Forces of Nature

As we approach the first of November, the question on every retailer’s mind is, of course, how strong will holiday sales be this year? With as much as 40 percent of a jeweler’s profits earned during the all-important holiday selling season, it’s not a question to be taken lightly.

It’s also not a question that elicits an easy prediction this year. Economic pundits have thus far taken a fairly positive view, forecasting a modest increase in holiday spending over last year’s figures. Given that last year was a reasonably good year, that’s encouraging.

But this year also brings many new variables to the equation. While the war in Iraq is nothing new, public attitude about it has shifted to the negative. Hurricane Katrina obviously will have an impact on stores in the affected areas, but the more widespread effect is reflected not only in higher energy prices and more expensive building materials but also in concerns about the cost of rebuilding and questions about who will bear it.

Ultimately, to some degree, everyone will. Even if the federal, state, or local governments pick up the lion’s share of the rebuilding tab, that money has to come from somewhere. So far, according to news reports, it seems to be coming from domestic programs that impact all of us—more money for rebuilding means less money for Medicare, education, road repairs, and other programs that are part of our daily lives. So that could mean more out of individual pockets to educate our children or help our parents buy the medicines they need, as well as paying higher local taxes to fix roads and maintain parks.

Then there’s another great unknown—the weather. Despite some in the world who would attribute Katrina to global warming and say that America’s consumerist nature is responsible for bringing disaster upon itself, science has proven that weather moves in cycles. And we’re not in a favorable one. Both the Old Farmer’s Almanac and the Farmers’ Almanac are predicting a fairly nasty winter for 2006. While admittedly not paragons of science, their forecasts obviously have some merit or neither book would still be in existence. And as anyone who’s ever lived in the country knows, there’s a lot to be said for simple practical wisdom born of experience.

What does this mean for jewelers? It means the weather might be the factor that determines your holiday sales. Economists have already pointed out that while higher gasoline prices at the pump are hurting lower-end consumers the most, the real issue of concern is yet to come, when prices for natural gas and other home-heating fuels soar this winter. The great question is: When will winter arrive? If it comes early, that could be bad news. If not, heave a sigh of relief on Jan. 1.

The luxury customer, as always, is prepared to ride out higher energy costs and, indeed, bankers and economists have no worries about this market. The low-end customer is already suffering (witness Wal-Mart’s lower earnings), but the customer to watch carefully is the luxury-striver, e.g., the one who’s stretching to afford a McMansion, not the one who lives in a bona fide mansion. When the cathedral ceiling meets a 50 percent hike in home-heating costs, the money has to come from somewhere.

This is the customer who is irked about spending $75 to fill the SUV, but who can absorb it without really hurting his or her bottom line. But when the bottom line has to absorb not only the $75 fill-up but also consumer goods that are more expensive because of the cost of transporting them, plus a huge winter heating bill on top of it, somewhere along the line there’s going to be some belt-tightening.

That’s not to say that there won’t be Christmas shopping. Or that there won’t be the same emotional needs to fill. Gifts of love aside, we all know by now that luxury shopping is all about emotional gratification, and that the products people buy must resonate with them in an emotional way. Whether it’s diamond jewelry or a Whirlpool Duet washer and dryer, there has to be something inherent in the product and the shopping experience to make the consumer feel the need to own it.

In this environment, increasing advertising and building your relationship with the customer are more critical than ever, as is choosing product that’s anything but the same old, same old. Showcase the unusual and distinctive, and use your marketing to appeal to the emotions, whether you’re selling a gift of love or helping a customer choose a gift for herself. Consumers don’t change their psyches overnight, so they will still want luxury goods. But if they have to choose fewer of them this year, you want them to choose yours.

As Katrina taught—and Rita proved—if you know a storm is coming, the best strategy is to be prepared. By marshaling your forces now, you can ride out any kind of holiday storm and prove the positive pundits right.