The question is no longer whether the situation in jewelry retailing is difficult, but in what can be done in this respect? What possible measures can be taken to change the situation in the industry? Over the past few weeks, I've had the opportunity to talk with many retailers and those who provide services to retailers in an attempt to understand what is bothering them, what are the difficulties and what generally deprives them of sleep.
Many people talked about the same thing, for example, what role Blue Nile plays in the industry - a role that many consider destructive. Species marketing is another reason for concern. Let's take a closer look at these two issues, which, according to many, are slowly destroying jewelry retailing in the United States.
BLUE NILE
Blue Nile was a rising star and favorite child of Wall Street. The emergence of diamond retail in the online arena should not have surprised anyone. But with the motto "to destroy", which is the driving force behind many start-ups, Blue Nile remained faithful to this approach and really destroyed the retail trade in diamonds.
One such destructive force was the price offered by Blue Nile, combined with their mobile application. It is difficult to sell an expensive product to a prospective long-time buyer who has a smartphone on his hands that compares you with an inexpensive alternative. But let's ask ourselves - what do we sell, is it a cheap commodity? Cheap goods are something that has nothing to do with luxury goods, low prices are for essentials: clothing, food, etc. Luxury items are used as discretionary spending after basic goods. Luxury - this is what gives life "something special", a highlight, above and above something ordinary.
Worse is that Blue Nile has become for many a benchmark in the price. I said that this is worse because the business model of Blue Nile is different from most jewelry retailers - they are distributed everywhere as an online operator, they sell diamonds, and they are betting on the sale of large volumes. For ordinary specialized retailers, the overhead costs for store maintenance are high, they focus on selling jewelry, but in this case everything is slow.
Trying to compete with the prices of Blue Nile is to find yourself defeated. Consider the figures: net sales of Blue Nile in the first quarter of 2015 amounted to $ 106.5 million, and their net profit was only $ 1.2 million. Blue Nile operates at very low rates of profit: their operating income for the quarter was $ 1.9 million, a margin of 1.8% of net sales. For greater visibility, the net profit was 1.1% of net sales. No real retailer is able and not interested in such rates of profit - and they should not be interested.
Considering all the psychological space that Blue Nile occupies in the minds of the owners of real stores, it should be remembered that jewelry sales in the United States in 2014 reached a total of $ 68.83 billion. The sales of Blue Nile in the US amounted to $ 392.4 million - only 0.6% of the sales of precious jewelry, occupying a smaller market share than most people believed.
I do not belittle the role of Blue Nile in the market. They have made changes and affect the behavior of the consumer. It can be argued that Blue Nile prices pull you into a price war that you can only lose. So what if you focus your efforts on maintenance and design? I talked to one designer retailer who lowered the price of diamonds to make them closer to the prices of Blue Nile, and his business grew by more than 20% due to the fact that he focused his attention on design, for which he takes decent money. Is not it more worthwhile than just thinking about it?
SPECIES MARKETING
Finally, after five or six years, species marketing should return. At the current stage, it looks like the budget is not large, but let's wait and see what happens when the diamond miners and other companies put their efforts and see what difference this will create.
A NOW ABOUT HIDDEN ISSUES
Obviously, retailers have more than Blue Nile or marketing. For example, high prices are considered. Contrary to expectations, the prices of gold, silver and diamonds have declined in the last couple of years, and diamond producers have accordingly lowered their prices accordingly. The jewelry producer index (Jewelry Producer Price Index) shows that in April of this year, prices on average returned to their price levels, which were in December 2010.
There are several real issues that need to be addressed. But some problems remain hidden: for example, stocks. A comparison of stocks relative to sales shows that they are not commensurate. Many independent retailers have cut diamonds "Princess" and "Marquis", which are among the stocks for more than two years, sometimes longer. This links financial resources. These stocks must go.
Probably, it is possible to conduct a large sale and offer them at a purchase price in order to free up these resources and create a movement of goods sold at a loss in order to attract buyers. Or, if worried about the long-term impact of large discounts, why not create earrings with small inserts or small pendants with these diamonds and do not offer them as a second additional product at an affordable price for each purchase for some amount of $ XXX or higher. This will help release the safe from them and free up cash for more successful acquisitions.
TOO MUCH TOTAL
When I first started working in the diamond industry, I usually went to several jewelry stores, to feel the market. It offers a lot of different products, and there were so many that after a while I felt confused. Very quickly, all the diamond rings already looked the same. Not that retailers offered a great variety, offered a lot of products. There were too many products, and the differences between them were too small. It always bored me. Just think, what kind of experience do we offer consumers - is it impressive or discouraging?
It is good to have a huge variety available to satisfy the taste of the buyer. Just do not expose everything in the window! Reducing the accumulation of random selection and every jewelry free space will give the potential buyer, the first who came to the store, the ability to evaluate each product. The whole process of selling can become much easier (at least for people like me ...).
MODEL OF H & M COMPANY
All this leads me to this new era of retail. It used to be, if you bought a pair of Levi's jeans, they were worn for many years, in fact, for decades. It was great for my father in the 1960s, when he was a student working as a gasoline tanker at a gas station to make ends meet. He needed several working jeans, and they were worn forever, which was fine for him. My father did not belong to the third millennium generation.
There is much talk about the third millennium generation, differentiation, marketing and luxury goods. But, maybe, we need to approach this from a completely different angle. There are a number of successful retail models that can be a source of inspiration for the jewelry industry of the United States.
I call it the H & M model (named after the Swedish company Hennes & Mauritz, the largest clothing retail chain in Europe), but there are many other examples of retailers that are doing about the same: they offer good-quality products of acceptable quality at a very affordable price . H & M and similar stores offer something that is perfect for the coming year. Next year - throw away the old, come and find yourself new designs of good quality and at affordable prices. This is the business model.
This idea is very simple: almost everyone wants something new, which looks great and costs so much that they will not be bothered by the fact that they will not wear it next year. This allows them to look completely fresh and new in the next year.
I have a friend who jokes that such things are good until the first wash - they are not worn for very long. I do not advocate the creation of jewelry, on the contrary. Jewelry should be of good quality, and the design should be excellent. Lighter items with matching diamonds will lead to prices that are available in the category of precious jewelry.
I believe that these products should be attractive, easy to wear, and if the owner of these jewelry leaves them in the jewelery box for a couple of years, it will not make anyone worse, especially jewelry manufacturers and retailers, because jewelry owners, Probably return to the store and buy a new piece of jewelry, also a good design and at an affordable price.
http://edahngolan.com/the-jewelry-retail-challenge-think-hm/?utm_source=Edahn+Golan+Diamond+Research+%26+Data+Newsletter&utm_campaign=febb08ae5d-RSS_feed_newsletter_campaign3_12_2015&utm_medium=email&utm_term=0_3db00ffc52-febb08ae5d-319355397
No comments:
Post a Comment