Thank goodness for jewelry’s core business of Valentine’s Day, Mother’s Day, Father’s Day, anniversaries, weddings, birthdays, special occasions, repairs, get-out-of-the-doghouse gifts, restyling/remounting shows, semiannual sales, watch battery and strap replacement, pearl strand restringing, insurance appraisals, trunk shows, and the fourth-quarter holidays scheduled in 2009 or else we’d all be wondering what to do this year with the economy in such bad shape.
Is business as bad as last year? Are you reducing your staff’s hours? Are you cutting back on your advertising and promotions? Are you ready to throw in the towel? I hope not, because there is light at the end of the tunnel. Unfortunately, it probably will be a long tunnel, but for those willing to go the extra mile, business will get better. (And no, wise guys, that is not a train approaching from the other end of the tunnel.)
Here are some things to remember as you journey through the tunnel. First and foremost, recessions are cyclical. The bounce that comes in retail following a recession is usually a sustained period of solid sales growth, in terms of both market share and dollar volume. As recessions progress, manufacturers reduce production to meet declining demand, wholesale pricing power becomes fully leveraged as inventories fall below basic demand levels, retail competition is leaner due to Darwinian laws (and tougher new Chapter 11 regulations), retail inventories slim down, and consumers build up significant delayed demand that takes a long time to deplete, especially since not all consumers gain physical or mental spending traction at the same time.
We don’t know how long this recession will last, but most economists are not optimistic about a quick fix. Here’s what we do know: Unprecedented amounts of money are being printed to ease the credit crisis. Economic sustainability packages are being devised to keep functional manufacturers, businesses, and banking systems in place. The American public is an economic force of unbelievable power. This economic force believes in sweat equity and understands the value of fair wages for a fair day’s work. While we have experienced an unprecedented reversal in terms of the average person’s total net wealth in the past year, we are still the richest nation in the world and have more economic horsepower than any other country, despite the current gloomy fiscal climate.
We also know that, as a country, we have been living beyond our means for the last decade or so thanks to too-easy access to multiple lines of credit and an unsustainable real estate bubble. We, as an industry, share some of the blame for facilitating this with easy payment plans attached to confiscatory credit terms and weak credit checks and balances. We allowed millions of people to buy jewelry they couldn’t really afford. The harsh reality is that we created a nation of cheap-and-cheery jewelry junkies. The good news is that many of the worst retail offenders are no longer in business, and more will follow before the recession is over.
This gives the rest of the retail industry an opportunity to learn from the mistakes of those who have set a terrible precedent with the jewelry-buying public. You need to break the negative jewelry sales cycle. As you return to the jewelry shows to restock your inventories, look for fresh and exciting product. Look for salable merchandise that complements your core customers’ economic profile, matches their ability to spend, and has significant real and perceived value. Patronize manufacturers and wholesalers that talk to you about sustainable margins and protect their suggested retail prices by limiting their online distribution to product SKUs that you don’t sell or compete with.
Above all, look for suppliers that will walk the walk as your business partner, actively working with you to make their product a success in your store through advertising, promotions, quality POS materials, fair local and regional distribution policies, flexible take-back policies, reasonable stocking plans, service support, and open lines of regular communications. These values and qualities are your keys to offering merchandise you won’t have to move out at low margins and make up the difference with confiscatory interest payments that take the joy out of giving and owning jewelry. What a concept!