Where to Now?

At this moment, in mid December, anyone connected with retail is wondering how the final two weeks of the 2009 Christmas season will turn out. Some retailers report progress, with the last month or two up a bit over the disastrous 2008 figures. While we cannot draw broad conclusions from anecdotal tales, we sense some stability. Confidence remains shaky, and we await an uptick in employment, but maybe, just maybe, we’ve passed the bottom of the recession.

The real question is: Where do we go from here? This year will distinguish those who have taken on the national and global upheavals and moved ahead to take advantage of the profound changes we’ve witnessed and those who are frozen in place.

I’m reminded of other earthquakes in our industry, all wrought by disruptive technologies. The early 1980s saw the application of grading systems into a diamond investment bubble that destroyed countless companies. The Swiss invented the quartz watch movement, gave it away because they thought it was a gimmick, and spent decades recovering their preeminent position in luxury watches. Globalization, ease of travel, free trade, and cast-in-wax setting decimated American manufacturing and contracting. In distribution, we saw the disappearance of regional wholesalers. In retail we saw the near-total consolidation of the discounter channel and the collapse of catalog showrooms. This year we see the end of leased jewelry departments in department stores and many long-established retailers and suppliers crushed by forces that came too fast to be checked. We see De Beers struggle with immense financial problems.

These changes are blithely attributed to “market conditions.” That suggests that if we give it time, the “market” will return to what it was. Nothing could be further from the truth. If we contemplate the disasters listed above we see that in each case nothing came back to what it was. But the jewelry business didn’t die. It adapted. We saw plenty of losers, but many new winners. So it will be this time.

The past 30 years or so have seen the development and rapid expansion of an unregulated, global financial stewpot that encouraged development of a huge consumer market based on debt. Say goodbye to that.

The working public, especially the middle class, has seen its anchors lifted. Job security, pensions, benefits, and pay raises have fallen victim to an unprecedented technology-based explosion in productivity. Remember, the first PC cameout less than 30 years ago. In a technology-based economy, longevity and size mean little—adaptability and speed count. All businesses now seek (or should!) new ways to apply technology with a key objective a reduction in payroll and otherfixed overheads. The middle class will become lesscorporate and more entrepreneurial.

The Internet has evolved as the marketplace of the future. Retailers once laughed at the proposition that people would buy diamonds over the net. Then they said the public wouldn’t buy fine jewelry over the net. Look at what Gilt.com does every day, and with a policy of final sale, no returns. It’s booming.

It may seem like I’m flogging a dead horse when I say the obvious—any consumer-oriented business not well represented on the Internet in five years will be dead. We know that essentially every consumer with disposable income already uses the Internet to research vendors. But that cannot be the whole answer. Translating a brick-and-mortar business to the Internet won’t be enough.

I recently met with a group of designers from France. Most were small companies, as is typical in our trade. But France has a long and illustrious history in jewelry. The quality and creativity of these designers was evident when I saw their selections. But the French jewelry industry also is suffering severe declines, and not just because of the current recession. The problem is global. But these designers showed a real understanding of the issues and are seeking answers. All recognized that time is short.

Over the next months, I will try to propound issues and solutions. I ask readers for questions and suggestions. Let us all move into the new world.


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