One has to wonder about the gurus in the financial market. All through the latter half of last year, most were saying the economy was sound and chances of a recession were low. Either they’re inept, or they lied to keep the public from fulfilling a recession prophecy—maybe both.
We saw real declines starting last summer, and we knew it wasn’t an aberration. I turned to people in other industries, and they told me the same thing. I’m not an economist (and maybe that’s an advantage), but it was clear we were in a recession well before Christmas—even as economists continued to say there was only a 50–50 chance of one. In mid-January the Federal Reserve System’s Ben Bernanke, whose every word gets parsed, noted that periods of recession can be dated only well after the event. He did say there were real risks. That’s a big help!
The old saying is that the jewelry industry is the first to feel a recession and the last to recover. You could say we’re the canary in the coal mine. Unlike many economists, those on the front lines of commerce know firsthand what’s happening, and we certainly saw the problems early.
Every retailer by now has figured out what’s going on. The public faces rising costs of living at the same time the credit crunch will impede their ability to take on debt, whether on credit cards or by dipping into their home equity. I think the credit problems have still to ripple though the credit card industry, and that could bring more market uncertainty and further restrain consumer spending.
Regardless of my view, we’ll all be very happy if the economy starts to turn by year’s end and we see a reasonable Christmas 2008. In the meantime, jewelry sales will continue, and the question is how to adapt to circumstances, whether they’re short term or become a new way of life. This year will test the best of us.
Retailers will have to deal with three important issues this year: lost price points because of rising metal and diamond prices, a public that may continue to trade down, and intense advertising and promotions from a wide variety of competing luxury products.
The tendency of most retailers in our industry is to cut expenses when things get tough—to hunker down and survive. Some may have no choice, but in general that’s a bad policy. Slow times are when careful merchandising and innovative marketing really pay off, frequently setting the tone for bigger success when the economy improves.
Every case is different, but here are some general thoughts:
Do a careful study of last year’s sales and look for trends in profit, repeat sales, and styling.
Build a tight merchandise plan for this year, down to the last piece, and stick to it.
Venture into alternative materials. A sizable supplier told me they saw gold sales dive last year, but gold-filled and silver boomed. That isn’t for everyone, but consider all possibilities.
Don’t show or close out dead stock to your customers. Get rid of it elsewhere—you want your customers to pay full price.
Finance the merchandise plan through selective disposal of inventory.
Think carefully about which suppliers can help you develop the plan. Don’t be afraid to ask.
Create advertising around some new product themes and present it consistently. Don’t forget about Internet and cable television advertising.
Get out of the store and mix in the community. The more the better. Be seen and be heard.
I could go on, but this is the kind of thinking that will be needed this year. If you think you’ve done all this up to now, think again. This year could transform the entire business.