Analysis: The State of the Majors

Trying to get all the pieces in place to make a retail operation run smoothly these days is like solving a Rubik’s cube.

It’s difficult, time consuming and involves a lot of moving parts. But, in the end, it’s really satisfying when you get everything to line up.

The question is, though, which retailers are best at putting all the pieces of the puzzle in place today?

Is it the biggest players, with their enormous marketing budgets, money to spend on the best social media talent, and numerous physical touchpoints?

Is it the online-only retailers, with their 24/7 availability, lower prices (and, in some cases, lack of sales tax) and fast and free delivery, all made possible by lower overhead costs?

Or, is it the mom-and-pop stores that can offer more personalized service and, in many cases, a better in-store experience?

Let’s attempt to answer these questions by first looking at what the 2017 State of the Majors lists reveal and, then, what the players in the industry have to say about the current state of jewelry retail.

A Tale of Two Lists
While the overall number of retail doors is decreasing, there were more companies that sold in excess of $100 million in jewelry and watches last year.

What this means is that retailers are taking advantage of store closures and increasing their sales by scooping up the jewelry customers of now-shuttered stores, whether it’s an independent jeweler that’s shutting down after decades in business or a Macy’s that once anchored the local mall.

Among retailers that made the list last year, sales are up by an average of 4 percent year-over-year, reports Edahn Golan, owner of Edahn Golan Diamond Research & Data, who compiled the sales figures for the “$100 Million Supersellers” list.

Golan’s findings of a single-digit increase in sales jibe with those of the U.S. Commerce Department, which revised its 2016 U.S. jewelry and watch sales figure upward between February and August, from $80.9 billion to $85.4 billion. That is up 6 percent compared with 2015 sales of $80.6 billion.  

The top five sellers on the list remained unchanged from last year, albeit in a slightly different order: Signet Jewelers Ltd., Wal-Mart, Macy’s, Costco and Tiffany & Co.

While Signet and Tiffany stayed in the top five, both face major challenges. 

Tiffany & Co. (No. 5 on this year’s $100 Million Supersellers list, down from No. 3 last year) is tasked with reinventing itself for a new generation, while Signet Jewelers Ltd. (still No. 1 on the $100 Million Supersellers list) has a lot more problems than just figuring out how to appeal to millennials. 

The mammoth chain is grappling with shaken consumer confidence in the wake of scandals over stone swapping and the way the women who work there have been treated, a problematic credit portfolio and thousands of stores in struggling malls.

The chain’s CEO, Mark Light, abruptly retired at the end of July, citing health problems. As of this writing, Light’s successor, Virginia “Gina” C. Drosos, has only been on the job for about three weeks.

There are many questions about where Signet is heading but one thing is certain—the retailer is firmly focused on improving its omnichannel experience. The company announced in late August that it is paying $328 million to buy R2Net, the company that owns JamesAllen.com and Segoma Imaging Technologies, which has developed machines that, as Signet put it, “enable delivery of a next-generation digital shopping experience for jewelry.”

Outside of the brick-and-mortar stalwarts, there are the same number of online-only players on the $100 Million Supersellers list as last year—four.

Amazon moved up one spot, from No. 9 to No. 8, while Blue Nile also ticked up a bit, from No. 19 last year to No. 17 this year, in a tie with Fred Meyer Jewelers.

R2Net’s JamesAllen.com remained in the No. 28 spot while Overstock.com was down four spots, from No. 34 to No. 38.   

It’s also worth noting that two of the four e-tailers on the list are continuing to open physical locations.

Blue Nile had five “webrooms” by the end of the year while, at press time, Amazon had 11 book stores, with another two in the works, and one Amazon Go grocery store.

What this tells us is that even in the year 2017—when you can open your tablet at 3 a.m. and order anything from the comfort of your couch—people still want to see, feel and touch what they’re buying.

They also want to get a sense of what the seller’s brand is about, and retailers of all sizes know it.

Helped Wanted, By Everyone
Itay Berger is the president and CEO of Diamonds Direct, which ranks No. 29 on this year’s list of $100 Million Supersellers and No. 35 on the list of Top 50 Specialty Jewelers by store count. 

The company had 10 stores at the end of 2016 and has opened another four so far this year, bringing its total current store count to 14.  

Berger’s main worry with the stores he’s opening isn’t online competition: “Our basic assumption at Diamonds Direct is, no one really wants to buy a diamond online. It’s up to you and what you do with that customer [when he or she comes into the store]; and how much you are willing to listen and find a way to make it happen for him or her.” 

