Over the last 10 years there are so many things that have changed in the jewelry business, some of them for the good of the industry and others to its detriment. The internet has accelerated the transference of information and made products readily available. National chain stores have changed their business models to become more aggressive and today’s consumers have altered their buying habits accordingly. Industry veterans suggest that 10,000 privately held stores could close over the next 7-10 years.
Simply put, the jewelry business isn’t the same as it was 10 years ago and independently owned jewelry store owners need to respond quickly. With this article, I hope to offer advice on how to overcome the many challenges that independents will encounter.
Today’s consumers can be categorized as value or experience driven. The value driven consumer rarely cares about the image of the store, the brand name of the products, or the service after the sale. He/she is concerned about one thing and one thing only and that is “the lowest price possible”. The internet is best equipped for this type of customer and has done a great job of servicing them. The attraction for potential internet consumers may be the value and the anonymity of comparing products and prices without human interaction.
Some people have told me that they feel obligated to purchase after spending time with salespeople at brick and mortar stores, this adds undue pressure to make a quick decision. Spend thrifty consumers can also be methodical decision makers and require time to feel good about their decisions; the internet offers this while brick and mortar stores do not. Generally speaking, a retail store’s operating expenses represent a high percentage of their overall revenues. They simply have to sell their diamond and jewelry for more – competing with internet retailers on price and shopping leisure becomes a difficult task.
So in turn, independently owned stores have lost market share every year for the last 9 years. In fact, the retail independents have shown only modest growth of 2%-5% per year while internet retailers have grown 25%.
The experience driven consumer is largely concerned about selection, convenience, brand image, availability, and service. Recognizing this are the national superstore chains, including Jared Jewelers, Helzberg, Bailey Banks & Biddle, and others like them. These companies are building bigger and better stores with millions of dollars in inventory bursting out of the showcases. Every possible jewelry choice is available and their customers don’t have to shop anywhere else.
In addition, they are placing a greater emphasis on training their employees than they have in the past. The days of receiving second rate advice and service at national chain stores are becoming a thing of the past. This is something that independent retailers have always hung their hats on: they can no longer say that you’ll only get great service at privately owned stores. All of this is made possible by an aggressive plan to take over a market previously controlled by mom and pop stores, and then investing in that plan. The independent jewelry store can’t offer the same size product selection because they don’t have the finances. The chain stores have better real estate, better product selection, and more money for advertising.
You could say that the internet retailers have opened the door for the chain stores by fragmenting the marketplace and putting independents on the ropes. Recent growth by chain stores and internet retailers has placed independents in a bad place. They can’t sell their jewelry at the same price as the internet retailers and can’t afford to offer the same product selection as the chains. Without careful planning and adjustments in their business model independently owned stores could border extinction. There are some that would strongly disagree with this outlook and think that it would be impossible for it to happen.
To that I ask one question…”When was the last time you purchased home improvement items from a mom and pop hardware store?” Or “When was the last time you purchased electronics from a mom and pop electronics store?” These stores existed until the consolidation of their industries occurred. It simply took longer to happen in the jewelry business, but I assure you that it will continue to happen. The future for independents seems bleak but there are things that can be done to assure their healthy existence in the industry.
Taking back market share is going to be a very important part of the process and this should start with the internet. Most independents have done nothing to create a presence on the internet; I’m amazed to hear that some jewelers don’t even have a website. I think this is largely due to their reluctance to embrace a business practice that has taken so much from them.
An example of a well-done internet jewelry website is design your engagement ring
The internet retailers have grown quickly because they haven’t been challenged, it’s time for the independents to step up and create a much more competitive environment for internet retailers. The area most needing improvement is the sale of online diamonds and engagement rings. Margins of course, have dropped considerably on loose diamonds because of the availability of aggressively priced goods.
Independents have a real problem accepting the notation of selling diamonds for much less than they have in the past. In order to succeed, they’ll need to understand that diamonds can be sold for more in a store and less online. Why not do business with both types of customers and take back some of the market share previously lost to competitors. Putting together an effective website involves more than listing jewelry on web pages. Content is very important as well as search engine optimization, I recommend hiring an SEO specialist before hiring web programmers. They’ll give valuable insight on how to create a successful website.
Dealing with the superstores takes a different approach and a lot of courage. Most independents will never have the funds needed to compete on the same level as the superstores. That’s not to say that they can’t hold their own and carve out a good living. It will require choosing a jewelry category that is possible to dominate or own a large piece of. Dealing with the chain store advertising budgets, inventory, prime locations, and trying to be all things to all customers will be next to impossible. I think the store owners that’ll be successful will leverage their passion and strengths in certain product categories and attempt to own that market.
I’ve owned a retail jewelry store for 13 years and witnessed the deterioration of the market for privately held stores. I’m also experiencing first-hand the problems faced by my counterparts and vacillated over the proper course of action. I’ve decided to stay true to my passion and continued to promote my bridal and diamond business. I know in the end that it’ll be the right decision because I have a good chance of creating a strong presence in one product category. This presence will be hard to take away from me and I should always be able make a good living. I hope that all independents can do the same, but it’s obvious at this point that it will take courage and commitment.