The average ticket for U.S. specialty jewelers rose a strong 8 percent in 2005, according to an analysis by IDEX Online Research. For mass market specialty jewelers, this means that their average ticket was about $350 in 2005. For guild (high-end) jewelers, their average ticket surpassed $800, with many far outpacing this average.

 

If jewelers can raise their average ticket while maintaining roughly the same number of transactions, there can be dramatic profit leverage as a result of more efficient absorption of relatively fixed overhead costs. In 2005, IDEX Online Research estimates that it cost the typical U.S. independent jeweler about $87 to get a customer in a store and to sell him/her an item. Therefore, a higher transaction value generates far more profit than a low ticket, after allowing for these relatively fixed costs.

 

The graph on the right summarizes the average ticket for major specialty jewelers in the U.S. market. As is clear from the graph, the average ticket varies substantially by jeweler, depending largely on the position in the market.

 

Average Ticket Comparison 2005

 

Number of Jewelry Transactions Down in 2005

While the typical jeweler’s average ticket rose solidly in 2005, the number of jewelry sales transactions in the U.S. market appears to have declined. U.S. Department of Commerce data shows that total jewelry sales in America rose by 3.8 percent in 2005. Since the average ticket was up about 8 percent, simple math suggests that fewer tickets were written – perhaps as many as 4 percent fewer transactions occurred. 

 

Despite fewer transactions – probably due to fewer customers coming through the front door of most stores, coupled with a 1.7 percent decline in retail jewelry prices in 2005 – the typical jeweler was able to increase the average ticket substantially. In part, this relates to up-selling – selling higher priced goods than in 2004. In part, it also means that jewelers created more add-on sales in 2005, since the average ticket may include more than one item.

 

The table on the right summarizes the average ticket for major specialty jewelers. The percentage change in the average ticket between 2005 and 2004 is also shown.

 

Each of the jewelers listed on the table above had some solid reason for the increase (or decrease) in the average ticket. For example, the Bailey Banks & Biddle division of Zale Corporation has been actively focusing on eliminating under-performing stores. These average ticket calculations include only those 73 stores that remained in operation at the end of its July 2006 fiscal year. Beleaguered Whitehall ran inventory reduction sales; despite heavy discounting, sales people created tickets with multiple items, which led to an increase in the average ticket. A decline in the average ticket at Zales Jewelers was one of the catalysts for a major management upheaval within both the Zales Jewelers’ operating division as well as at the corporate level.

 

Among the mass market jewelers such as Kay, Zales Jewelers, Zales Outlet, Whitehall, and others, the average ticket was in the $350-$400 range. We believe that the average ticket for all specialty jewelers in America is in the $325-$375 range. In general, chain jewelers have a moderately higher average ticket than independent jewelers. This correlates with other data, which show that chain stores also generate higher sales per square foot than independents.

 

There appears to be a huge disparity between the average ticket of online jewelry retailers, as the table below illustrates.

 

Blue Nile’s business is dominated by diamond engagement rings with an average value of $5,700, more than double the industry average of $2,750. For this reason, we would expect its average ticket to be much larger than other online retailers. In 2005, Odimo sold a variety of goods, including discount-priced gray market merchandise at a low average ticket. Thus, despite 30 percent of its sales coming from higher ticket diamonds and diamond jewelry, 70 percent of its sales consisted of low-priced goods that dragged down its average ticket. Tiffany’s low average ticket suggests that “corporate sales” – with an inherently lower average ticket – were a large portion of its online and catalog sales mix.

 

Credit Sales Generate a Much Higher Average Ticket

Jewelers know that a credit sale generates a much higher average ticket than a cash sale. The industry rule-of-thumb is that the typical credit sale is about three times as large as the typical cash sale. In its legal filings, Whitehall Jewellers, which recently became a private company, reported the disparity in cash versus credit sales. The average credit sale in 2005 was $909 while the average cash sale was just $284.

 

IDEX Online Research estimates that 40-50 percent of the retail revenues generated by U.S. specialty jewelers are credit sales using proprietary credit programs. Revolving credit, such as traditional Visa and MasterCard credit card sales, are not counted as “credit sales” in these statistics for specialty jewelers.

 

In 2005, about 51 percent of Sterling Jewelers’ sales were made on its proprietary credit program. Zale, which has outsourced its credit operation, saw its credit sales fall to about 41 percent of revenues in 2006, down from the prior year’s 44 percent of sales. Sterling’s same-store sales rose by 7.1 percent in its most recent year; Zale’s same-store sales were up only 1.6 percent. We believe that Sterling used credit – which it can control – to build sales, while Zale, which relies on others to make credit approval decisions, could not use credit as effectively as a marketing tool.