Friday, July 3, 2015

Top 10 issues for 2015 - #4: American jewelry retailing. What's the problem?

Everywhere we turn these days, we read about the weakness in jewelry retailing in the US.  The numbers are down vs last year, every month for the last six months, and there does not seem to be any reason to think the summer will be any better.

We can, of course, see all this as the "canary in the mine."  Jewelry has frequently been described as the first to get hurt in a downturn, and the last to recover, being that such purchases are discretionary and remain low on a list of priorities, excepting in most cases for the purchase of an engagement ring.

All that does not seem to ring true at this point.  Back in 2007, I began to hear many retailer say that there was something wrong.  After a few great years (2006 being the best) they saw business drop off sharply in mid-year.  I took that as a real warning, an early warning, and echoing the declines we saw with the recessions in the 1980's and again in 2001.

This time, though, the country has been out of the steep decline of 2008-9 for five years, with the recession officially ended in 2009, and all indicators have been in general positive territory for years.  Home buying is up, car sales are booming, and employment is up.  Moreover, jewelers had a couple of good years.  So why the stall now?

Answers to these kinds of questions are never easy.  It sometimes takes an outsider, someone not in the business, to give us a clue.

A couple of years back, I attended a session of the Luxury Marketing Council, here in New York, where American Express, and The Harrison Group, presented a study on affluence and wealth.  They predicted that the US would make steady progress out of the recession, and that the wealthiest top 10% were sitting on a great deal of cash.  They predicted that within a year, once it appeared that the world financial sector would recover, cash would come pouring out for a wide range of acquisitions.  They had a long list luxuries that this public would spend money on, which included vacations, cars, electronics, homes, apparel, etc.  Dead last, and the only two categories that they said would decline in sales, were watches and jewelry.

While they did not elaborate on all the reasons for that (I asked!), their focus was on the superior branding, advertising and image building of other luxuries, and a real shift in public sentiment.  Intuitively, I had to agree with them.

I recall an incident that occurred many years ago when I visited a then well-known men's clothing store in New York, Wallach's, to buy a couple of suits.  I asked the sales person how things were going, and he said business was not so good.  I remarked that there seemed to be plenty of customers, and he said yes, but everyone, like me, was buying two suits, while a couple of years earlier they were buying three.  "That's a third less business with the same customers."  Wallach's, and many other men's stores, went out of business in the years that followed.  Nowadays, when I go to a ballgame, people come in shorts and tee shirts.  But I remember those old photos when it was almost all men that went to a game, and they all wore suits, ties and a fedora.  Bought any hats lately?

Whether we like it or not, from a business point of view, men's clothing went from suits to sport clothes; from suits every day to casual Fridays; and from casual Fridays to casual all the time.  These days, neckties are in trouble.

Social mores do evolve and change.  So do value judgements and life priorities.  Quite aside of those natural forces that have gone on for countless centuries, we are in a time where the range of ways we can spend discretionary dollars has boomed, and the competition for those dollars is fierce.  But, as I wrote about last year, some people now foresee the end of anything more than organic growth, or, for that matter, that consumerism in an age of climatic distress is less than desirable.

Without much effort, I came up with at least twenty "reasons" why retailing faces stressful times under current conditions.  I am sure, readers, that you all can come up with such a list.  That is a discussion worth having, as is a forum for devising new approaches that satisfy many needs - profits, sustainability, environmentalism, and an individual's psychic needs.

Anyone interested?

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