The 2008 holiday selling season was one of the worst on record for the jewelry industry. But a few jewelers bucked the trend and posted a gain in sales. What did those successful jewelers do?

 

With the Valentine’s selling period in full swing, it is time to review one more time what worked – and what didn’t work at Christmas. There are lessons to be learned from jewelers’ successes. By applying those lessons now and over the next few months, jewelers can leverage consumer demand for jewelry.

 

The Good

IDEX Online Research suggests that about 10 percent (maybe less) of all jewelers posted a sales increase in the holiday selling season. A greater percentage (perhaps 20-25%) posted an increase in transactions, even if sales weren’t up. This trend is likely to continue through the first three quarters of 2009, if economists’ predictions turn out to be correct.

 

What drove sales and transactions?

 

• The most successful jewelers reported that they called their best customers by telephone. In each case, they told the customer that they had a specific piece of jewelry for them to view, such as, “Mrs. Gotrocks, I’ve got this great emerald pendant that would look great on you. If you like it, I’ll call Mr. Gotrocks and ask him to put it under your Christmas tree.” Those jewelers who simply called customers and said something like, “We’ve got some great merchandise” did not do as well.
  
  The lesson: Work the phones. Personal communications always works best.

• So-called “annuity” products sold well. Jewelers reported that merchandise such as charm bracelets sold well. Customers bought the bracelets and a few charms, and came back again prior to Christmas to buy more charms. Even though the average ticket is much lower on this merchandise, it created traffic, and it created the opportunity for jewelers to recommend other merchandise. If there is one hot brand we heard time-and-time again, it was Pandora. Pandora worked well for most jewelers during the holiday selling season.
  
  The lesson: Focus on merchandise that will keep customers returning to your store.

• Bridal jewelry remains a favorite. While some jewelers saw the average ticket drop for bridal goods, the core bridal category remained solid. We recently saw a report from a Wall Street analyst who says that when unemployment rises, the number of engagements drop. That’s pure fiction, and is unsupported by historic trends.
  
  The lesson: Don’t neglect bridal jewelry.

• Men’s jewelry was mentioned by a number of jewelers as a strong category. Normally, jewelers think of watches as the primary masculine category; this year, watch demand was weak. However, jewelers mentioned various pieces of men’s jewelry as a stronger-than-average category.
  
  The lesson: Don’t forget your best customers for male jewelry.

• Low-priced gold and silver jewelry sold well. Customers tend to shop for lower price point goods in recessionary times. While low-karat gold and silver jewelry generate a lower average ticket, the margin can be well above average.
  
  The lesson: Meet the customer where they are.

Inelastic Demand

Terry Burman, chairman and CEO of Signet Group, reminded us that his company’s research shows that jewelry demand is relatively inelastic. In other words, people with a propensity to buy jewelry are going to buy it, despite a recessionary environment. They might shop at merchants offering value-priced goods. They might buy less expensive goods at their family jeweler. But Burman’s point is clear: consumers will buy some jewelry.

 

We did hear reports from some jewelers who reported that a few of their best customers did not come into their stores. For example, one jeweler said that none of the car sales people who are in his customer base showed up to buy jewelry in the holiday selling season. Aside from a few categories such as this, most jewelry buyers spent some money – likely much less than last year, though – from their local jeweler.

 

The (Bad) Surprises

There were a few negative surprises, such as the following:

 

• Branded goods, especially well-known better quality branded merchandise, were unexpectedly weak during the 2008 holiday selling season. We think this probably had to do with the higher price points for most of these brands. “Cheap” doesn’t brand well; it sells on price. So, naturally, branded goods tend to sell at the upper end of a jeweler’s range of retail price points.
  
  Long term, we continue to believe that brands will provide more confidence to consumers who buy jewelry. Short term, though, they have proven to be relatively ineffective.
  
  The lesson: Keep those brands. Show those brands. Consumers may not buy them today, but they will remember that you carry them.

• In a stunning reversal of historic trends, high-end jewelry merchants posted notably weaker results than jewelers offering more moderate priced goods. Normally, wealthier clients of high-end jewelers keep spending. But, in the current economic slowdown, three factors came together to hurt wealthy consumers’ demand: a weak stock market, soft home values and lack of credit.
  
  Further, newly wealthy consumers – those with annual household incomes of more than $100,000 – have made most of their wealth from the stock market and real estate, often by leveraging their investments. Not only are they out of leverage (credit), but the core values of their portfolios have dropped. Based on recent estimates, we believe that about three-fourths of the 16 percent of American families who earn $100,000 or more annually are “new wealth.”
  
  The lesson: Consumers with incomes above $100,000 spend far more per capita on jewelry than any other income level. Don’t neglect this core group of consumers with excellent long term potential. Stay in contact with them. At some point, they will loosen their purse strings and reward themselves for their austerity by purchasing a small token of jewelry.