Retail Surveys
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Analyzing JA's Cost of Doing Business Survey
By Michelle Graff
October 20, 2009
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| The 2008 results marked a new low for Jewelers of America’s Cost of Doing Business Survey. |
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New York--After slipping only slightly in 2007, retail jewelers saw sales take a sharp turn for the worse in 2008, Jewelers of America’s (JA) 2009 Cost of Doing Business Survey shows.
The annual benchmarking survey revealed that the median--the mid-point for the data set, not the average--sales decline was 3.5 percent, compared to a 0.3 percent dip in 2007.
It marked a new low for the JA survey, with the association noting upon the survey’s release in mid-August that “industry sales declined materially for the first time in 20-plus years. Not even the decade’s dot-com collapse was as difficult.”
The survey garnered 687 responses, up from 384 the previous year, a participation rate that may have been boosted by being offered in conjunction this year with National Jeweler’s America’s Best Jewelers Benchmarking Survey for the first time.
Despite the survey’s response rate, some questioned the results--or more specifically, why they weren’t worse. The 3.5 percent sales slip sounded too modest to retailers who saw sales sink 20 percent or more, or at least that was the take of the numerous readers who commented on NationalJeweler.com’s story about the JA survey after it was initially published.
Consider some unscientific-yet-entirely plausible input from industry analyst Ken Gassman and Jeff Corey of New England chain Day’s Jewelers: Both suggest that retailers might have opted to skip the survey this year because of their bleak sales.
“There’s no question in my mind that the people who completed the survey were those that had better seasons than most,” says Corey, who says he almost didn’t complete the survey himself because of his stores’ 13 percent drop in sales. “A lot of jewelers who typically would complete this survey did not because they were embarrassed about their numbers.”
A case of the declines
Breaking the data down by store type shows that no shops were immune to the economic ills of 2008.
Chain stores, the survey shows, fared the worst. After seeing sales increase by 2.5 percent in 2007, chains watched their sales plummet by 13.2
percent in 2008.
Gassman says the drop is the result of mall apathy.
“Chains typically have their stores in malls, and mall traffic has been down dramatically over the year,” he says.
Independent high-end stores and designer/artist/custom shops also received a wake-up call. After watching their sales increase 3.5 percent in 2007, sales for independent high-ends were down 1.3 percent in 2008 while designer/artist/custom shops saw sales slip 0.8 percent in 2008, after being up 6.1 percent in 2007.
Girardin Diamonds & Fine Jewelry in Valdosta, Ga., was actually able to buck the trend, says partner/owner Paxton Morris, with sales increasing 5 percent in 2008.
He attributes the increase to a number of big-ticket bridal and Rolex sales in 2008.
“We don’t count on those as a way to survive,” Morris says, but Morris stops short of saying that the sales increase was simply a matter of luck.
Girardin makes a habit of keeping track of customers’ milestones, and staffers do not hesitate to contact customers well ahead of events such as 10-year, 20-year and 25-year anniversaries.
“A couple of these [sales] we had been discussing for a matter of years,” Morris says.
At independent mid-range stores, sales continued to slide, dropping 5.5 percent in 2008 after a 1.7 percent slide in 2007.
Jon Migdow, owner of TDC Jewelry in Buffalo Grove, Ill., says his sales were down around 5 percent in 2008, and business, not surprisingly, hasn’t been any better in 2009.
“This year has been horrendous,” he says. “I’m sure there are pockets of business here or there but I think the jewelry industry certainly has taken it on the chin at every level, from manufacturing to retail.”
At TDC, customers are buying less frequently, choosing less expensive items when they do make purchases and are skipping fashion pieces almost entirely.
“We just don’t see that layer at all this year, that ‘just because’ purchase,” Migdow says.
According to the survey, diamond jewelry is the top-selling category, commanding 35 percent of overall sales, down from 38 percent in 2007.
After diamond jewelry, retailers sell more loose diamonds (holding steady at 14 percent), colored stone jewelry (9 percent, down from 10 percent in 2007) and repairs (10 percent, down from 11 percent in 2007) than anything else.
The only category showing a significant gain was watches, which rose from 3 percent to 6 percent of sales.
Managing margins
While sales slipped significantly in 2008, margins for all stores were down only slightly from 48.7 percent in 2007 to 48.6 percent for 2008.
Independent high-end stores saw steeper declines, with median margins falling from 45.2 percent in 2007 to 43.5 percent in 2008.
Margins also declined for designer/artist/custom shops, from 50.7 percent in 2007 to 49.1 percent in 2008.
At Girardin, Morris says margins were particularly lower for diamond pieces, due to more “aggressive” pricing on the jeweler’s part.
“Consumers are more so than ever looking for discounts and deals,” he says.
The survey revealed that gross margins fell in nearly all 14 categories, save estate/antique jewelry, for which margins rose from 47.2 percent in 2007 to 49.6 percent in 2008.
The largest drops occurred within the cultured pearl jewelry category, for which survey respondents reported margins of 53.2 percent, compared to 56 percent in 2007, and timepieces and watchbands, where margins fell from 47.9 percent in 2007 to 42.6 percent in 2008.
Independent mid-range stores saw margins slide only slightly, from
50.8 percent in 2007 to 50.4 percent in 2008.
The same held true for chains, for whom margins dipped from 46.7
percent in 2007 to 46 percent in 2008.
Migdow says profit margins at his Illinois store have held steady and that he refuses to resort to markdowns just because volume is down.
“I just don’t know how you can surrender both,” he says. “If you give it away for nothing, you’re not going to be in business for too long. You have to compete but, at the same time, you have to sell the value of your service, your store, your image, the things that make your staff special, that adds value to your product. That’s what it’s all about.”
This story first appeared in the October print edition of National Jeweler.
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