He also has a handle on his inventory and is doing what the experts say retailers should do today: Have a well-curated, specific selection of merchandise, instead of trying to be a store that has everything for everybody. (As the store’s name would suggest, Diamonds Direct’s focus is diamonds, specifically bridal.)

Berger’s biggest concern is maintaining the store experience across all doors and finding the right people to help him do it.

“I think what keeps me up at night is, really, having the right people on the floor, in the back office, in the shop, at the front desk who can truly deliver the Diamonds Direct experience,” he says. “And that’s the key in retail. If you have the right people to take ownership and care, you’re going to be successful.”

Staffing, in fact, is Berger’s biggest challenge, and when National Jeweler asked him if he has a strategy that has helped with staffing he replied simply: “No. The only strategy is, we are always hiring and we never say no to a good person with a great attitude and who is a hard worker, because we value it.”

The staffing headache is seemingly shared by jewelry retailers of all sizes.

El Paso, Texas independent Susan Eisen, who has exactly one store, can run down a list of the advantages she believes her single store has over the major chains, chief among them: the flexibility that being a single-store operation brings. 

She can switch up her showcases, computer system, hours of operation, and control pricing and discounting without having to run it up a chain of command.

“We can change tomorrow,” she says. “Whatever it is I want to do as an independent, I can do it tomorrow and I don’t have to ask anybody.”

But, she would not say that hiring is any easier as an independent. Eisen says she gets frustrated that she trains new people, only to see them leave to go to another industry after two or three years.

‘Omni’ Means ‘All’
The axiom in retail today is that every company is a technology company, whether it’s selling jewelry, auto parts, or coffee and donuts.

This also is a fact known by retailers of all sizes or, at least, the ones who are still going to be around five years from now.

Berger said Diamonds Direct plans to launch a new website next year that’s designed to be more of an extension of the in-store experience than its current version is. The retailer needs to improve its omnichannel experience, and he knows it.

“Honestly,” Berger says, “we have a lot of work to do in improving our technology and IT, and we’re really busy doing it.”

Online is an area where the bigger retailers, like Diamonds Direct, seemingly have the edge.

Lee Peterson, executive vice president of brand strategy and design at WD Partners, said when it comes to online presence, bigger retailers are going to win out over smaller competitors on economies of scale. 

When a large chain, like a Macy’s or a Tiffany & Co., relaunches its website, it’s revamping a touchpoint that has the potential to drive customers into thousands of stores worldwide, not just one or two.

These are also the types of players that have the money to bring the best-known “influencers” on board and to hire the best in-house talent to formulate effective social media marketing campaigns. 

“The majors win” is the running wisdom among smaller jewelers, though both Alex Fetanat, president and CEO of GemFind, and Craig Rottenberg, president of five-store New England operation Long’s Jewelers, say that online is an area where the independents have gained competitive ground.

Rottenberg said having a professional-looking website that could be managed in-house, without the assistance of an outside IT team, used to cost $100,000, at minimum. Today, he asserts, a hosted, cloud-based website that has a nice-looking template and is responsive can be constructed for around $10,000.

Long’s Jewelers uses Shopify. Other options employed by independent jewelers include BigCommerce, Punchmark and Fetanat’s company, Newport Beach, California-headquartered GemFind. 

“Technology has become much more affordable and much more pay-as-you-go,” Rottenberg says. “You don’t need to be a major to have a sophisticated, current-looking website.”

Fetanat echoes that thought: “If somebody wanted to have the right online presence these days, it’s a lot more cost-effective than it was 10, or even five, years ago.” 

These revelations about building a website today come with a couple of caveats.

No. 1, yes, it is less expensive to build a professional-looking website today. But that does not mean it is cheap, and it also does not mean it is easy. Retailers must constantly spend money to keep up with changes in technology and to properly maintain a solid social media presence.  

No. 2, though jewelers have progressed in terms of their digital presence, Fetanat says that the industry, as a whole, is still five to six years behind when it comes to technology, though his company continues to try to push it forward. 

 
A former computer engineer, Fetanat fell into the jewelry business after he sold his software development company, took some time to travel the world, and met an emerald dealer in Colombia. 

Combining these fields of knowledge, he launched GemFind in 1999 as a database where manufacturers could upload their diamond inventory and jewelers could shop it—a panacea for what was the biggest online threat to independent in those days, Blue Nile.

Nearly 18 years later, GemFind has partnered with many jewelry designers and diamond suppliers and, through its JewelCloud platform, can populate websites with products and content from the vendors. In addition, GemFind offers full custom website development; digital marketing and advertising; Diamond Link; a ring builder; a studs builder; and a pendant builder as well as various Facebook apps.

At JCK Las Vegas this year, it added another advancement, pixel-tracking, which allows jewelers to see through JewelCloud the products, price ranges, brands, etc., that website visitors click on most frequently.

