Silver Lining: Retail Jewelers Discover Affordable Jewelry

As sales of diamond pendant necklaces and midrange inventory continue to soften, jewelers are bringing on more affordable products. But it isn’t just less-expensive inventory that’s new. Fashion jewelry for female self-purchases is ushering in fundamental changes in the way jewelers buy inventory, display jewelry, and manage their staffs.

The high price of gold has pushed much gold jewelry over the $1,000-and-under threshold for women who occasionally indulge in a guilty pleasure at a jewelry store. Meanwhile, silver jewelry has gained ground over the last four to five years, while the number and variety of fashion jewelry have kept pace with always-changing clothing fashions. Factor in a recessionary economy, and a perfect storm of market conditions is forcing jewelers to consider more-affordable jewelry.

In 2005, Craig Husar, president of Lyle Husar Designs, in Brookfield, Wis., didn’t own a single piece of silver jewelry. That changed the following year when Husar was planning a store expansion. "The move to lower-price-point jewelry a couple of years ago was based on industry experts indicating that the female self-purchase was the future of our industry," says Husar. "Meeting key price points of $1,000 or less was a major part of catering to that demographic."

When Husar took over the adjoining retail space, he added 2,000 square feet to his existing 3,000. The floor plans drawn up in 2006 allotted 400 square feet for a Pandora boutique and other silver jewelry. Within a year Pandora had become such a strong seller that Husar built a 300-square-foot display just for that brand in the front of his store. Silver now accounts for nearly 10 percent of his display space.

Jenny Caro’s silver experience is similar. "A few years ago, I only had a few pieces of more-upscale silver jewelry, which ranged in retail prices from $300 to $600," says Caro, owner of Jewelry By Design, in Woodbridge, Va. When she expanded her store in 2007, Caro assigned 30 feet of display case space exclusively to silver jewelry, anchored by a busy Pandora case.

In the summer of 2007, Caro was overextended on vendor credit and overwhelmed with the cost of her expansion. A down Christmas season punctuated the turbulent year. To recover from the triple-whammy, Caro liquidated old gold inventory until she could comfortably fund a gold-buying program that started in early 2008. The program helped pay down vendor debt on gold while allowing her to invest in silver, with Pandora her first line.

In late spring Caro went to the summer SJTA show to pick up two more lines of silver, from Elle and Calidora Designs. All three silver lines were big sellers last Christmas.

With sales up in the first part of 2009, Caro attended The JCK Show ~ Las Vegas to pick up two more silver lines, Kameleon and Sarah’s Hope. "At this stage I’m maxed out on silver," Caro says. "My top sellers are in the $100 to $300 range, and I continue to concentrate on expanding my bridal lines. Hearts On Fire is doing very well with double store credits given, versus cash, as part of my gold-buying program, which is incentivizing customers to buy more-upscale diamond jewelry. Gross year-to-date sales are up 30 percent."

The Necker brothers, with Necker’s Jewelers locations in Davenport and DeWitt, Iowa, began to explore silver and other lower-price jewelry in 2000 when Dave and D.J. feared their store image might be "too exclusive." They brought on Elle about eight years ago as their first silver line, giving them a head start on their competitors and a fashion-forward market advantage at a time they were looking to offer more products to a wider customer base.

In recent years they’ve concentrated more on silver. Lorenzo, Pandora, Patricia Locke, and Sarah’s Hope have become solid sellers at their two stores in rural Iowa. "Lower price points have picked up quite a bit," says Dave Necker. "In 2004 to 2005, silver made up 1 to 2 percent of sales. In 2008 to 2009, that same category is now 18 to 20 percent of overall sales."

Affordable jewelry isn’t just about silver. Many jewelers are rethinking their pearl products as well. The Neckers, for example, are carrying more freshwater goods in a variety of jewelry types, colors, and fashions.

At one time, akoya and Tahitian pearls made up 50 percent of Caro’s pearl products. They’re now at 10 percent. "I’m bringing in more-affordable freshwater pearls," she says. "And Honora is a pearl line that I’ve recently brought on. People like the many fashions and colors as well as the prices."

Husar is expanding his pearl category with additional freshwater goods, while maintaining current levels of pricier pearl products. And he’s learned to "never say never" to jewelry made with affordable metals. Rebecca, primarily stainless-steel and brass jewelry electroplated with rose gold and set with a colorful palette of good, eye-clean natural-color stones, is among his top-five brands of popular fashion jewelry.

Jewelers are also getting more creative with impulse-purchase opportunities, from designer reading glasses and name-brand sunglasses to umbrellas featuring handles bejeweled with faux stones and elastic bracelets featuring inexpensive opaque gemstones or pearls sourced at the Tucson, Ariz., gem shows.

As jewelers prepare for the upcoming holiday season, their inventory has become a two-horse race, with lower price points bringing in female self-purchasers on one end of the inventory spectrum and couples holding up the other end with bridal jewelry. Meanwhile, the middle portion of retailers’ inventory is staying level at best or hemorrhaging at worst. "In my focus groups, jewelers are telling me that diamond pendant sales are down 30 to 40 percent," says Dave Necker.

"We found that the middle portion of the business, purchases from $2,000 to $5,000, was dropping off and has been over the last two years," Husar adds.

"I’m phasing out more-expensive bridal jewelry, ranging in prices from $2,000 to $5,000," says Caro.

Although silver jewelry is giving cloudy economic times a silver lining, rapid growth in lower-ticket sales has potential drawbacks. Caro is pleased with the surge in sales, but discovered that 50 percent of her customers are one-time buyers. "This is horrific news for any retailer," she says. "We’re looking to get that 50 percent back in some numbers with follow-up calls shortly after the sale and with jewelry-cleaning calls at six months."

More customers buying less-expensive jewelry also has compromised Caro’s ability to conduct customer outreach calls on gift-giving occasions such as birthdays and anniversaries. "We’re in a position where we need more salespeople and a sales manager," she notes.

Selling these new products and fashion jewelry brands also requires additional sales training. Some jewelers are dedicating junior salespeople exclusively to certain brands in silver departments, allowing experienced people to concentrate on selling higher-end jewelry that requires a broader grasp of gemology and product knowledge and greater sales dexterity.

Finally, store owners are discovering that SKU-intensive lines require more time to sort, tag, and display and require frequent reordering. Many are implementing new inventory management policies and hiring support staff. Caro reorders frequent sellers every week or two.

But these are the kind of problems jewelers don’t mind—especially when so many of their peers are threatened by the difficult economy.