While most of 2011 has been intermittently positive for
independent jewelers, issues surrounding the national budget have given many
small business owners some cause for concern. Even in areas where the economy
has been steadily improving, the summer months are traditionally slow, and with
the recent national debt crisis, some stores worry
that fall and the holidays may be lean times.
The upshot? Companies that
were able to successfully navigate the curves of the past few years will need
to continually refine their tactics to keep their existing customer base and
expand into new markets.
A Challenging Market
Although the news outlets continue to offer fresh insight
into why the economy is in flux, the core problems facing business owners are
not significantly different this quarter than in quarters past. “Our challenges
haven’t changed,” said Penn Fix, president, Dodson’s Jewelers in Spokane,
Washington. “It’s still a very challenging environment, so our key words are
‘flexible’ and ‘nimble.’ In order for us to compete with the internet, our
margins are lower, and we’re not carrying as
many loose goods. We don’t purchase a lot of stock, but we can quickly
bring in what customers want.”
Benny McNair, owner of McNair Jewelers in Gadsden, Alabama,
agreed that being flexible is key right now when it comes to maintaining his
business. “As far as actual sales in the showroom, we’re sometimes busy,
sometimes not,” he said. “You have to be flexible. I feel sorry for the stores
that don’t have a repair shop, and send things out. It used to be not uncommon
to sell $30,000 or $40,000 pieces, but now everybody
has backtracked with what they can
spend. Everybody upgrades so they can have a new ring without having to
buy a new ring. Stores have to be adaptable.”
Part of being adaptable is having product that will sell,
even if it’s not the product that used to sell. “The biggest challenge now is
staying current with market prices,” said Rick Beaulieu, president of Springer’s
Jewelers, with two stores in Maine and one store in New Hampshire. “We’ve been
working with suppliers, but manufacturers are having the same problem. At the
same time, you have to adjust your prices,
and you have to adjust your price points. Customers have a size in mind
and they have a budget in mind, but the diamond they thought $7,000 would buy
may not be the size they thought it was.”
For some retailers, the adjustment to new ways of doing
business happened long ago. “My wife and I run this business ourselves,” said
David Robuck, co-owner of Michael’s Jewelers in Anchorage, Alaska. “We keep our
overhead low, and we only have one employee. We picked a direction several
years ago. I think most places, their biggest failure is overhead. They don’t stock
their inventory right. If people want to do well, they have to lower their
overhead and get their hands dirty.”
Keeping overhead low is
also a priority for Steven Tapper, vice president of Tapper’s, with
three stores in Michigan. “The challenge is how to run our organization as
efficiently as possible, but provide a level of service that continues to build
the brand,” he said. “In the past, we made sure we had as much help as
possible, and sometimes we were overstaffed to make sure we had more than adequate
coverage. But there are minor adjustments you have to make when you don’t have
as many people on the floor.”
Vanishing Middle Class
In addition to smaller
staffs and tighter inventory, many retailers are struggling to address a
dwindling middle-class consumer market. “The market drop tightened the noose,”
said McNair. “It’s just a matter of realism. We’re going to have to try and
find a niche for people walking in who spend lower dollars, and higher dollars,
and middle dollars. I appreciate young customers who spend $500 or $1,000 on a
piece they had to work and scrape for. Whoever you deal with, even if you make
10 cents on them, you need to make them happy.”
Fix agreed. “The overall
industry is facing a disappearing middle class,” he said. “I’m not necessarily
worried about me, but about the jewelry stores that catered to a very strong
middle class. That’s an issue.”
A Sense of the Holiday
That said, things might improve come late fall, and into
Christmas. “We’re looking at where the economy is going, and we’re getting a
sense of what we may have to carry,” said Beaulieu. “But I like the idea that
we’re getting the pullback now. People say they want to spend their money. I
think most stores are going to be flat for the holidays, but the people who are
aggressive will see an improvement from 2010.”
The Marketplace
- Round continues to outsell all other shapes.
- 1-carat and .75-carat
stones are top sellers.
- SI1 is the most popular clarity.
- H-I is the best-selling color range.
- Platinum and white gold are about 50/50 in the marketplace
because the price of gold has risen, making platinum seem like a comparable
value.
- The average price for an engagement ring, including stone and setting, is $6,850.
Article from the Rapaport Magazine - September 2011. To subscribe click here.