When Designers Sell Direct

Branded stores are the hottest trend in retailing today. From fashion houses like Chanel and Dior which have always known the cachet of a designer boutique to household names like Sony, Nike and Liz Claiborne, manufacturers increasingly seek to capture the consumer’s dollar – directly.

The branded store brigade includes a sizable contingent of jewelry designers. Denver-based John Atencio leads the way with six stores in Colorado; the newest, and perhaps best known, member of the group is Lagos, whose tiny but tony shop opened in Philadelphia last fall.

JCK talked to some designers who spend time behind the counter as well as behind the bench. Has the duality angered any of their wholesale accounts? Has it helped them run their businesses more profitably?

Fears & feedback: Designer/retailers agree on one big advantage of having a retail operation: it gives them immediate consumer feedback on their designs – the kind of feedback they don’t get from wholesale customers. Test marketing pieces in their own stores before taking them to wider distribution allows them to drop the dogs before they lose money.

Most designers JCK interviewed have been able to reassure wholesale accounts that they’re not trying to compete directly. Ray Tracey lost a few retail accounts in Santa Fe when he opened two galleries, despite repeated assurances that he wouldn’t treat other jewelers “like a redheaded stepchild” in favor of his own store. But he was the only designer to lose any accounts involuntarily. Once questions are answered and concerns allayed, most jewelers seem happy to continue the relationship.

Designers generally sell direct only within a certain area; they give their own stores the same kind of exclusivity they’d offer any wholesale account in the area. Outside that immediate area, they’ll direct a customer to the closest retail jeweler carrying the line. Above all, designers are adamant about maintaining price and claim never to have undercut a competitor. Indeed, their own prices sometimes exceed those charged by their jeweler customers’!

Building desire: While jewelers may fear that the designer selling direct will steal their business, branded boutiques often seem to increase business for nearby outlets carrying the same goods. This holds true for ready-to-wear, electronics, footwear and jewelry. It seems the added exposure and prestige provided by such a boutique counts for amazing advertising power.

Nine West, a popular women’s shoe manufacturer, has boutiques in many malls, yet the anchoring department stores still carry the line. When lines like St. John, Tahari, Calvin Klein and Ralph Lauren opened boutiques on Madison Avenue in New York, neighboring stores like Barney’s, Bloomingdale’s and Saks got up in arms. But far from losing business to the new stores, sales in their own Klein, Lauren, Tahari and St. John boutiques actually increased. Steven Lagos says that Bloomingdale’s branches in suburban King of Prussia and Willow Grove, Pa., noted a hefty increase in Lagos sales after his store opened in Center City Philadelphia. He says that suburbanites who only come downtown for dinner or the theater see his store, then flock to their favorite local Bloomie’s to buy.

Designers who sell direct by participating in the growing number of retail craft shows also draw questions. Some – like the American Craft Council retail days – are established nationwide events; others are purely local. While jewelers fear lost sales to customers who may think they’re getting a bargain by buying at a craft show, designers claim that reputable artists won’t discount prices there, either. Most will direct visitors to the nearest retail account.

Here’s a look at some designers who sell retail:

JOHN ATENCIO has six stores in Colorado, all of them designer boutiques. In addition to his own line, he sells only David Yurman, Michael Good and Jean-Franáois Albert, as well as a few pieces from the Quadrillion diamond line. All are merchandised by brand name. He has only one other retail account in the state, in Grand Junction.

Why sell wholesale and retail?

“I spent 10 years selling retail, but in the mid-1980s the economy bottomed out in Colorado. We had to look at other ways to keep our business going, so in 1989 I approached Mort [Abelson] about exhibiting a line at the New York show and the rest is history. We saw a way to maximize our product, as well as communicate with customers.”

Atencio benefits from Colorado’s resort business. People from around the country ski in Aspen; when they return home, they recognize his name from the Aspen store.

“It has created some problems over the years. But as we learn to handle it, it’s become less of an issue. We encourage people to shop at their local jewelers, and we encourage jewelers to sell at our suggested retail price. We sell at full retail and don’t encourage discounting at all. Most jewelers who sell our line want to know what my retail price is, anyway. And I think people would rather buy jewelry close to home.

“Also, in order to do really well at wholesale, you have to be well capitalized, and retail is a good way to capitalize.”

