The industry’s big chains are coming off a good year, but they’re concerned profits could sour in 1998. The toughest challenges? Getting shoppers to spend more on jewelry and having the right staff to sell the merchandise
For leading jewelry store chains in the U.S., 1997 was a good year. Zale Corp. and Sterling Inc., two of the nation’s largest retailers, expected to post healthy year-end earnings; Friedman’s, with 418 stores, projected a 23% boost in both sales and profits, in spite of failing to meet a target for comparable store sales; and Fred Meyer Jewelers, now with 260 outlets (including departments in 93 superstores), anticipated a 13% comparable store gain. (Official numbers for 1997 weren’t available at press time.)
These chains and others project a bullish 1998, according to a JCK poll, but higher sales figures are far from guaranteed. First, these retailers must convince tight-fisted consumers to spend more of their disposable dollars on jewelry.
A number of store executives say consumers aren’t spending their money on fine jewelry in spite of a positive business outlook with low unemployment, growth in personal incomes and a strong national economy – hopefully little affected by recent turmoil in Asian markets. Sales, in general, showed little gain over 1996, and shipments of precious metal jewelry were down 2% in 1997 with another 2% decline anticipated in 1998, according to federal projections.
“1998 won’t be the easiest year that the jewelry industry has had,” says Jeff Comment, chairman of Helzberg Diamond Shops, a chain of 190 stores. “There are strong competitive pressures and the economy could slow down, which could affect fine jewelry. But it will be a good year for those jewelry companies that run their businesses right.”
One such competitive pressure is the lack of demand for jewelry, says an executive of a major chain, adding: “Customers’ priorities are changing to travel and savings.”
Baby boomers, many of whom have satiated their material needs, are putting their disposable income into retirement or stock funds, or toward such big ticket items as vacation trips and housing, rather than luxury wares like jewelry or fine watches, say recent consumer surveys.
Other factors are credit card debt, which is at its highest level in years – especially among younger consumers – and loss of market share. Chains see lucrative slices of the jewelry market being cut away as competition increases. One recent example: Neiman Marcus announced that it will start opening free-standing stores specializing in fine jewelry and gifts this year.
Chain retailers, however, are rising to the challenges posed by the year’s projected pressures. To make themselves more attractive to consumers and create a renewed interest in jewelry, many leading chains aim to:
Strengthen their public images with name changes and increased advertising;
Improve operational efficiencies through technological upgrades and better staffing and credit debt policies;
Tighten their focus on merchandise and regional markets.
Image. To sharpen public perception in tough markets and to improve returns on marketing dollars, some firms are consolidating multiple trade names into one. Helzberg, for example, has started its plan to rename all 46 of its free-standing Jewelry3 stores as Helzberg Diamonds within the first months of 1998.
The name change capitalizes on the “remarkable sales success we have with use of ‘Helzberg Diamonds,’” says Comment. “And there are good synergistic reasons to go into a market with one name. When we began Jewelry3 five years ago, we didn’t expect that one day we would have both mall and free-standing stores in the same markets.”
The name change also eliminates confusion in the public’s mind about who is who or what. Recent market research by Helzberg in St. Cloud, Minn., and Indianapolis, Ind., found that the public incorrectly associated the Jewelry3 name with that of a discount or costume jewelry store. Changing the name lets Helzberg “spend more time telling customers what we can do for them, instead of explaining what [Jewelry3] means,” says a company official.
Barry’s Jewelers is in the process of consolidating its stores under the Samuels Jewelers name. All A. Hirsch & Sons, The Ringmaker and Hatfield stores, located on the West Coast and in Arizona, will become Samuels as it remodels those stores in 1998. All 34 Mission stores in Texas, Oklahoma and New Mexico as well as its Schuback stores in North and South Carolina will change to the Samuels name by 1999. (The last Barry’s store was changed to Samuels in 1997.)
“We believe the Samuels name, which dates to 1890, is a much stronger and established name,” says Chad Haggar, vice president of operations for Barry’s. “Mission is known as a credit jeweler and it has never been able to shed the image.
“We believe a single name is beneficial to marketing and building familiarity with customers. It streamlines our whole strategy, gives the customers a familiar nationally-recognized name,” he notes. “Right now, the company is too fragmented, with too many store names in too many states.”
Marketing. Advertising strategies are getting closer scrutiny this year. The major chains upped their holiday budgets in 1997 and the increase will continue in 1998.
A strong public image is especially important this year. “Maintaining profitability in the face of increasing competition and reduced consumer disposable income is the biggest challenge in 1998,” notes Dale Perelman of the 40-store Kings Jewelers chain in Pennsylvania. “So we’ll continue to hammer away [in the media] with King’s as the value leader.”
