While some may dream of a white Christmas, most jewelry retailers are hoping the holiday season will put them in the black this year.
But that might not be easy. Holiday spending habits are changing. Only 30% of American consumers expect to spend more this holiday season than they did last year, according to an AlixPartners consumer survey that came out in September — a drop of six percentage points from its 2018 poll.
The ever-changing political climate in Washington, DC, is also adding to pre-December jitters. The pressures of the new China tariffs are threatening already-slim margins, and an unstable stock market hints at the possibility of a Federal Reserve rate hike and even another recession.
Both jewelry retailers and the well-heeled clientele they serve are bracing for the fallout. Six in 10 shoppers are worried about the effects of tariffs, according to the “Holiday 2019: US Shopper Survey” from Coresight Research, and a majority say they will buy fewer items and spend less this holiday season if prices rise.
At the same time, online jewelry sales are increasing at a steady clip, which may be cutting into brick-and-mortar transactions. In 2018, online jewelry sales grew 14.2% year on year at 42 stores, according to a September 2019 Internet Retailer report. That figure accounted for 15.4% of total retail sales in the jewelry category, up from 14.6% in 2017, the report found. Many independent brick-and-mortar jewelers still have not figured out how to compete with their online counterparts in terms of price and convenience.
There’s also a growing trend away from jewelry gifting in general. Early this year, Mastercard-SpendingPulse predicted that traditional jewelry sales for Valentine’s Day 2019 would drop to $1.1 billion as the luxury goods category in general saw some slippage.
From mainstay to meager
The cumulative effect of all these changes has made holiday sales less of a given — even as many stores still depend on year-end purchases to pull through. On average, approximately 40% of store sales happen around the holidays, according to Ellen Fruchtman, president of Fruchtman Marketing in Toledo, Ohio, whose firm specializes in marketing to the jewelry industry. “The truth is, the holiday season is still the time of year with the largest propensity to buy,” she says. “That’s going to be hard to change.”
Many traditional independent retailers continue to embrace the holiday sales rush. “It’s such a large percentage of everybody’s business,” says Bill Jones, president of Sissy’s Log Cabin, which has five brick-and-mortar stores in Arkansas and Tennessee, plus an online store. “The holidays are over 25% or 30% of the industry volume. Customers absolutely want to buy jewelry gifts. It’s part of our culture in the south. Our women just love jewelry.”
That said, the pace of the season is changing. “The holiday season seems to be getting shorter and shorter for independent retailers,” says Fruchtman. “Fine jewelry tends to be more of a last-minute gift. And men are doing most of the shopping, and they’re not planners.”
She also says the prices of the items that sell tend to be lower, meaning that even if traffic is high, sales may appear to be trickling. “What we have seen over the years, unfortunately, are more smaller-ticket items being sold. The days of the $10,000 to $50,000 piece are long gone. And for those who are fortunate to see some of those, they are certainly less regular. The big ‘boomer’ buyers are either not buying as frequently or not [buying] at all.”
Steve Quick, owner of Steve Quick Jeweler in Chicago, Illinois, agrees that the season has changed. “Business used to build throughout December. Now we count on the last 10 days for the bulk of our holiday business.” He expects the holidays to bring in only 20% of his annual sales total, and has adjusted his plans accordingly. “Christmas was the time to clear out our payables and possibly treat ourselves to some extra retirement contributions. We came to expect it. Now, we temper our expectations — and in turn, our buying — because it’s no longer a slam dunk.”
Even online stores are seeing a change. Brian Gavin, owner of web-based jeweler Brian Gavin Diamonds, says the holidays are no longer reliable.
“Traditionally, we followed the model that the end of the year is when we make money,” says Gavin, a fifth-generation diamond cutter who’s been online since 1998. “[But] last year, my Christmas season wasn’t good, like a lot of the industry. If I had relied on Christmas, I would have been in trouble. I [have] to sell every day to make money. I’m not a bear. I can’t go into hibernation and then do it all in two months.”
