It was expected that industry conversations after the turn of the year would address prospects for 2010. It’s no surprise that answers are hard to come by. The trade continues to contract. According to one analysis, the number of retail operations fell by 2.5 percent for 2009, a net loss of about 600. That doesn’t count branch closings, which number in the high hundreds as well. Some say the number is twice that since some closings were orderly and didn’t involve bankruptcies or abandonment, which get reported. On the supply side, closings were closer to 4 percent. One large company we heard about suffered a 75 percent decline in volume between 2008 and 2009.
We could make a broad distinction between those companies—retailers and suppliers—that are looking for ways to position themselves for strong growth in the coming months and years and those playing out the string, unable or unwilling to transform how they do business.
In essence, the critical components to success are communication, relevance, and scale.
For most companies it won’t be enough to advertise and promote as in the past. The key is to reach a target customer and deliver an effective message wherever they’re located. That does not exclude TV, radio, and the press, but it does include YouTube, Facebook, Twitter, eBay, etc., and a well-designed, mobile-compatible Web site.
Relevance is more than hitting a home run, as Pandora did with its bracelet—a concept being endlessly copied. Relevance is sensing the public mood, unmet needs, and the design trends that reflect these factors in a time of erratic or difficult sourcing and volatile prices for basic materials.
Scale is maintaining a business infrastructure that’s in proportion with market share. Unfortunately, many of today’s problems are the result of expansion in the boom years that involved taking on new debt. Now we have a market that may take years to approach the level of volume we were used to.
I recently visited the Vicenza show and saw these factors in play. There were no strong design trends, as in years past. But there was a strong shift to silver jewelry at many vendors. I was told that the Italian market has readily accepted silver as an alternate, and we saw some well done adaptations. One company told us they had completely moved to silver and no longer produce gold jewelry. Others have stopped developing gold products and are only advancing silver lines. Some have moved back into electroform productions, which we saw here years ago in the last run-up in gold prices. Clearly, many companies were trying to be relevant to their customers.
Vendors said business was OK, but not remarkable. People were buying, but cautiously. So much for scale.
Everyone grasped the new market realities. In some cases that meant revisions to the market approach taken, and some real successes were evident. But too many vendors had empty booths and looked shocked and paralyzed. The show had 200 fewer exhibitors than last year, and next year may see another drop.
If this show was rocked by the recession and high gold prices, other outside factors can be in play. In Brazil, where I visited late last year, the market has been difficult despite a generally good economy. A growing middle class is acquiring competitive luxury products. Retail sales taxes on jewelry are high, and manufacturers have always produced lightweight 18k jewelry (gold in Brazil must be at least 18k). Now it has reached ridiculous extremes. Also, colored stones, which Brazil is famous for, are harder to acquire. Mines are playing out, others have been closed by the government for environmental reasons, and new ones aren’t opening. Some manufacturers who specialize in colored stones foresee a serious problem. Still, some manufacturers have worked hard to build their export business and saw good gains last year.
And we need to add that the relatively weak dollar has hurt these foreign companies. Many have backed off working in the United States. That should mean U.S. manufacturers can compete in these markets. And retailers may be seeing poorer selections of new merchandise. Have we done anything about that?