The Bright Future for Retailers

What does the future hold for the retail jewelry business? Who better to ask than Sam Arnstein, a 50-year veteran of the industry who now consults with jewelers throughout the country, passing along his formidable expertise in sales training, marketing, merchandising, and store management.

Jewelry is Arnstein’s life. He started working in his father’s store in Vancouver, Wash., when he was still in high school and wound up spending 11 years there, until his father sold the business to Zales. He then spent 27 years at Weisfield’s Jewelers, moving up from sales associate to store manager, divisional manager, operations manager, and finally to regional vice president of the chain. It grew to 73 stores before it was purchased by Sterling Inc. of Akron, Ohio.

Of all the jobs he’s held and of all the settings he’s worked in – from independents to chains, from credit stores to guild stores, from small-town locations to malls and urban settings – consulting is his favorite. “I love what I’m doing now,” he says.

Some basic elements of the jewelry business haven’t changed in the five decades of Arnstein’s career. The reasons people buy jewelry remain essentially the same. Platinum is in again. And the bridal business is still a big part of any store’s revenues.

In other ways, though, things are radically altered, thanks to the pervasiveness of computers, the dominance of shopping malls, the influx of women in the workplace, and the erosion of consumer confidence in virtually every profession.

JCK recently spoke with Arnstein, the well-known creator of a video sales training program, The Practical Approach to Selling Jewelry. He shared his perspectives on trends affecting jewelers today and ventured predictions about the future.

The mixed blessing of computers. “Computers changed the industry because they made information readily available and helped people run their businesses better,” Arnstein notes. “But the flip side is that retailers initially saw computers as a panacea, while they’re really just one in a set of tools.”

One risk, he says, is letting newfound statistics carry too much weight in store management. “You can’t just drastically reduce your offerings to focus on the 20% of goods that your inventory management software identifies as accounting for 80% of your sales. You have to use your intuition, as well. Customers still want to see an assortment of jewelry, and they also seek out those unique pieces that may not necessarily turn over several times in a year.”

A new and growing risk associated with computers is that as consumers use them to research prices on the Internet, they’re increasingly able to access wholesale prices for gems and jewelry. That puts real price pressures on independent jewelers, who have to compete with retailers with significantly lower overhead, such as high-volume chain stores, television shopping networks, and, increasingly, Web-based jewelers.

The malady of the malls. Malls didn’t exist when Arnstein started out. Now they’re everywhere. “Malls fostered the growth of small chains because the independents felt they had to open up in new mall locations to protect their market share,” he says. “While these locations lead to greater sales volume, the impact on expenses and the time required at the shop is considerable. Also, because people have access to so many jewelers at one location, it made marketing a lot different and eventually depressed prices as well.”

Having a presence in a mall also sucks independent jewelers into the high-volume, low-markup game because they have to compete with the mass merchandiser located a few doors away.

Why consumers are suspicious. Virtually every profession – law, medicine, journalism, retailing – has been hurt by an erosion in consumer confidence over the past few decades. “Consumers today are only concerned about whether they’re getting their money’s worth,” notes Arnstein. And their suspicions are fueled by media reports of undisclosed or unstable enhancements. “That places an even greater premium on integrity, trust, and expertise,” he notes.

Even without the media exposés, the nature of the product itself tends to ignite suspicions: Most people would find it difficult to place a value on a piece of jewelry or to identify particular gemstones and distinguish them from synthetics.

At the same time, Arnstein warns, “Salespeople have to be careful not to use product knowledge as a substitute for sales ability. You can’t just give the customer a short course in diamonds and expect them to make a purchase.”

A related problem: “Treating diamonds as a commodity gives consumers just enough information to be dangerous. They’re using the grading system like a model number, and we have to educate people that no two diamonds are alike.”

Crime isn’t going away. One of the most dramatic changes Arnstein has witnessed is the growing prevalence of crime. He fears even more lies ahead. “Crime adds to jewelers’ overhead because we may be talking about armed guards and possibly restricting access to stores through buzzers. This is a particular issue in malls,” he notes, citing their inadequate security measures and long hours of operation.

Why the future looks bright. Despite the jewelry industry’s problems, Arnstein’s overall forecast is optimistic. One bright spot: the growing premium placed on designer jewelry brands. “Designer jewelry is one of the salvations for the gross margin crunch that the industry has suffered in recent years,” he notes. “’Designer’ seems to imply more integrity to the buying public, and that can move prices upward.”

Consumers’ tastes also have become more sophisticated; hence the growth of the concept of a “watch wardrobe” and the increasing popularity of colored gemstones above and beyond rubies, sapphires, and emeralds.

Arnstein expects to see more designer brand lines and higher-end jewelry available at the discount retailers and QVCs of the world – which are being forced to compete with high-end independent jewelers on both product quality and customer service.

And he anticipates that independent jewelers will continue to carve out a larger and more profitable niche as they become more sophisticated in managing their expenses and inventory. Independents also are benefiting from better access to competitively priced products at the major industry shows that have emerged over the past decade. Furthermore, they’re increasingly able to buy direct from suppliers either in person or through the Internet.

Mellowing into wines

At 65, Sam Arnstein still has no plans for retirement. But when he does decide to take it easy he has definite plans: to travel to South America, Italy, and Australia, where he has lectured on jewelry topics under the auspices of Jewellery World (Australia’s national jewelry trade magazine).

He also hopes to develop greater expertise in his longtime hobby of wine-making. Over the past 20 years he’s learned to create cabernet sauvignon, merlot, shiraz, chardonnay, and sauvignon blanc. But he’s never had the chance to pick grapes at harvest time and to immerse himself in the science of wine-making.

Looking back over his 50 years in the industry, does Arnstein have any regrets? Perhaps one: that when his father offered to sell him his store back in 1959, he did not accept.

“The gutsy decision would have been to buy it. At the time I was just 26. I didn’t have a lot of responsibility, and all I knew was working for my dad,” Arnstein says. “Financially, I probably would have been a lot better off, but the education I’ve received instead has been tremendous.”