That’s why he’s stopped focusing on holiday-driven sales, he continues. “For me, we can’t target those kinds of traditional holidays. Also, women buy things for themselves. We find more women shopping with us than men.”
Hard to compete
Another factor affecting holiday jewelry sales is competition from other luxury categories. Jones says his biggest rival during the holidays is experiences. “At the end of the day, [consumers] only have so much disposable income,” he notes. “We have to compete with multiple industries. And ski trips are a big deal. For a family of four, for a week, that’s $20,000.”
Fruchtman points to technology as a major competitor as well. “Women are just as interested in the latest 65-inch TV or Apple Watch,” she says. “The world is becoming more and more casual, and younger couples are more and more practical. And of course, there are other luxury products, from handbags to other fashion.”
In order to hold their own, stores need to employ a mix of traditional tactics and digital strategies, states Bill Boyajian, founder and CEO of consulting and coaching company Bill Boyajian and Associates, which specializes in the jewelry industry. “I still believe in holiday catalogs to target those with disposable income, and holiday events in-store to generate sales,” he says. He also emphasizes “clienteling” — a data-gathering method retailers use to firm up long-term relationships with key customers — declaring it “critical for every jeweler today.”
Jones says in-store events create excitement. “Stores need to promote,” he asserts. He plans to focus on yellow gold, designer pieces, Fire Polish branded-diamond studs, diamonds by the yard, and custom bracelets. “We do our catalog every year and have Christmas parties at every one of our stores, and we send email blasts and have trunk shows. If you go into a store and get excited about something, you may buy something you never
even dreamed of. And everybody loves to go to
a good party.”
Fruchtman agrees that events — especially unusual ones — are a great strategy in terms of getting people to shop. “You have to provide a reason for them to walk in your door,” she says. She suggests thinking beyond traditional trunk shows. “One year, we had a very popular and upscale florist come to a store, and he was showing how to decorate your home for the holidays. Or think about having a fun men’s night. I had a retailer who secured Super Bowl tickets as an enter-to-win [giveaway, with people entering their names in a drawing], and the store was packed. And yes, they purchased.”
More than one basket
For jewelers looking to move away from dependency on holiday sales, Gavin says it’s best to focus on engagement jewelry, rather than fashion. “[Engagement] is the mainstay of this business,” he says. “There are a lot of people who get engaged in December and at Thanksgiving, but also, they get engaged just before the summer or just after the new year. So the first six months of the year can be very strong for us.”
For Jones, engagement and bridal are only
part of the year-round sales plan. He says mid-range designer lines also sell well outside of the holiday season. “What we find consistent is David Yurman and LAGOS. [People like] the fun jewelry in those prices, and can afford to layer it because of the price range.”
Fashion lines may do better when the marketing behind them is directed not at gifters, but at the end-wearer. “Self-purchasers are also not bound by specific holidays,” notes Quick.
Inventory aside, retailers are starting to acknowledge that a shift toward year-round sales and a less holiday-heavy strategy might be not only desirable, but necessary.
“Unless your overhead is very low, you need
year-round business,” says Gavin, in part because today’s customers aren’t buying jewelry the same way they used to.
“Why do people buy jewelry today?” he asks. “Engagement, status and a gift of love, and to celebrate something. But do people buy a $500,000 necklace to wear out for dinner and dancing? No. My grandmother used to, [but] the lifestyle has changed.” Today’s jewelry purchases are deeply aligned with practicality, he observes. “It’s about need.”
One of the biggest challenges for holiday-dependent jewelers is their tendency to lose money over the course of a year because they rely so heavily on December sales to bail them out, says Boyajian. “The year’s total business and profitability usually come down to the last seven to 10 days before Christmas.”
Fruchtman also believes dependence on holiday sales can be a dangerous gamble.
“Have a bad season, and it can kill your business,” she says. “We do everything in our power to help our retailers not to be so dependent on four weeks of the year. Are there always going to be more sales happening during that time? Yes. But [jewelers] have to realize there’s an occasion for someone every day of the year.”
Image: Stocksy; jadetrau.comArticle from the Rapaport Magazine - November 2019. To subscribe click here.