IDEX Online Research: Chain Jewelers Step-Up Holiday Season Marketing

In an effort to boost sales and profits, jewelers’ advertising is aimed at getting people into their stores. Three themes appear to dominate jewelers’ promotional programs this year:

• Price-based promotions
• Product-based promotions
• Emotional “tug-at-the-heartstrings” promotions

Based on their marketing programs, these publicly held companies have disclosed their target sales gain for the 2005 holiday selling season, as follows:

• Finlay – Same-store sales gain of 2.5-3.0 percent.  This is well ahead of the +0.6 percent same-store sales gain that the company has posted year-to-date.
• Zale – Same-store sales gain of 2-3 percent.  For the first three months of Zale’s current fiscal year, same-store sales were down 1.2 percent.  Thus, the holiday sales budget, if achieved, will represent a substantial turn-around from current sales trends. 
• Sterling – No stated goal.  For the nine-month year-to-date, Sterling’s same-store sales are up 7.6 percent; in the most recent quarter, same-store sales advanced by 6.6 percent.  With relatively easy comparisons against last year (+4.9 percent November and December; +4.7 percent November, December, and January), we would be disappointed to see a same-store sales gain of less than 5 percent at Sterling. 
• Tiffany – Management says its fourth quarter same-store sales goal is in the mid-to-high single digit range; we interpret this to mean a range of +5 percent to +8 percent.  Year-to-date, Tiffany’s same-store sales are up 8 percent, so it should not be too difficult to achieve its fourth quarter sales goal. 
• IDEX Online Projected Sales Gain – IDEX Online Research remains comfortable with our current projected sales gain of +3-4 percent for the holiday selling period.  However, on a year-to-date basis, U.S. jewelry sales are up a very modest 1.8 percent. 
• U.S. Retail Sales – While the National Retail Federation recently raised its sales estimate for the holiday selling season to +6 percent from its former +5 percent projection, most consensus forecasts are in the +4-5 percent range.  Either way, jewelry will loose market share, if it under-performs other retail categories. 

The following is a summary of each of the major publicly held companies’ holiday marketing plans: 

Sterling Jewelers – Kay, Jared, and the regional brands – Sterling generates about 40 percent of its annual sales in the fourth quarter; thus, the all-important November-December period is very important for the company.  The following programs are designed to boost sales and profits at Kay, Jared, and the regional brands: 

• Overall marketing spend, as a percentage of sales, will be up slightly over last year.  This means that the overall marketing budget in dollars will be up materially due to strong sales growth over the past year. 
• Television impressions will be higher due to increased spending for advertising on this medium.  New commercials will capitalize on the highly successful “Every Kiss Begins with Kay.” 
• The company will also advertise on radio and in newspapers.
• Local radio advertising impressions for the regional brands have been maintained.  Television is being tested in one J.B. Robinson market. 
• Merchandising initiatives include the following:
• Leo, loose, and solitaire diamonds will be promoted.
• Kay has an enhanced diamond offering.
• The fashion gold jewelry assortment has been increased. 
• Luxury watches will be promoted, especially at Jared.
• The level of local television advertising support for Jared during Christmas is being increased, and will cover 100 percent of the company’s stores this year for the first time.
• Sterling noted that its training has been at record levels this year.  The goal:  increase the average transaction. 

Finlay Enterprises – Leased fine jewelry departments in leading U.S. department stores – While Finlay sells “fine jewelry”, it is fashion-oriented.  With an average price ticket of about $200, the company caters to consumers seeking fashionable merchandise in department stores.  During the 2005 holiday selling season, the company will be focusing on the following strategies to boost sales:

• Merchandise initiatives
• Diamond bracelets
• Diamond hoop earrings
• Three-stone jewelry
• Yellow gold jewelry
• Right-hand rings
• Diamond stud earrings
• Silver jewelry with semi-precious stones and diamonds
• Big, bold colored stone jewelry
• Moissanite jewelry
• The company plans a particularly intense marketing program in the 10 days leading up to Christmas.  Further, it will increase its use of direct mail.
• Store staffing plans have been implemented to boost sales.

Zale – Brands include Zales Jewelers, Zales Outlet, Gordon’s Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewellers, Mappins Jewellers, and Piercing Pagoda – Marketing and advertising plans for Zale’s brands include the following:

• Holiday television advertising started in early November.  There is a new voice, new music, and a new look, since the company recently hired a new advertising agency.  The message, “Zale is the solution for all of your gift-giving needs” is designed to drive traffic and communicate a message of style to a fashion-forward customer.  Zale’s television will create about four billion impressions during the holiday selling season, according to management.
• Zale will use fewer newspaper ads and inserts.
• Zale plans to step up its use of targeted direct mail.  In addition, it will utilize regional versions of catalogs.
• For the first time, Zale ads will be in fashion magazines such as Elle, InStyle, Vogue, and Marie Claire.
• Zale will utilize poster ads on buses in certain markets.
• Merchandising initiatives include the following:
• Big bold color stone rings
• Three-stone rings, pendants, and earrings
• Right-hand rings
• Yellow gold jewelry
• Proprietary collections and designer collections
• Big hoop gold earrings at Piercing Pagoda, as well as colored stones, CZ, and semi-precious stones, diamond accents, and yellow gold
• Overall, advertising expenditures will be up 60 basis points (as a percentage of sales) versus last year.
• In addition to holiday-specific marketing plans, Zale has implemented initiatives especially in its previously under-performing Zales Jewelers division.  For example, it is upgrading its top 600 best-selling products to provide better quality and value for its customers. 
• New sales associate training programs have been implemented.

Blue Nile – While Blue Nile management did not provide any significant detail about its marketing plans, they said that the average transaction value was expected to increase, primarily as the result of a greater mix of higher-value merchandise.  Last year, the average ticket was $1,283 during the fourth quarter, the lowest level of the year.  In the most recent quarter, Blue Nile’s average transaction was an astounding $1,773.  We would expect the average ticket during the December quarter to be somewhere between these two figures, probably at the lower end due to sales mix.  In addition, Blue Nile may raise its advertising-to-sales ratio to 4.5 percent from its current 4.0 percent level.