Friday, June 16, 2017

Las Vegas - 2017 -- Then and Now

by Frank Dallahan
By the time you read this, you will be a week or so away from travelling to the shows in Las Vegas. 1993 seems an eon ago when JCK began the westward migration of the industry show circuit to Las Vegas. The industry since then changed considerably on both sides of the sales counter. The Internet was just starting to be used for email if indeed your company had email. Today, a frequent topic of conversation and strategic thought is given to the use of the Internet to actually do business.

The manufacturing community was largely domestic and manufacturers were just beginning to form relationships with manufacturers in Hong Kong and India. Today, the domestic jewelry manufacturers are a much smaller segment of the business as the Chinese and the Indians have taken over more and more of the manufacturing function.

Then, DeBeers was a marketing powerhouse driving demand for diamonds through various programs geared to both consumers and the trade including both manufacturers and retailers. DeBeers advertising was heavy in print gearing itself to both the bridal and the post bridal markets. Their television advertising was compelling and persuasive for so many diamond products – The Tennis Bracelet, The Three Stone Ring (Yesterday, Today, and Tomorrow), theTwenty-fifth Anniversary Diamond, and the Diamond Anniversary Ring. DeBeers also initiated the notion of how much to spend for the purchase of a diamond engagement ring by relating it to so many months salary to be allocated for the diamond engagement ring.

The Diamond Promotion Service was the DeBeers entity charged with personally communicating the DeBeers message and training directly to jewelry retailers throughout the U.S. The DPS was an actual sales team charged with selling the DeBeers message programs and products to retail jewelers. Today, no one leads the parade extolling the diamond’s significance, and value to the marketplace either at the consumer or trade levels. The DPS is gone. There has been no new product developed and sold successfully save the current two stone diamond ring now being advertised by Jarrod. The jury is out on the appeal and results of this concept. For my money, Yesterday, Today, and tomorrow was a much stronger concept.

Today, we have man-made diamonds made in factories, turning the story of the diamond as a symbol of love to one of man-made diamonds being a better ecological choice than diamonds mined from the earth, presumably playing on the Millennials’ desire, demand, and preference for more acceptable green products.

And, speaking of Millennials, their counterparts in 1993 were significantly different than today’s consumers. Brides and grooms were younger and less well educated. Today,they are better educated, many with graduate degrees for both the bride and the groom.For wedding information they read Brides and Modern Bride. Today, it’s The Knot.

In 1993, an ounce of gold sold for $393 per troy ounce. Today it is $1257. Silver sold for $4.30 per troy ounce in 1993. Today it is $16.80. Platinum sold for $375 per troy ounce. Today, platinum sells for $925 per troy ounce. These increases in precious metals prices have had a significant impact on the retail prices of jewelry products and consequently sales of gold, silver, and platinum are also seriously affected. Of perhaps greater importance perhaps, is the effect precious metal pricing has on product design and development over this 24-year period. It stands to reason that the unit sales of jewelry are impacted with these price movements. Is it any wonder that wedding rings, as an example, are now offered in different metals such as titanium in order to keep prices at what is perceived to be an affordable level.

Is it any wonder that retail sales of silver jewelry have literally gone through the roof as the price of gold has nearly tripled since 1993! Similarly, silver product design has moved from lightweight to more generously weighted product.

Platinum seems to be squarely anchored in the bridal market for engagement rings and to a lesser degree men’s wedding rings,

This little trip down memory lane has a point. According to the Department of the Census, retail sales of jewelry in jewelry, luggage, and leather stores plus the separate category of only jewelry stores (who knows why there are two such categories of retailers selling jewelry?), sales amounted to $34 billion in 1993. In the latest period (2015) sales were $65.7 billion. While total retail sales from every category amounted to $1.235 trillion in Q4 of 2016, e-commerce sellers accounted for 8.3% of sales up nicely from 2015’s share of 7.6%.

Despite the somewhat hysterical, ominous warnings some forecast, consumers still continue to patronize retailers. The analogy of television’s impact on radio, it seems to me, is applicable to the retail vs. the Internet story. The Internet will gain market share over time even in jewelry just as QVC and HSN grew, as did jewelry retail sales grew.

Focus on your business. Focus on customer service. Focus on the products you sell. Decide which market segments where you place your focus. And most of all communicate with your target markets every way you can. It worked then and it works now!

Monday, May 22, 2017

The Silver Story…An Update

by Frank Dallahan
Over the past ten years or so we've become accustomed to precious metal prices at historically high levels and in a sense, we can take things for granted. Gold remains in the mid $1200s, platinum in the mid $900s and silver prices in the mid teens. The base prices of the three precious metals have a significant impact on the retail sales prices of jewelry products sold today. Sticker shock is as real in the jewelry business as it is in the automobile business.

So, is it any wonder then that silver jewelry has rocketed onto such a significant growth track over the past eight years and as a result has become increasingly important for retail jewelers' merchandise assortment planning. Too, silver has become the quintessential artisanal metal for fine jewelry allowing designers to design product that realistically could not be done with gold or platinum because of the significant cost differentials.

Price point merchandising has always been important in planning jewelry assortments. Building traffic for independent jewelry stores depends on a variety of factors. The demographic profile of the consumer is one. Increasingly, female self-purchase is or should be part of that planning function. Jewelers have come to recognize once you get the consumer into the store you must have a wide selection of product and price points to satisfy the desires of these shoppers.

Research has pointed the way to silver's value and attractiveness in bringing the younger woman into independent retail jewelry stores. When women look for a gift for someone else or to purchase something for themselves, the independent jewelers are in a better position to fill the role of providing the answer.

The latest Silver Promotion Service annual report of silver's contribution to the industry once again – as it has for the past eight years – demonstrates, clearly, the sales and perhaps more important, the profit contribution silver products make to a jeweler's business. The latest report tells us about the growth story of silver. 62% of the jewelers in the study reported sales increases in their silver jewelry product in 2016 and of that number 54% reported sales increases in the range of 11% to 25%, with the overall average increase coming in at 16%! These are impressive numbers given the difficulty of 2016 for the industry.

Perhaps more important is the maintained margin story from this year's study. Silver far and away provided the best-maintained margin of all the products in the survey including diamond, bridal, gold, and platinum. Considering the fact that silver product is a favorite among the female demographic and thus an important draw to the store, silver jewelry is doubly significant to the independent retail jeweler.

A final few points from the study to consider:
  • 88% of silver jewelry is purchased by consumers in the 20 – 55 age range and encompasses both female self-purchasers and female gift givers.
  • A significant majority (72%) of the jeweler respondents believe silver jewelry is very important to their business
  • And 89% of those retailers surveyed believe the booming market in silver will continue unabated for the next several years.

Silver makes so much sense for independent jewelers because it permits focus on unique designs from the world of creative designers and manufacturers. And, thus allows jewelers to distinguish their stores from chain operators.

How was your silver business in 2016? Is the silver opportunity calling you?

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