Wednesday, June 21, 2017

Where is retail headed?

Nobody knows for sure.  Present trends show that retailers of all sorts are working hard to adapt to a marketplace that is shifting dramatically.  Jewelry retailers are not exempt from this paradigm shift, but their issues are not quite the same as for other retailers, and that holds true for most of their suppliers.

Stated quickly, what are the specific issues confronting traditional jewelry retailers?
  • The low end of the market continues to move steadily towards Internet retailers.
  • The low end of any store's business is the traffic builder, and important opportunities to build long term relationships.
  • The low end of the market, now significantly composed of non-precious materials, is appearing in many non-jewelry environments, further diluting the business.
  • The mid-market has been suffering for decades now, but will still serve a substantial part of the public.  It is increasingly owned by larger chains, but faces daunting prospects due to buyer burnout, a very mature market, high priced materials, and effective promotion of alternative luxury products who have the scale to spend heavily on marketing.
  • People are now far less inclined to "own" and collect; regardless of age, they are far more into sharing, borrowing, experiencing; that leads the mid-market consumers to either step up (if they can!) into the upper market, or step down into the fashion area.  Again, that is a trend we have all observed for years.
  • The top end of the market is alive and kicking.  The rapid growth in the number or rich and super-rich households has produced extravagant luxuries and flamboyant products.  Even so, the luxury market seems to be stalling.  The rich will only buy so much.
  • Location means everything.  It used to be that neighborhoods evolved and changed slowly and maintained their character.  Now we read about a luxury boom on one street coming and going in barely five years. Jewelry retailers have a hard time reacting to demographic changes.  Their brand and merchandising have distinct targets, and such changes can bankrupt the business quickly and easily.  So move, change or die.
  • For all channels, not having an effective web site is now becoming a sure path to failure.  Shoppers are checking the web before shopping, and checking it after shopping.  
OK, one can say that there is actually nothing new in all that, except that the pace and pressure keeps building, and that many of the traditional modes of selling jewelry are fading further and further.  And we know that in many cases, retailers selling discretionary products have a hard time recasting their brand image.

Most impressive lately has been how major luxury brands (mostly in apparel) have closed hundreds of stores, maybe thousands by now.  Some have shifted to Internet only sales.  These are not easy moves, as each location involved high setup costs, so these closing essentially acknowledge that these chains do not view current conditions as temporary.  We have entered a period of profound adjustment to new retail rules.  Clearly, the country was, and still is, over-stored, a leftover in many cases from the period of exuberant mall construction and urban renewal.

Add to that the double-digit growth rate of Internet-based retailers.  The Internet has, it seems, countless ways of seeking and reaching potential customers, and that means invading everybody's back yard.  Think you have geographic exclusivity from a brand?  Forget it.  "Local" retailers are now nationwide, if not worldwide.  That means that even in a time when there is a steady decline in the number of jewelry retailers, which we would assume benefits those still in business, we find that everyone is competing with everyone - more competition, not less.

It might not seem so, but I am not trying to be negative!  I only point out what we all should be seeing, and dealing with.  The jewelry business will not disappear.  Nor will brick and mortar stores, which will continue to be the primary means for moving merchandise.  There are a good number of retailers who have reacted to all these issues (and there are many more I did not list) and are doing well.  Some are doing very well.  

What is unfortunate is the loss we see in diversity and experience.  When we see so many high quality independent jewelers closing, usually for perfectly good reasons, we lose some of the industry's reach into local communities, and we lose their years of knowing just how to merchandise and sell better jewelry.  The reality is that starting and building that kind of store these days is really tough.  

Can the industry find its way through all this without us ending up with a few mass market super chains, a few global brands, on-line and multi-channel retailers, and a handful of fortunate independents sitting in great locations?  I sure hope there are ways to re-energize the creativity and personality of the business.  A very good independent retailer recently complained that there is nowhere near enough creativity and fresh styling ideas.  Too many companies rushing to copy whatever seems to be trending, hunkering down in this difficult time.  We don't want boring, do we?

Central to a re-thinking of what we do should be an oft-repeated but poorly promoted aspect of jewelry.  Buying jewelry, regardless of price or content, is always an emotional act.  It inevitably involves a judgment on the part of the buyer about personal statement, psychic satisfaction, reward, a gift of love to another person, and pure pleasure.  All of these aspects are far more important than the claim that a consumer "needs t try it on."  That is a mechanical or technical aspect, the piece's fit and feel, that can contribute to all the aspects just noted, but isn't itself the driver of a sale.  On-line retailers, for all their efficiency and reach, will be striving to take on that emotional element. We saw such an effort recently with one site that has a very attractive and knowledgable person walk through a decision making process with a potential buyer, all done face-to-face on Face Time.  A good start, I think, towards bringing real diversity back into jewelry.



