BusinessReport

E-Mail: An Effective Marketing Tool

You’ve heard a lot about Internet retailing. Less publicized but perhaps just as important for jewelers is the Internet’s power to help strengthen relationships with customers. Jewelers are only beginning to tap this potential, using e-mail newsletters, e-mail direct mail, and e-mail gift reminders. Though it’s too early to quantify any sales increases, a less tangible benefit is clear: It’s a relatively cheap way to maintain top-of-mind awareness with key customers.

“You can afford to be much more in a relationship with your customers when you use e-mail marketing,” says Rich Goldstein, president of Austin, Texas-based iJeweler, a consulting firm specializing in Internet marketing for the jewelry industry. He recommends that jewelers “use e-mail and a Web site to bring people to your store as opposed to selling online. In the jewelry business you want to show them the gorgeous merchandise and talk to them in person. A ring on the Internet is just a commodity.”

Goldstein contends that people who shop online end up visiting either a store they know or one they find through an online search. E-mail marketing establishes a jeweler as the store they will know and visit even if the store doesn’t sell online. The store’s Web site is always just a click away, through the jeweler’s address embedded in the e-mail message.

Another benefit: A well-executed e-mail promotion can generate a 10% to 20% response rate in actual sales transactions, according to Forrester Research Inc., a Boston firm specializing in Internet retailing. A 2% response rate is considered successful for conventional direct mail.

Robert Mann, chief operations officer of Mann’s Jewelers, a high-grossing store in Rochester, N.Y. (www.mannsjewelers.com), began sending e-mail newsletters in late December—but only to customers willing to share their e-mail addresses. Says Mann, “With e-mail, the customer is stepping up to the plate, saying, ‘I want the information. I am a jewelry purchaser and consumer.’ Compared to other forms of advertising, you’re really narrowing the board you throw your dart at, and you have a much more defined target. ”

Three months into the venture, Mann says it’s too soon to estimate the resulting sales. “However, based on people’s time constraints and their busy, hectic lives, I can see that the potential is significant,” he says. “Once you set it up, you can’t find a more cost-effective way to reach a client base.” He plans to continue other forms of advertising but notes that “no matter what conventional advertising medium you use, you blanket huge groups of population and the message is only relevant to a small handful of them. Plus, you miss a lot of target audiences.” His start-up costs for e-mail marketing were $700, compared with the $15,000 he spent on his store’s Web site.

Expressions Ltd., a $1.5 million revenue jeweler in Davenport, Iowa, began sending e-mail newsletters in early ’98. President Jim Turner says, “So far, the greatest benefit has been solidified relationships with our existing customers.” In a typical month he receives 10 to 12 responses to his newsletter, which goes to 100 people. Typically, people respond to a point in an article, ask for assistance with buying jewelry, or ask a question about jewelry care. Although Turner attributes just $5,000 of last year’s sales to his e-mails, the store gained 15 new customers as a result of the communications. Turner estimates his internal labor costs at $300 a month for his time spent researching, writing, and editing the store’s e-mail newsletters.

Turner built his e-mail list by placing a bowl of chocolate kisses in the store with a sign inviting customers to take a kiss in exchange for sharing their e-mail address. Other addresses came from referrals and from the store’s e-mail site: www.expressionsjewelers.com. He won’t send unsolicited e-mail newsletters. “It’s offensive to us when we get one, and we wouldn’t want to be offensive to anyone else,” says Turner.

A gift-reminder service has been a popular e-mail marketing feature linked to the Hyde Park Jewelers Web site (www.hydeparkjewelers.com). Nine hundred people signed up for the service in the first two months after the firm launched its electronic gift reminders early this year. Gina Cornelison, director of marketing for the firm (which has stores in Las Vegas, Denver, and Aspen, Colo.), says subscribers provide the store with dates and taste preferences for upcoming gift-giving occasions. Then, she sends an e-mail letter suggesting 10 gift ideas two weeks as well as one week before the occasion.

Cornelison says she’s looking to automate the service and track resulting sales. She also intends to use the firm’s current database of e-mail addresses (from its catalog customers) to send more targeted e-mail letters promoting new designer lines and special events in the store. This approach, she says, “puts us ahead of our competitors as a more cutting-edge and progressive store.”

“Compared to other forms of advertising, you’re really narrowing the board you throw your dart at. You have a much more defined target.” —Robert Mann, Mann’s Jewelers, Rochester, N.Y.