Right now, Fetanat says the company is working on GemFind.TV, which will allow consumers to click on a product on a retailer’s website and then be connected with an employee in the store, who will make a presentation to the consumer about that particular piece via online video.

It’s not dissimilar to Hero, which connects in-store sales associates with e-commerce customers through live video streaming as well as messaging and photos. Hero launched in the United States in April through a partnership with John Hardy, which opened its first standalone stores in the U.S. in 2016.

“The consumer doesn’t even have to come into the store,” Fetanat says of GemFind.TV. “I think that would be a game-changer for a lot of jewelry stores.”

Better Together
Another area where the advantage falls squarely in the majors’ favor is buying. As anybody who stocks up on household essentials at one of the big warehouse clubs knows, you can get better pricing when you buy in bulk.

But that doesn’t mean independents are without recourse when it comes to scoring better prices from manufacturers. 

While National Jeweler was conducting research for this article, we posed this question to a group of retailers gathered for an event in New York: What tools and services are available to help the independents compete with the big players? 

One retailer didn’t have to think for a second before firing back this answer: “Buying groups.” 

 
Such groups, which include Continental Buying Group (CBG), Independent Jewelers Organization (IJO), the Leading Jewelers Guild (LJG), Retail Jewelers Organization (RJO) and Southeastern Jewelers Organization (SJO), have been a part of the industry for decades and, in Steven Singer’s opinion, they’re poised to grow in importance. 

Singer, the owner of Steven Singer Jewelers in Philadelphia (famous for its deliberately antagonistic tagline, “I Hate Steven Singer”), was elected as the 57th president of LJG back in March and delivered the keynote address at the group’s July meeting in Newport Beach, California.

In an interview for this article, he recapped that speech for National Jeweler.

He reported to his group that attendance was “noticeably lighter” at the Luxury and JCK Las Vegas shows, the only two Vegas market week shows he attended this year. The shows are traditionally the largest and most central gathering for jewelers in the industry’s year, and are thus a bellwether for the health of trade shows in general. (JCK Las Vegas officially reported that its attendance was down slightly). 

“There were still plenty of people in Vegas--don’t get me wrong--you could just see it wasn’t the same feel as in years past. The biggest thing going on was there was nothing going on. It was a little bit lackluster.” 

Explaining the downturn in attendance at JCK and other trade shows is like watching a circle of dominoes go down in video-looping app Boomerang; the attendance just keeps falling, no matter which way you look at it. 

But there reasons for the seemingly inexorable decline. There are fewer jewelry stores today, which means both fewer customers for manufacturers and a smaller base of attendees from which show organizers can draw. Those companies that remain are more carefully monitoring their spending. 

At the same time, where JCK is concerned, Las Vegas has gotten exponentially more expensive. Singer recalls that the point of having the industry’s major trade show in Vegas was so people wouldn’t have to pay New York prices. Now, Vegas has become nearly as expensive as the Big Apple.

As a result of these varied factors, the industry seems to be moving away from the idea of one big central show, toward a more curated, manageable trade show experience, Singer believes. Some vendors and retailers are scattering to smaller shows, others to the buying group shows, where many vendors feel they can get a better return on their investment and form relationships with the retailers.

Retailers are getting the message, too: “It used to be a thing that we (the retailers) needed to beat up vendors on price,” Singer continues. “The war’s over. We have to have a relationship with our vendors. We have to partner with them. We have to have a relationship with our customers. We have to make it frictionless and easy. 

“Anybody who doesn’t embrace that is pretty much just going to go away.” 

In addition to these factors, retailers like having a close-knit group of similarly situated stores with whom to share best practices, which buying groups provide, Singer says.

Rottenberg, of Long’s Jewelers, also noted the need for independent jewelers to share information, which he says is happening more these days.

“We are talking much more openly. [In talking to retailers] outside of your market, there’s so much to gain from sharing, ‘Hey, this worked well,’” he says.“If we can learn from each other’s successes and failures, it’s so powerful.”

In LJG, Singer says, members are embracing technology and an omnichannel approach, with a big emphasis on mobile, which is where most shopping today starts whether a consumer is looking for a cup of coffee or a piece of jewelry. 

Being in a buying group also helps Singer better compete, because he finds out new things that are coming down the pike earlier and he gets a jump on them, like many of the major players do. 

In short, buying groups can help both retailers and suppliers let go of old methods of business that are no longer working and avoid becoming irrelevant in a world where technology is changing everything, rapidly. 

“In the world of Uber and Lyft,” Singer concludes, “we don’t want to be the yellow cabs.”