DOUG ZARUBA, who has a gallery in Frederick, Md., opened a second in Alexandria, Va., in April. In addition to Zaruba’s own work, the gallery carries other designers like George Sawyer, Jerry Scavezze, Biba Schutz, Steven Kretchmer, Eric Walls, some John Atencio and Janet Alix. Others are featured in two-month shows.

Jill Zaruba says, “Doug had designed a particular line, but you can only sell a certain amount in a small city and we had to make the production profitable. Also, it gives credibility to our store to have our jewelry in other places around the country, and gives us a safety net if the local economy goes bust.”

Doug likes the testing ground. “Based on what retail customers tell us, we have adjusted designs, wearability, etc. Customers are much more tied into fashion and their particular attitude. To us, it’s a piece of sculpture, but to the customer, it’s a very personal object and they want to be able to wear it with a particular outfit.”

Like Lagos, Zaruba has a big retail account not too far away: Nordstrom in Pentagon City. (The fact that that’s an hour away is nothing in Washington, where commutes easily last an hour or more.) Customers who are loyal to Nordstrom (or want to put a piece on their Nordstrom credit card) go there.

Never forget the best reason to go retail, say the Zarubas: “It’s nice to have money coming in. There are no receivables. The money comes in right away. It’s getting harder and harder to compete for small manufacturers. Big manufacturers are doing designer-y stuff, so it’s tough to compete, but at retail it’s easy.”

ETIENNE PERRET owns Etienne & Co. in Camden, Me. , where winters are long and the tourist season lasts only three or four months. Unlike the designer galleries owned by other designers, Perret’s retail operation is a full-service retail jewelry store, with lines like Mastoloni pearls, B.A. Ballou, Golden West chain, Jones & Woodland division of Krementz, etc. He also carries designers Sean Gilson, Nancy Lincoln, Ron Pearson and his own line. He has no wholesale accounts in the Camden area, but does have one in Bar Harbor, the next stop on the Maine tourist route.

“For years, I’ve run two businesses. One is a full-service jewelry store, the other is my own line. Now I’m working on combining the two into one business, where the store is a retail purchase point for my collection. More and more, I’m advertising only my own collection and buying less of other designers. It’s tough – I am losing some of my traditional customers, who would come in for a small gift for so-and-so, and now I’m selling 18k and diamonds.

“If I have consumer presence selling my collection at retail, I can get feedback and adjust products accordingly. Being in a vacation area is an advantage, because I get people from around the country.”

Perret sees a blurring of distribution lines. “Computerized inventory tracking and customer lists are making it much easier for the manufacturer to find consumers who use the product and skip the retailer altogether. Things used to go from producer to wholesaler to retailer to consumer. Then they went from producer to retailer to consumer and eliminated the wholesaler. Now, eventually, will they go from producer to consumer and eliminate the retailer? Isn’t that what’s happening with branded stores?

“On the other side, I already see retailers making their own product and skipping the manufacturer altogether, like Tourneau’s private label watches. It goes both ways.”

ROBERT WANDER of WINC Creation doesn’t have a store, but his wife, Deanna Haimoff, has three high-end retail stores in Hawaii. Her husband’s line is just one of many she carries; the stores don’t bear his name. Still, he finds them a great test market. He knows within three or four weeks what works, what doesn’t and why. He says Hawaii’s tourist demographics are excellent for test marketing; if a product doesn’t work there, it doesn’t work, period.

Perhaps because he doesn’t do it himself, Wander sees the possible conflict in going retail. “If I were a retailer,” he says, “I think I would be very reticent to buy from a designer who has a retail store, who wants to capture money that could be coming to me. If I’m a retailer, I have enough competition from other retailers. I don’t need it from wholesalers who try to sell to me.”

EVE ALFILLE of Evanston, Ill., is a designer who dropped her wholesale line to focus all her energies on her retail gallery. Why? “Partly because I have an interest in doing one-of-a-kind pieces. A retail store is kind of like a lab – I like to observe the end user wearing my designs. It’s interesting. Also, a lot of retailers don’t know how to display designer work. I can do it better myself.

“I think retail is the best way to market myself. As long as I can keep expanding my business from this location, and expanding my catalog, I’m very happy. If the market matures and I can’t expand any more at retail, I may again open a wholesale division under another name. I won’t rule it out.”