E-Mail Marketing Do’s & Don’ts

  1. Don’t send “spam” (computerese for unsolicited commercial e-mail messages). The cost of lost sales from the customers you alienate by sending e-mail without their advance consent may negate any potential sales gains. Unsolicited commercial e-mail is also a violation of the acceptable use policy of most Internet providers—a breach that could result in a warning or even having an account canceled.

  2. Do Keep it simple. Don’t use graphics-heavy messages or fancy text formats unless you’re sure the recipient has the necessary e-mail software to view them. Most don’t, so you’re better off describing products in the text and referring readers to photos on your Web site. Text should be in ASCII format with no more than 65 characters on a line.

  3. Don’t use “emoticons” (computerese for designs made with punctuation marks). Some people may mistake them for typos, while “digerati” who do know what they are may view them as clichéd.

  4. Do Respect online privacy. Don’t sell your list. When you ask for customers’ e-mail addresses, make it clear what types of messages you would send.

  5. DO Send a confirmation request. Ask people to confirm that they’d like to be added to your e-mail mailing list. Online harassment sometimes takes the form of signing someone up for so much unsolicited e-mail that their e-mail account overloads.

  6. DO Make your messages useful, amusing, and warm. The more fun your e-mails are to read, the better your chances that your readers will forward them to others. That’s an easy and inexpensive way to build your list. Don’t send impersonal, cold messages. After all, the benefit of e-mail is establishing warm relationships with customers who feel a personal connection with your store.

Sources: John Mozena, Marx, Layne & Co., Farmington Hills, Mich., (248) 855-6777; Rich Goldstein, iJeweler, Austin, Texas, (512) 444-8070

Crime Trends Improve

Jewelry-related crime declined dramatically in 1998, according to the Jewelers’ Security Alliance. The results track a nationwide decline in overall crime rates. JSA president John Kennedy notes that the results also show that more aggressive enforcement against jewelry crime by police, the FBI, and other agencies is beginning to have a positive impact [JCK, January 1999, p. 17].

Five Sale-Killers—And How to Conquer Them

All too often customers who are ready to buy jewelry walk away from a store without making a purchase. Why? According to jewelry sales trainer Shane Decker, there are five classic “sale-killers” that easily can be overcome.

Speaking at the recent Independent Jewelers Organization’s spring buying session in Denver, Decker, of Franklin, Ind.-based Shane Decker Diamond Co. Inc., cited compelling research on this topic. According to a recent nationwide survey of thousands of shoppers after they visited clothing, auto, furniture, and jewelry stores, here are the main reasons purchases weren’t made:

  1. “We weren’t asked to buy it.” This was the most common reason cited by shoppers who found what they wanted at a store but didn’t make a purchase. Customers expect assistance from knowledgeable sales associates who can guide them toward a purchase and validate their choice, says Decker. “They want reassurance, permission to spend their money.”

  2. “It was too expensive.” This was another common response among consumers who didn’t make a purchase. Decker’s explanation: “The sales associate didn’t prove it was worth it.” Listen to what the customer says he’s looking for and focus your sales presentation on the value of that product in terms that are meaningful to him—without doing a data dump. Use careful language when discussing price: The cost of a $2,150 ring should be stated as “twenty-one fifty,” not “two thousand one hundred and fifty dollars.” Ask engagement ring customers: “If you could only tell her that you love her one more time, what would you spend?”

  3. “I couldn’t get waited on.” Most retailers wouldn’t admit it, but customers are ignored all too often. Within the first 30 seconds after a customer enters your store, she should be greeted with a smile “so she knows you know she’s there,” says Decker. If you’re serving another customer, tell her, “Someone will be right with you.” One classic mistake is not setting aside paperwork or an appraisal to serve a customer. You have only one chance to make that sale. Also avoid “the huddle” formation: sales associates who are so busy talking to each other that the customer is ignored.

  4. “The store didn’t have what I wanted.” This important objection, raised by many of the consumers surveyed, can easily be addressed. Decker says the researchers found that most of these consumers would have been willing to wait for a special-order item. It just wasn’t offered. Showing pictures in a catalog or on a Web site can make the difference between blowing a sale and closing it.

  5. “The salesperson didn’t address my concerns.” In a jewelry store, many of these objections come down to trust. Even when you approach every aspect of your business with integrity, nonverbal cues are important to building trust. Decker counsels retailers to always make eye contact with customers, especially when discussing price. “It builds a customer’s confidence, and also shows that you think the price is worth it.” Some customers ask about stone switching or whether work is done on-site. Ask if they’d like to watch the diamond being set, or use a device such as Gemprint to document the unique features of their diamond so they’re assured that diamond-switching didn’t occur. Contact Gemprint in Toronto; (416) 626-0411.

