Retail Surveys
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National Jeweler Holiday/Q4 Inventory and Marketing Survey
Jewelers skittish on holiday spending
By Michelle Graff
July 27, 2009
Eight months into one of the bleakest years in recent retail memory, jewelers--just like their customers--are hesitant to spend money on anything that isn't a sure bet. Keeping inventories lean, they're investing in recession-proof bridal and lower-priced jewelry, such as sterling silver, and making sure every marketing dollar they spend will count.
National Jeweler's exclusive Holiday/Q4 Inventory and Marketing Survey digs deep into retailers' plans for what could be another slow holiday season.
In a year when the bleak state of the economy has dominated headlines, it is no surprise that jewelers are neither filling their display cases to the brim, nor firing up their fourth-quarter marketing engines.
Unless there's an economic miracle on Main Street sometime soon, the 2009 holiday season is likely to be a scaled-back affair, according to the results of National Jeweler's exclusive Holiday/Q4 Inventory and Marketing Survey, 2009. Of the 81 retailers who participated in the survey (notably fewer than in years past), a full 86 percent reported that their overall inventory for the fourth quarter would be the same size or smaller than last year.
This is up from 2008--a year in which display cases weren't exactly spilling over with goods--when 71 percent of those surveyed said they would have flat or smaller inventories. In the 2007 survey, 53 percent were going flat or smaller when it came to stocking their cases.
Marketing spend also is taking a nosedive for the end of 2009, the survey finds.
Of those surveyed, 82 percent reported they would be spending the same or less on marketing as last year.
In 2008, only 73 percent reported a flat line or downturn in their marketing budgets, and that number hovered at 62 percent in 2007.
Despite the slide, retailers still seem to know what works best for their stores and, perhaps more importantly, they say they are aware of what doesn't.
Using this information, they are charging ahead into an uncertain holiday season, hoping for the best.
At David Harvey Jewelers, with stores in Norwalk and Darien, Conn., Jeff Roseman is being a bit more cautious with his marketing and inventory spend, but he is also being careful not to sacrifice his image in the retailer's affluent communities located just outside of New York City.
"I'm optimistic, but I'm also a realist," Roseman says. "I'm hoping we still present ourselves to the public as being the best choice."
Skittish about stocking up
A closer examination of the survey results shows a dramatic shift in retailers' attitudes toward inventory.
The greatest percentage of respondents, 45 percent, said their overall inventory for the fourth quarter would be slightly less than last year, up from 25 percent who gave the same response in 2008.
Meanwhile, the percentage of those who will maintain the same-size inventory as the previous year fell from 37 percent in 2008 to 25 percent in 2009, and the percentage of those planning on having significantly smaller inventories nearly doubled, from 9 percent in 2008 to 16 percent in 2009.
Larry Burland of Burland Jewelry Center in Phoenix, falls into the latter category.
Looking closely at his sales figures for 2008 and the first five months of 2009, he says he can't bring himself to buy much.
"The level of retail activity is not there," he says. "It just doesn't justify having more inventory than is required. I expect my sales are going to be down for 2009 somewhere in the neighborhood of 25 percent."
Burland says, however, that he predicted sales would start dropping off in 2007 and began scaling back his buying then.
Thomas Wright of Wright's Jewelers in Lincoln, Neb., also won't be stocking up this holiday season but, then again, he never does.
Wright buys as needed for his store, doing custom-design work by request, rather than taking a chance on merchandise that might not sell.
"We just have never gotten into major inventory ownership," he says. "If I'm going to gamble, I'm going to go to Vegas and have fun doing it."
He says too many jewelers today feel that owning inventory is the way to make sales and have reached a point where the word "overstocked" is an understatement in describing their stores. In Wright's opinion, the lower inventory levels revealed in the survey reflect wiser thinking.
"I think that's a good trend in the business," he says.
Minimized marketing
Retailers are taking the same minimalist approach to marketing this year, survey results show.
On par with results from 2008, retailers generally spend about 3 to 5 percent of their revenues on marketing, and the greatest percentage (47 percent) devote 25 to 50 percent of that money to advertising and other efforts in the fourth quarter.
However, the greatest percentage of respondents this year (30 percent) said they would be spending significantly less on marketing, up from only 11 percent who were planning a big drop in 2008.
Twenty-seven percent reported they would be spending slightly less than last year, and 25 percent reported planning to spend the same amount of money.
Retailers planning to spend slightly more totaled only 17 percent, down from 23 percent in 2008, and only 1 percent planned to spend significantly more, down from 3 percent in 2008.
At Walden's Jewelry in Omaha, Neb., Frederick Walden says his fourth-quarter marketing spend will be down about 25 percent, as his store cuts out advertising vehicles that are no longer working; namely, newspaper ads and a listing on YellowPages.com.
"A lot of people I know who own businesses have been doing the same thing," he says.
This year, Walden says he will focus on doing direct mailings to customers, with an eye on targeting the high-paid professionals among his customer base, such as doctors and lawyers.
"We're trying to step back, like in the old days, reach out to professional people who want that special little gift or service we can give them," he says.
Walden isn't alone in relying on direct mail to reach customers: Despite modern technology that allows messages to be sent out to thousands in a matter of seconds, the greatest percentage (27 percent) of retail jewelers surveyed still rank direct mail as the most effective way of generating sales and reaching customers.
Second to direct mail in perceived effectiveness is print advertising, cited by 20 percent of survey-takers.