7 comments:

  1. Another major issue confronting jewelers is how casual most Americans' lives are now. Outside of law and finance, very few people wear suits to work, so the kind of jewelry they need to go with jeans--and especially athleisure wear--is much different than what most jewelers are used to stocking or selling. Even formal occasions are much less formal now, but a lot of jewelers haven't adapted their merchandise mix to reflect the change. Also, now that consumers (especially Millennials) are used to shopping for fast fashion and even fast furniture, people are a lot less inclined to sink heavy dollars into something they think they might get tired of by next year. For emotional purchases this is less relevant, but then I go back to my point about formal dressing. If a husband wants to buy his wife a diamond riviere necklace for their anniversary, but she says "where on earth am I going to wear it, let's take a cruise instead" he is going to think twice about buying it. And of course you know my never-ending soapbox about needing more compelling merchandise in the price space that competes with bags and shoes!

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    1. Hi Hedda,
      You hit the nail on the head! The athleisure market is a 100 billion dollar business and growing. In 2016 leggings actually outsold jeans! My company has addressed this issue by creating a new category in the athleisure space. We manufacture diamond jewelry that retails for under $300 and can be worn from working out to going out. www.popdiamondjewelry.com

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  2. All very good comments, Hedda. Thanks. This is one aspect of the retail situation that I did not describe. Here is another one. the Great Recession of 2008-9 has had a similar effect as the one that started in 1929 and ran for 10 years. It made people acutely aware of the need to save money. We now have Boomers that in many cases are beyond worrying about having money, and they still buy jewelry. The Baby Boomers have now gotten frightened badly, and the generations that followed have observed and learned, right down to Gen Z. A hundred years ago, property was the sign of wealth. Now, increasingly it is money. People do not even know how to collect anymore, nor do they want to. Most BIG auctions are going to Asians, though there are still exceptions. Hedda, you are right on, though, the compelling merchandise is missing. Why? Development risk is too great. So we lose.

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  3. Most jewelry stores don't carry what I collect! And many who do are over-priced! (I collect antique/vintage cameos and Victorian Bohemian garnets.)Many jewelers are dismissive if not downright rude about some of mt most treasured pieces, they seem to only value mass-produced baubles that are the same in every chain. So I shop antique stores, flea markets, and heaven forbid, EBay!

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    1. Kat, you are describing a core issue for retailers of all sorts. Most retailers these days are reduced to carrying those items that sell easily, or, at the very least, don't end up in the closeout case. In some ways, they have been forced into such positions by simple economics. It is only some very profitable or very venturesome retailers that can carry the kind of jewelry you love. Yes, it is a pity, which is why I wish there were movements to recapture diversity in jewelry.

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  4. We see many of the things you mentioned but one thing that folks need to realize about Millennial shoppers.
    Many of them have limited disposable income due to heavy student debt, still living with parents and limited high paying jobs available after College. So much for luxury purchasing! Because of this reality much of the resistance or lack of interest or disdain for diamonds might just be a case of "SOUR GRAPES". Many of these customers bring up fake objections for why they won't buy diamonds or why they choose Man-made stones instead. Money might be the real reason! IF these same young buyers were better off financially they would readily embrace diamonds as their predecessors did. They still expect a newly engaged young woman to 'post images" of the ring on Social Media!
    By not lowering selling prices on solitaire diamonds (to prices near online sellers prices) retailers have made a “critical error” and lost these sales in many cases as well as lost future Biz from these same buyers. This is absolutely a shame and B&M jewelers persistence to try to get better margins may be the main reason that their customer base is shrinking.
    Just because a few customers will pay a high price for a diamond (say 40-50%+ markup) does not mean this is the right price. Increased sales, traffic and market share have been marginalized by chasing high markup and not facing reality.
    Sad but true!

    Gary Wright

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    1. Thanks for adding a very good point. I would even go further to say that there is a connection between student debt and the collapse so many families experienced during the Great Recession. The lesson learned is in the value of saving and not falling into debt traps that are so hard to get out of. We can be sure that a significant portion of public will have long term memories of this lesson. When buying jewelry, they will spend much less than they might have years ago.

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