Decker claims the biggest sale-killer of all is not pursuing add-on sales. “After they spend money on the first item, it’s easier to get them to spend on the second or third item.” Here’s how:

  • Show the customer matching items for the next gift-giving occasion or to add to the current gift.

  • Show the customer the next level of quality or size.

  • Give jewelry or watch-repair customers a high-ticket gem or piece of jewelry to admire during their wait. Decker claims this is the most fruitful strategy of all. Customers don’t have objections ready. They aren’t comparison-shopping for price. It’s free advertising. Customers are often flattered that you thought they could afford the item.

Decker offers one last caveat: Not having case keys handy is a major culprit in lost sales. “Every time you walk away, the chance of closing a sale drops 50%,” he says.

Hope Diamond, Move Over

As a boy growing up in Iran, Massoud Zahedi always knew where to buy keys. It was easy. You just went to the store with a giant key on its sign.

Twenty-five years later, when he was ready to open Jewelry Factorie, his first freestanding jewelry store in Atlanta, Zahedi knew just what he wanted in front: a giant, sparkling diamond. More precisely, he wanted a perfect standard round brilliant that was 12 ft. high and that rotated twice a minute. After all, he says, “People remember a three-dimensional form better than a name and address.” It would also help him provide customers with a larger-than-life explanation of the “four Cs” of diamond quality.

Zahedi, who designed aircraft when he lived in Iran, was uniquely equipped to realize his vision. The result: a 500-lb. blue “diamond” made of aluminum and stainless steel with a quarter-inch coating of blue Plexiglas. Though it cost him $40,000 to manufacture, he says it was worth every penny. At night, when he shines two strong spotlights on it, “it lights up the neighborhood like a giant disco,” he says.

When he asks new customers why they came to the store, they say, “How could we miss you?” Many visit the store just to gawk at the sign and take their photo in front of it. Zahedi opened the location last September. In his first six months of operation he grossed $650,000, selling more bridal jewelry in that time than he had sold overall in the previous 12 years in a mall location in downtown Atlanta. His architect designed the $1 million building, which includes three rental units on the lower level, to complement the giant diamond.

The sign suits his location well: 70,000 cars pass his store every day. “In the jewelry business you never see eye-catching signs,” he says. “Anyone buying a diamond who drove by our store would remember us and come see what we offer.” Zahedi is willing to reproduce his rotating diamond sign and sell it to other jewelers for $30,000 to $40,000, depending on site limitations, local building codes, and where the store is located.

Zahedi pledges to donate any profits from that sale to charities that care for orphaned children in impoverished countries. That’s a promise he’s made to his customers as well. A light board in his store lobby explains that he donates net profits from Jewelry Factorie to those same charities. He takes just a $24,000 salary from the store and earns income from his other store in Atlanta, Carnegie Jewelry.

Some customers find that pledge hard to believe. But Zahedi says, “I’m 35 years old. I’ve made enough money to retire now. If I pile up $100 million for myself and die, what’s the point? When I die I want to say I did something good for the world.” Plus, he says, the pledge may help him build sales.

For more information, contact Massoud Zahedi, Jewelry Factorie, at (404) 255-2627.

Independent Contractors May Trigger Audits

If your retail jewelry store hires designers or stone setters or any artisans as independent contractors, you could be risking an audit from the Internal Revenue Service or the Department of Labor. If you hired these workers improperly, your firm could wind up owing back payroll taxes plus fines of $15,000 or more.

Just ask the three companies that came to New York City accountant Ginger Broderick’s office after an IRS audit revealed that they owed $100,000 to $300,000 in back payroll taxes. The money was already spent on overhead, and the firms got hit with sizable liabilities by surprise.

Any firm that hires independent contractors could be next. “About 30% of U.S. companies are delinquent about paying their payroll taxes,” says Broderick. “The government is not getting its money on time, and it’s putting the burden on employers. If you use 10 or more independent contractors, those 1099s [tax forms] land on the IRS radar screen. The IRS starts looking at companies and can assess fines of $15,000 or more.”

Avoiding an audit and fine. When in doubt, hire workers as employees. “If you have workers that you are using on a regular basis, you will have much less trouble with the IRS if you treat them as employees rather than independent contractors,” advises Bob Stone, an attorney with the White Plains, N.Y., office of Jackson Lewis Schnitzler & Krupman. “The bottom line is that the government wants to get its taxes up front. If an individual is an employee on the employer’s regular payroll and FIT and FICA [taxes] are withheld, then the government gets its money on a regular basis and the IRS won’t bother you.”

