for frequent shopper reward programs or for targeted marketing based on factors such as birthdays or customer purchasing history. A jeweler could, for example, invite customers who had purchased a particular designer’s pieces to that designer’s trunk show.

SCA restricts its private-label card program to jewelers who have an existing private-label card program that has $200,000 in monthly billings or to firms with at least $2 million in annual sales.

For more information, contact GE Card Services, (800) 244-7354; Shoppers Charge Accounts Co., (800) 877-7467.

Coming Soon: Graduate Courses In Jewelry Store Management

For perhaps the first time ever, jewelers will soon have access to graduate-level business management courses designed to address their specific needs.

Scull and Co. of North Bergen, N.J., a management consulting firm serving the jewelry industry, has established accredited graduate-level courses through Ramapo College of New Jersey. Though dates and fees had not been confirmed at press time, course topics are expected to include CEO leadership skills, marketing for small businesses, e-commerce, and management and marketing skills for sales managers.

Joe Romano, president of Scull, notes that the courses will not include product training already offered by industry associations such as the Gemological Institute of America and the American Gem Society. “We’ll focus on Scull’s strengths, which include finance, operations, marketing, banking, security, hiring, firing, and personnel issues,” he says.

Classes are expected to be offered primarily on site at Ramapo State College in Mahwah, N.J., and on occasion at Scull offices. The curriculum was developed collaboratively by Romano; John Paladino, Scull’s chief operations officer, who holds a master’s degree in education and administration from St. Peter’s College, Jersey City, N.J.; and members of the faculty at Ramapo’s business school.

Obtaining accreditation for the courses, many of which include topics that long have been taught to Scull clients, demonstrates that “what we’re teaching is on a par with any business school and is yet another indication of the professionalism that can occur within the jewelry industry,” says Romano.

Lost in Transit

A week before their big day, a young couple asked to have their wedding bands engraved. Their jeweler’s regular engraver was on vacation, so he asked an assistant to send the rings by overnight delivery to another engraver, who promised a fast turnaround. The next day, the engraver called to say the rings hadn’t arrived. The carrier couldn’t locate the package, even with a tracking number. It was six days before the wedding, and the rings were missing—a sure-fire recipe for alienating potentially lifelong customers. To make matters worse, the jeweler wasn’t covered for the loss.

Jewelers should be aware that shipping losses aren’t always covered by a store’s Jewelers Block policy. Check your policy carefully to make sure you’re not at risk. To be covered for jewelry shipped by the U.S. Postal Service or by a private carrier (FedEx, UPS, Airborne, etc.), a jeweler must choose a limit of insurance coverage for “property in transit” on the Jewelers Block application. Look at the “Declarations” page of your insurance policy to see if you have this coverage. If there is no limit shown for property in transit, then your Jewelers Block policy provides no coverage.

Even when a jeweler has coverage, he or she should purchase additional insurance offered by the carrier up to the value of the item being shipped or up to the carrier’s maximum liability. Be sure to check the carrier’s specific requirements for jewelry shipments. Examples: UPS will not provide coverage for loose stones; and you must declare the full value of items shipped by U.S. Postal Service first-class registered mail.

There are three advantages to insuring packages with the carrier: The carrier has a financial incentive to ensure safe delivery; shipment losses won’t have an adverse affect on your Jewelers Block premium; and you won’t have to pay a deductible if the carrier provides coverage for the full value of the package.

Jewelers Mutual additionally recommends that jewelers use the U.S. Postal Service’s Express Mail service (combined with registered mail), which must be endorsed to the Jewelers Block policy, for overnight deliveries. Fewer jewelers insured through Jewelers Mutual have experienced losses through the Postal Service than through other commercial overnight services. Another advantage: You can buy up to $5,000 in coverage from the U.S. Postal Service for shipments through the Express Mail service.

When the value of a item exceeds the maximum coverage offered by the carrier, the Jewelers Block policy can provide coverage up to the limit listed for property in transit on the policy. Keep in mind, though, that most shipment coverage under a Jewelers Block policy has a deductible, which cannot be covered by other insurance or the shipper.

Here’s how the coverage would work when the jeweler has a shipping loss that’s insured both by the overnight carrier and through the Jeweler’s Block policy:

If the wedding rings in the aforementioned scenario were valued at $10,000, and the jeweler had coverage through the overnight service ($5,000, for instance, through Express Mail), only then would the Jewelers Block policy kick in. It would cover the value of loss in excess of $5,000, not to exceed the policy’s limit of insurance for property in transit. But the jeweler would still have to pay the policy deductible on the $5,000.

Of course, jewelers shouldn’t forget the most sensible way to prevent shipment losses—train staff to ship items correctly. Jewelry store owners who know how items should be shipped sometimes forget to pass along this information to the employees who actually wrap and ship packages. Consider posting in the back office Jewelers Mutual’s free shipping poster, “Good Box, Bad Box.” Copies are available at (800) 558-6411 or through (click on “for the jewelry industry,” “ordering loss prevention material”). Also see JCK, September 1999, p. 142 for additional information on how to ship goods safely, track items in transit, and respond immediately to losses.

This is one of a series of case studies prepared by Ronald R. Harder, president and CEO of Jewelers Mutual Insurance Co.

Ratio Clarification

Nathaniel C. Earle, president of the Jewelers Board of Trade, asked JCK to clarify three equations listed in January’s Business Report article “Six Ratios You Should Know” (p. 73). First, he wanted jewelers to know that the “current ratio” refers to total current assets divided by total current liabilities. JCK’s definition left the term “current” out of the numerator and denominator, since we assumed jewelers would understand the ratio is used to describe a fully operational business, not a business in the process of liquidation. Earle noted that “the ratio is designed to measure the total of cash and assets that are expected to be converted into cash within the next one-year period in comparison to the liabilities that must be paid within the same one-year period.”

Similarly, the quick ratio should be calculated by dividing the total of cash and accounts receivable by total current liabilities (we left out the term “current” in the denominator). Earle felt this was a critical distinction because using the term “current” indicates that inventory is not included in the ratio—providing a clearer indication of a firm’s liquidity. Earle notes that “if there is a large discrepancy between the current and the quick ratio, then the business may lack liquidity and be hampered in its ability to pay current obligations on a timely basis.” Inventory should not be part of this equation because it’s not liquid; to realize its cash value, it first must be sold and converted into an account receivable, which in turn must be collected and converted into cash before current liabilities can be paid.

Earle notes, however, that neither the current nor the quick ratio guarantees liquidity, because the assets in these equations might include a sizable account receivable (among those jewelers who extend credit) whose collection is in doubt, or the current ratio may include a large inventory of an item that is dated and not readily salable.

Earle also felt that JCK’s description of debt-to-service ratio formula should have been more specific. The sum of net income plus interest expense and depreciation should be divided by the projected bank indebtedness (principal portion of the loan and projected interest expense for the forthcoming yearly period). The denominator in JCK’s formula was simply described as the “current portion of the long-term debt.”

In addition, Earle felt that JCK should have included one more ratio in the article. He believes that jewelers who extend credit should master the calculation of accounts receivable turnover. The figure is calculated by dividing sales by accounts receivable. A higher turnover figure typically reflects a stronger credit portfolio, high collectability, and liquidity. A rising accounts receivable turnover rate also indicates improved cash flow to pay current liabilities. A lower or deteriorating turnover on accounts receivable reflects a potentially inflated current and quick ratio.

“If there is a large discrepancy between the current and the quick ratio, the business may lack liquidity.” — Nathaniel C. Earle, JBT