G. JONATHON STOPPER, owner of Simply Jonathon’s, Rochester, Mich., did the exact opposite; he closed his retail shop and went strictly wholesale. Stopper says, “I like my selling time to be productive. I have a captive audience at shows, and my temperament is better for a defined clientele than someone who’s just browsing.

“It takes a lot of retail customers to do the business I can do with one account. The wholesale side of my business has always been stronger anyway. Once I establish a relationship with a store, I need a couple dozen such clients vs. several hundred of the other. It’s easier for me to do business by doing just wholesale than by doing both.

“I don’t miss the opportunity to test market at retail. After 20-odd years, I feel comfortable with what I’m doing. If I keep getting the response I do, I’m happy.”

JOAN MICHLIN owns a gallery in the artsy Soho district of lower Manhattan. She’s also a familiar face in the designer sections of both the JA and the JCK jewelry shows, and a long-time exhibitor at the ACC Craft Fairs and the Rosen Buyers’ Markets of American Crafts.

Michlin sees her business as a “total picture.” Her retail gallery serves as a “test market” support system for her wholesale accounts, while her wholesale exhibitions help refine what will sell in her retail gallery.

“I used to launch new work at retail on July 1, previewing for the JA show. Now I launch it at The JCK Show and preview it before it goes to retail.”

Her gallery showcases her own work, with selected other artists in a changing show schedule. She sells her work at full retail, and also offers various one-of-a-kind and other pieces that are not part of her wholesale line of affordable gold jewelry.

The lack of down time is the best part of having both retail and wholesale operations, she says. Retail is busy when wholesale is slow; wholesale is busy when retail is slow. But retail requires a whole different mindset, she cautions. You must be there when the customer is there. You can’t just put your work in a box and go home; you’re married to it!

Have any of her wholesale accounts gotten upset that she sells retail?

“They are, until they find out that they’re selling my work for the same price or less than I am,” she says. “I’m excited that the future holds so much in store for us designers as a group, and for the savvy retailer.”

VINCENT POLISANO is the Vincent in Diana Vincent, the Diamonds-International Award-winning design team that suddenly disappeared from the market to focus on its own store. Now, Diana Vincent is back on a wholesale level. Polisano explains how the whole process happened.

“We sort of fell into it [retailing]. It’s not like we planned it that way. We started out in this little studio behind my mom’s house, but the space was getting too small and too busy with people running through it. So we moved to a bigger location. We had this dream of having a manufacturing facility with a beautiful showroom to show our jewelry to our clients, the way the Italians do. But what was happening was that people kept coming off the street asking for things like engagement rings.”

What about “Just Say No”?

“These were friends. Because I grew up in this community, went to high school here, I’d always been selling jewelry to neighbors and friends.

“Anyway, it felt good. It was cash flow, we didn’t have to carry receivables and, as we fell into it, we got more knowledgeable about marketing, buying patterns, etc.

“This was at the time when if you wanted to be in the July JA show, you had to be in February, too. We really didn’t want to do both. We didn’t have a salesman on the road, we just did shows and made the pieces ourselves, and it was getting to be too much. Since we couldn’t drop February, we dropped out altogether. We were still young and still a growing company. We were designers and jewelers, not businesspeople.”

As the years went on, Polisano and wife/partner Diane Chrambanis developed as businesspeople. They built their retail business into a full-service store that carries designers and lines like Michael Good, Gemveto, some Michael Bondanza, Oscar Heyman, Suna Bros., Simon Sobie and Damiani. It also gives small artists a chance to show, and offers all the regular jewelry-store things like repairs, appraisals and watch battery replacement.

Still, the pair felt they had a lot more to offer, so they got back into doing shows. Now they do both JA shows and The JCK Show in Las Vegas. They’ve also put a sales rep on the road to handle the Southeast and TOLA.

“The retail store is as active as it’s ever been, but we have management in place to run it,” says Polisano, “and we are actively pursuing our wholesale business.” They plan to put another sales rep on the road soon.

Diana Vincent doesn’t sell to local accounts. People have to come to the Washington’s Crossing, Pa., store. The tiny art community serves a market from Philadelphia to Princeton, an area large enough for the couple easily to have one or more wholesale accounts. But while they may be losing out on some business, they’ll keep it that way.

Prices at the store are full retail – the same price available at Mayor’s or any of their other accounts. “We don’t discount,” says Polisano. “I figure if they can sell at retail, we can sell at retail, and if they make a commitment to us, the least we can do is not step on their toes.”