If there’s any doubt whether a worker should be classified as an independent contractor or an employee, seek legal advice or put the worker on the payroll, adds Stone. “A lawyer can tell you how much risk you are taking with your hiring practices,” he says. He notes that there are substantial penalties for filing 1099-MISC (Miscellaneous Income) tax forms on workers who should be treated as full-time employees with taxes withheld.

IRS rules. According to the IRS, here are some ways companies can distinguish between an employee and an independent contractor. The worker is liable to be considered an employee if:

  • The company controls the person’s professional or work behavior. According to IRS guidelines, “An employee is generally subject to the business’s instructions about when, where, and how to work. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved.”

  • The employer gives a worker training to “perform services in a particular manner.” Independent contractors do things their own way.

  • The company establishes financial control over the business aspects of the job, such as reimbursing expenses. Independent contractors have fixed ongoing costs—equipment repairs, maintenance, lights, etc.—that are incurred regardless of whether work is being performed. If your firm reimburses these costs, you are treating the worker as an employee.

  • He or she works only for you. Independent contractors typically work for many clients.

What audits examine. When questions arise about the use of independent contractors, auditors from the IRS and the Department of Labor typically look at written contracts describing the relationship that the parties intended to create and whether the business provides the worker with employee-type benefits such as insurance, a pension plan, vacation pay, or sick pay.

Another factor is the permanency of the relationship. If you hire a worker and expect that the relationship will continue indefinitely rather than for a specific project or period, that’s generally considered evidence that your intent was to create an employer-employee relationship.

The extent to which services performed by the worker are integral to the regular business of the company is also important. According to IRS guidelines, “If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities.”

Keep in mind that when you do use an independent contractor, “you need to be sure you are doing business with a company as opposed to an individual,” advises Broderick. “Make sure the people you hire as independent contractors have business stationery, business cards—and if they’re incorporated, that’s even better.”

If the government finds that you improperly classified an employee as an independent contractor, in addition to tax penalties there’s another risk. Says Stone, “The Department of Labor can also put your benefit plans under scrutiny and argue that the workers you classified as independent contractors paid via a 1099 are really employees and should participate in these plans. Such a result could prevent the plan from passing discrimination tests and jeopardize its tax-deferred status.” Another problem that hopefully won’t arise: Back payroll taxes can’t be discharged in bankruptcies, says Broderick.

Given all these risks, if you still need to hire independent contractors, be sure to consult your accountant and attorney. Get their help in structuring contracts and work schedules that protect you from potentially costly IRS and Department of Labor audits.—Miles Z. Epstein

Key Stats

256 – Total number of jewelry-related homicides during the past decade.

37 – Jewelry-related homicides in 1991, the highest in the decade. By comparison, there were 19 jewelry-related homicides in 1998.

$328,000 – Average total value of jewelry stolen from store safes during jewelry store burglaries in 1998. The Jewelers’ Security Alliance attributes safe losses to assistance provided by dishonest employees of alarm companies and to the growing use of a metal-cutting device that can melt open safes and vaults using temperatures up to 9,000°F.

32% – Of robberies occurred during store-opening hours between 10 a.m. and noon in 1998, up from 30% of robberies in ’97.

23% – Of robberies occurred between 1 p.m. and 3 p.m., the next most active period.

54% – Of robberies involved violent physical contact with the victim in 1998.

$53.1 million – Total losses of traveling salespersons in 1998, one of the few growing categories of jewelry-related crime in last year. (This number includes robbery, burglary, theft and loss of unattended items). Losses were $50.9 million in ’97 and $50.5 million in ’96.

$314,000 – Average robbery loss among traveling sales reps in ’98, up from $300,000 in ’97 and $233,000 in ’96.

34 – Number of states where sales reps reported losses in ’98, up from 24 states in ’97.

51%– Of sales rep losses occurred in California, Florida, and New York in ’98.

7% – Of these losses occurred in Nevada (in connection with jewelry trade shows), and 7% occurred in Georgia. Wisconsin made the list for the first time in ’98, with 5% of losses occurring there. This illustrates the ability of criminal gangs to move operations to new areas, often owing to increased law enforcement in their habitual haunts. Thirty-nine percent of losses occurred in California in ’97, while this number shrank to 25% in ’98.

Sources

(Numbers represent order of data presented)

1-11 Jewelers’ Security Alliance 1998 Crime Statistics