Much has been said the last few years about the declining number of jewelry operations in the United States, especially among independent jewelers. I noted Jewelers Board of Trade figures last month. Some take this to mean the days of the independents are over; that this industry will consolidate as so many other retail industries have.
This view fails to consider some fundamental aspects of the evolution of jewelry retailing.
People refer to the business as segmented, when the appropriate term might be stratified. Ask a person at Wal-Mart what’s happening at Graff, and he will ask, “Who is Graff?” Ask someone at Graff about the latest merchandising at Wal-Mart and her eyes will glaze. It isn’t just the demographic makeup that’s different; it’s the very nature of the products and services. They are in different businesses.
Consider the central attribute of jewelry: endless variation. Were we to develop a list of every MP3 player made (the iPod and its competition), we might find a few hundred. Jewelry is in the millions. IPod retailing is easy to aggregate. They are identical products, mass produced by low-skill labor, easily recognized, and displayed by consumers as badges of coolness. Jewelry requires highly skilled labor, is produced in tiny quantities (even for the mass retailers), and achieves greatest value by not being the same as a neighbor’s. A person can walk into a small jewelry store and have a custom piece produced. Try that with an iPod—or almost any other product. A few comparisons I can think of are furniture, knitwear, custom-built motorcycles, and houses. Those are available from large manufacturers and retailers, but the best quality and best design come from small operators who are true designers and artisans.
If anything, the call for those kinds of people is rising in the world, even as we see so-called luxury products peddled in large quantities and in every venue. The more that good styling is knocked off by mass marketers, the more the affluent will seek the unique and hard-to-copy item.
So why have we seen the drop in U.S. retail operations? That brings us back to stratification. A large number of small stores owned by aggressive merchants began to branch out about 40 years ago, and they have evolved into the mall operators of today. In the process, they cut out a space for themselves in the spectrum of the jewelry market that has become hard to invade. We could list some 50 of these chains that have disappeared over those years as that market coalesced around the best operations—those that best served the bridal-oriented middle-class consumer. Other retail formats (catalog showrooms and most discounters) that aimed at the same group went out of business. The department stores went after the accessory and fashion part of the business. And wholesale clubs developed a large business with consumers who sought good quality, low prices, and minimal service.
At the independent level, a number of forces are at work. The global brands at the high end (Tiffany, Cartier, Winston, etc.) have reacted to the explosive growth of super-affluent populations, and they have expanded worldwide. But for the average American retailer, survival and growth depended on inheritance, location, and vision.
Inheritance is a factor because many retailers don’t have offspring ready to take over. Selling a store is difficult since good ones have sizable inventories. Liquidating is a common solution.
Location is a factor because upgrading will not work unless an affluent population is present. One retailer gave up three locations in an area hard hit by declines in manufacturing and moved to a rich waterfront community where a successful high-end business ensued. The move was risky; it meant starting over. Many retailers won’t have the courage to do that.
And finally there is vision. The ability to merchandise well, diversify selection, offer a range of services, possess broad knowledge of jewelry, and market effectively defines the independent space in the market. This space cannot be supplanted by other channels and cannot be outsourced.
These factors led to dominant retailers in local markets—a local consolidation.
The independents will be with us forever.