RAPAPORT...The last stop for diamonds is the retail store. Here is a behind-the-scenes look at what is happening at retail in the U.S.
NRF Urges End to Hidden Credit Card FeesThe European Commission (EC) ruled that hidden fees, currently charged by MasterCard to process credit card transactions in Europe, violated its rules and must be withdrawn within six months.
EC competition commissioner Neelie Kroes said the fees drive up costs for consumers as well as retailers. Consumers, Kroes noted, risk paying twice – once through annual fees to their bank, and again through inflated retail prices. Kroes stated that the commission will accept such fees only when they are “clearly fostering innovation” to all users’ benefit.
Averaging close to 2 percent in the United States, interchange is a fee that Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected more than $36 billion in interchange fees in 2006, up 17 percent from 2005, and up 117 percent since 2001, according to data collected by the National Retail Federation (NRF).
Charges for the year 2007 are expected to hit $40 billion, or about $350 per household, according to the NRF. Interchange is largely unknown to most consumers because Visa and MasterCard do not disclose the fee on monthly statements and prohibit merchants from disclosing it on receipts.
Currently, MasterCard interchange rates for cross-border transactions in Europe range from 0.8 percent to 1.2 percent of each transaction. Visa was not addressed in the ruling, but reached an agreement with the EC in 2002 that restricted its fees – previously averaging 1.1 percent – to a maximum of 0.7 percent. That agreement ended December 31, and the EC ruled that beginning in 2008, Visa will be “responsible to ensure that its system is in full compliance with EU competition rules.”
Pluczenik, Luxe Holdings Launch Brand in Russia
Belgium-based Pluczenik launched its “Louvre By Pluczenik” brand of jewelry in Moscow in partnership with Luxe Holdings of Russia. The new brand was presented at the inauguration of Luxe Holdings’ Louvre jewelry showroom at the newly opened Ritz Carlton hotel in Moscow.
In addition to “Louvre By Pluczenik,” Pluczenik presented new pieces for its Escada Fine Jewelry collection in partnership with Luxe, as well as the Pluczenik Collection for the high-end market. Pluczenik also exhibited its famed matching diamonds, the largest pair to carry the Forevermark signature. They weigh over 52 carats, and are valued at around $5 million.
Chaim Pluczenik, chairman and chief executive officer (CEO) of Pluczenik, called high-growth markets like Russia “an ideal platform” for selling the company’s most beautiful pieces and rare diamonds, thanks to the knowledgeable clientele there.
Pluczenik and Luxe Holdings first partnered together in 2004, with the distribution of Escada Fine Jewelry in Russia and all Commonwealth of Independent States (CIS) countries. This event marked a further expansion of that partnership.
Movado Profits Rise on International Growth
Movado Group, a manufacturer of luxury jewelry and watches, reported that net income grew 21 percent to $26.5 million in the third quarter of its fiscal 2008, boosted by growth in its international business.
Net sales grew 8.3 percent to $180.2 million in the three months ended October 31, 2007, while comparable store sales at Movado boutiques in the United States rose 8.8 percent.
Efraim Grinberg, Movado’s president and chief executive officer (CEO), stated that the company had made great progress in building its international business. That sector grew 33 percent from last year and represented more than 40 percent of wholesale revenue during the third quarter, Grinberg noted.
Among the watch brands Movado designs and distributes worldwide are Ebel, Concord, ESQ SWISS, Coach, Tommy Hilfiger, Hugo Boss, Juicy Couture and Lacoste.
For the year to date, Movado’s net income grew 14 percent to $41.2 million and net sales increased 7.8 percent to $421 million, as comparable store sales rose 1.1 percent at Movado boutiques. Comparable store sales in the first nine months of fiscal 2007 increased 5 percent.
The company raised its end-of-year earnings outlook to range between $1.74 and $1.78 per share, rather than $1.54 per share, “assuming the U.S. economic environment does not deteriorate.”
Tiffany Partners With Swatch
Luxury jeweler Tiffany & Co. teamed up with the Swatch Group to develop, produce and distribute watches under the Tiffany brand. Under the agreement, Swatch will incorporate a new watchmaking company in Switzerland, using the Tiffany trademark. Tiffany’s representatives will sit on marketing and product design committees, and Tiffany will hold one of the five directors’ seats.
The new company will produce a complete line of Tiffany & Co. watches in Switzerland, generating new watches and incorporating existing Tiffany designs. Distribution channels will include Tiffany & Co. stores as well as Swatch Group affiliates, retail outlets and third-party distributors. The Swatch Group will have the right to operate Tiffany & Co. branded watch stores outside the United States, including a targeted inventory of other Tiffany jewelry. The venture constitutes a 20-year partnership, with a possible ten-year extension if certain conditions are fulfilled.
Men’s Jewelry Sales Reach New HeightsJewelry sales to men doubled from 2004 to 2006, according to a study by Unity Marketing.
Pam Danziger, founder and president of Unity, explained that jewelry designed for men used to be a “stepchild” compared to women’s jewelry. But in 2006, men’s jewelry reached a 10 percent share of the market, becoming a force that jewelry marketers and retailers could not ignore.
According to the quarterly luxury consumer surveys commissioned by Unity Marketing, men’s jewelry purchases rose each quarter this year to a high of 12 percent. This compares with an historic purchase level of 5 percent in 2006.
Danziger commented that the findings suggest that men are utilizing the experience they have gained buying women’s jewelry in shopping for themselves. As they move from business casual to more formal attire, many men are looking to enhance their wardrobe not only with fine watches, but also with gold rings and cufflinks, Danziger noted.
This shift coincides with an overall trend toward specialty retailers who can provide unique designs and individualized service. After several years of losing market share to discounters and mass merchants, specialty jewelers regained a full 50 percent share of the jewelry market in 2006. Danziger stated that jewelry shoppers seeking fashion-forward merchandise of superior quality found the service and expert advice available in jewelry stores to be just what they needed. They were willing to make trade-offs for experiences that are not available in most discount and warehouse retail outlets.
Article from the Rapaport Magazine - January 2008. To subscribe click here.