More radio and TV coverage is expected as some chains become disenchanted with direct mail. Littman’s will use fewer direct mail catalogs this year. Fred Meyer “tried direct mail, but we don’t have much confidence in it,” says Ed Dayoob, company vice president. “We’re staying consistent with radio and TV ads, and with flyers.”
Meanwhile, Zale’s, which expanded its catalog operations and has an Internet site, is looking to reach clients through infomercials and advertising on TV home-shopping programs.
Operational improvements. Upgrading computer technology is becoming a more important competitive tool. A number of regional firms, such as Pennsylvania’s Kings Jewelers, Mayors in Florida and Don Roberto Jewelers based in San Clemente, Calif., are evaluating their information systems with an eye toward improving operations, inventory control and distribution. For example, Don Roberto Jewelers is upgrading its computer department “to better track
consumers, their addresses and phone changes,” in an effort to reduce credit debt, says Robert Treete, president. “We have approximately 100,000 customers, and we need a bit of tech help to track them.”
In the South, Carlyle Jewelers is installing new hardware and software at both the store and main office levels and making new investments in systems and technology as a way “to improve service to our customers and lower cost of operations,” says John Cohen, copartner and president.
Fred Meyer Jewelers just completed a major upgrade and revamping of its distribution systems and the effects already are being felt. “It’s a key factor in the 13% increase in ‘comp’ store sales for 1997 because now we can get the right product there and get it there quickly,” says Dayoob. “We ship better and ship daily. We turn around orders immediately and always have the good basics in stock.”
Staffing. This will become increasingly important to chains in the coming year. Indeed, it makes the difference in an especially competitive market, but it is tough to get the right kind of employee, say chain executives.
“It’s our top priority,” says one regional executive. “If you don’t have the right staff, you have nothing. And I’m not talking about just training, but people who want to do something with their lives and who work hard.”
Carlyle & Co.’s John Cohen notes, “Success is dependent upon the quality of people working in the company, the quality of service they provide and the quality relationship they develop with the customer. It’s difficult for us to attract good people to work in the company. The kind we want to hire don’t grow up wanting to work in retail. Our challenge is to attract better people to the industry. If we are going to grow, we need to hire good people and good store managers.”
Credit. More chains are implementing tougher or more efficient ways to handle credit sales, reduce bad debt and/or upgrade their credit customer base.
Determining “the credit worthiness of the consumer is the biggest challenge for many jewelers in 1998,” says Robert Treete of Don Roberto. “Consumers have taken on a lot of credit, more than in the past, and they are having a difficult time in paying it back.
“We sell luxury items and we don’t want to be the last to be paid,” he adds. “We are going to have to learn how to keep the customer in the boundaries of what they can afford,” even if it means losing some credit customers.
Zale Corp. recently strengthened its credit card program. That move “allows us to have more flexibility with our credit card and avoid a lot of costly and cumbersome administrative entanglements,” says Robert DiNicola, chairman.
Meanwhile, Friedman’s also significantly strengthened its credit operations and receivables portfolio in 1997. It expects to see the benefits in 1998. One already is evident: the percentage of past-due customer accounts-receivable of 90 days or more shrank from 9% to 7.7% in 1997.
Merchandising. Barry’s is focusing on offering “more and deeper merchandise at competitive prices,” especially diamond merchandise, to reach and hold what company President Sam Merksamer calls “better customers.”
Littman’s Jewelers in the Northeast will focus on diamond merchandise in 1998. It is increasing its diamond engagement ring inventory and focusing on larger sizes, better quality and “fashionable” goods, says co-chairman Leonard Littman.
Fred Meyer Jewelers also will focus more attention on its bridal trade. Dayoob says, “Once you have a bridal customer, you have a customer for life.”
Expansion. Some major chains are tightening their grip on existing markets and going into new geographic markets. In 1997, Friedman’s Inc. acquired all legal rights to the Friedman’s Jewelers trade name from another Southern jewelry chain, now known as Marks & Morgan. This opens up more than 100 previously inaccessible locations in several core states, says Chairman Brad Stinn. Many of the 70 to 90 stores it plans to open during fiscal 1998 will be in these new markets.
Friedman’s also has a major investment in Crescent Jewelers on the West Coast, enabling Friedman’s to “participate in the rapid growth of a jeweler operating outside our current geographic territory with similar merchandise and expansion strategies,” says Stinn.
Meanwhile, Zale’s will add 280 outlets to its store total of 1,065 by the year 2000; 124 of them will join its Zale Jewelers division in fiscal 1998.