Roseman of David Harvey Jewelers says the fourth-quarter, direct-mail catalog he launched more than a decade ago is still his best advertisement.
"It's uniquely ours and defines our brand image," he says.
Filled with photos of the store's brands and a listing of its services, Roseman says customers bring the catalog in all year long to fill gift requests for birthdays and other special events.
"This is a powerful advertising tool," he says. "I've never had anything with such a long shelf life."
Another effective advertising vehicle for Walden's Omaha store is PBS, though, overall, television advertising seems to be losing steam among retailers.
Only 6 percent of those surveyed picked TV/cable advertising as the most effective way of generating sales and reaching customers, down from 13 percent in 2008.
Walden also says that radio spots on local stations targeting the 18- to 30-year-old male demographic help him sell bridal.
"That's what brings our diamond engagement ring [sales] in," he says. "We try to use some of the stations that I don't like to listen to."
In the survey, 10 percent cited radio ads--tied with Web/e-mail and other [for which most wrote in "word of mouth"]--as the third best way to reach customers.
While the percentage of those who find Web advertising effective doubled between 2008 and 2009, jumping from 5 to 10 percent, only 1 percent of respondents reported that social networks/blogs, such as Facebook, have been most effective at reaching customers.
Among those interviewed by National Jeweler, a few say they are giving social networking a shot but feel it is too early to gauge the tool's success or failure rate.
"I think it's way early," to tell how effective social networks can be, Roseman says. "I'm not saying that it's going to generate gobs of money for us, but the people that are really into Facebook like to know that you are savvy enough to be there."
Rising to the top
While retailers are trimming the fat when it comes to both inventory and marketing, they still know what they need to buy, and what they need to sell.
Those who participated in the survey reported they would be stocking more sterling silver jewelry than anything else.
In analyzing retailers' inventory intentions in 11 categories, sterling silver stands out. A total of 72 percent of participants reported they'll be stocking more sterling silver jewelry this fourth quarter, with 48 percent saying they'll stock slightly more and 24 percent saying they'll carry significantly more.
Thirty percent said they would be upping their inventory of custom jewelry in the fourth quarter, followed by loose diamond/bridal inventory and diamond jewelry (for which 23 percent of respondents planned an increase). Twenty-one percent of respondents each said they would increase their designer and private label jewelry.
Burland says he started stocking up on sterling silver jewelry about two years ago and that cuff bracelets crafted of the metal, in particular, are popular sellers in his store.
He is also increasing his inventory in colored-gemstone jewelry and pieces crafted of a mix of karat gold and sterling silver.
These pieces carry a price tag that currently appeals to his customer base, which he describes as solidly middle class.
"My market is not the credit market nor is it the ultra-high-end market," Burland says.
Asked which products they will market most heavily this holiday season, the greatest percentage of respondents (29 percent) said diamond jewelry, followed by other (11 percent). Loose diamonds and custom work came next (each 10 percent), followed by bridal jewelry and designer and/or jewelry brands (each 9 percent).
Colored-gemstone jewelry and sterling silver or other low-priced items will be the primary focus for 8 percent, while fewer jewelers are planning to promote private-label jewelry (4 percent), watches (2 percent) or specific diamond programs, like Three-Stone, Journey or Right-Hand Ring (1 percent).
Jim Swords of Swords Jewelry in Guntersville, Ala., says diamonds are definitely at the top of his holiday marketing list, noting that the stones account for 60 percent of his business.
He says his strategy in selling diamonds has been to stock the work of smaller designers that are not carried by chain jewelers at the nearby mall.
"Let's face it: whatever we're doing, diamonds are our business," Swords says. "If we don't market diamonds, then we're not going to keep our volume up."
Events, not incentives
Events--whether it's a customer-appreciation holiday party or a single-vendor trunk show--are another way jewelers lure customers.
While the greatest percentage of retailers, 35 percent, reported not hosting any in-store marketing events during the holiday season, those who reported hosting two or more events during the holiday season totaled 41 percent, up from 35 percent in 2008.
Swords says his main event every holiday season is an estate jewelry trunk show.
The retailer's strategy is to advertise the trunk show via direct mail, expose its mostly female customers to this type of merchandise by offering it at reduced prices and then hope that the ladies send their husbands in to buy more at regular prices.
"We do really well with that," Swords says.
Another trend that emerged when analyzing the survey results is the staying power of sales, which have been the story of the year for many retailers in these troubling economic times.
When asked what incentives they will use to attract customers during the holiday season, 51 percent of respondents mentioned that they would be hosting holiday sales. Twenty-four percent said that such sales would be the most effective marketing tool for closing the deal.
Jewelers interviewed by National Jeweler had mixed reactions on holiday sales.
At Walden's Jewelers, Walden says he uses simple signs with black-and-white lettering to advertise sales on diamonds and gold in his store, which works "beautifully."
"I think sales are very good," he says.
But Wright and Roseman shun public sales, only offering savings discreetly to long-standing clients.
"That's not our style," Wright says when asked about sales. "We would never do that. In 30 years, we've never had a public sale."
Roseman agreed, saying the closest thing to a sale at his store would be the "buying opportunities" he creates for certain customers via one-on-one appointments or small special events.
But a 25- to 50-percent-off sign in front of David Harvey Jewelers? No way.
"That's my job in merchandising the store, in getting the right price points so I don't have to resort to that," he says.
To see the full results of National Jeweler's exclusive survey, download Holiday/Q4 Inventory and Marketing Survey.
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