Latest News
|
|
|
Look around, jewelers: The sky isn't falling
By Jan Brassem
April 06, 2009
|
| Jan Brassem is managing director of Brassem Global Consulting, a global sourcing and mergers and acquisitions firm. |
|
|
After hearing the depressing economic news coming out of Washington, reading the "downer" articles in jewelry trade journals and even listening to my kid's grade school gym teacher gripe about financial issues, I cautiously stuck my head out the door recently to see if the sky was, indeed, falling.
Nope, but you'd think the bank would show up at any minute to foreclose on our house. (We own the house, free and clear, but I'm not sure that it would make any difference.)
I've talked to retailers across the country--jewelers among them--to get a feel for the retail industry in general, and the jewelry retail business in particular. My conclusion? The retail picture is awful. Jewelry retail numbers are worse: Sales are way off and margins--if any--are thin. There's nothing but gloom, whining and groaning. But then again, it's still early.
Free jewelry business and economic advice has become so plentiful that much of it solves problems you didn't know you had, in ways that you don't understand. Most of it, of course, isn't worth the price.
I'd like to add some more free advice to your collection, but I bring to the table a couple of new elements, including: a) My personal experience of managing a jewelry company during a recession and b) a graduate business school education. (But I warn you, most jewelers tell me one offsets the other.)
History of Recessions 101
It shouldn't be a surprise to anyone that the U.S. economy, or any economy for that matter, is subject to fluctuations. When the "business cycle," as it is called, expands, income and employment levels grow, leaving Americans quite happy.
On the other hand, when the economy contracts for three successive quarters (as it is doing now), the economy is in recession. Jobs are eliminated, and Americans start to worry. This expansion-to-contraction cycle takes, on average, seven-plus years. The federal government can, and does, try to shrink the time between expansion and contraction, but it cannot, no matter how hard it tries, eliminate that period of time altogether. Business cycles are a fact of life.
There have been several recessions since the mother of all contractions, the Great Depression of 1929. The recession that occurred during the Jimmy Carter and into the Ronald Reagan administration from 1980-1982, was the worst since the Depression, and also the most agonizing--a painful distinction. (Interest rates reached 18 percent, and gold, in 2009 dollars, topped out at more than $1,100 per ounce.) That sad banner still stands, regardless of what the third-grade teacher thinks.
This begs the question: Since seasoned jewelers have navigated the recession of 2001-2003, why were so many unprepared or shocked by the current recession? The answer is simple: They didn't learn the lessons of 2001-2003, and worse, they have been running their companies as status quo. Here are some factors they should have considered:
--Cash is king. Jewelers didn't plan-or, in other words, save--for a rainy-day economy. Afflicted by what I'll call the "La-Di-Da Syndrome," many jewelers interpreted the good times to mean that they would not fall prey to another business cycle. Therefore, they did not arrange "stand-by" lines of credit with a financial institution. Apparently, for many jewelers, little--or no--cash was saved for a rainy day. Evidently, they forgot the management lessons of 2001-2003.
--Times have changed. The business landscape has changed since 2001-2003. Jewelers have ignored the new channels of distribution that have emerged, such as home jewelry parties, direct mail, Web malls and the like. Branding has now become a questionable marketing tool. (Read Branding Only Works on Cattle by Jonathan Salem Baskin, Hachette Book Group, USA 2008.)
--The two-ton gorilla. The Internet has become a major marketing opportunity, yet jewelers--by and large--were late to the game in developing a Web presence.
--Be nimble, be quick. Jewelers didn't have--or didn't use--their own economic intelligence system. Many were economically blind-sided. Had they listened to their own business network (The Wall Street Journal, leading economic indicators, gas prices and all the rest), jewelers might have been able to see the recession coming and taken quick action by decreasing expenses and changing market direction.
--Sales and profit erosion. When sales and profits shrink, it's time do something--anything. Forget business as usual. Find cheaper (foreign?) sources of supply to quickly hold margins, carry a new product category, market to a new demographic, join forces (create a joint venture) with another company. The list is long.
--The worst thing to do. What's the most important lesson I learned when my company was in the middle of the 1980s recession? I'm glad you asked. What I did, and would never do again, was feel sorry for myself, and moan and groan--a lot. Other than that, I did nothing. I froze. I was so worried, so concerned, so emotional that I lost sight of the problem at hand. I let my business lead me instead of me leading my business. Never again!
Editor's note: This story first appeared in the March 2009 print edition of National Jeweler. Look for more of Brassem's columns in National Jeweler's Your Store section.
|
|
More Brand Profiles
A night out at the New York City Ballet or Jazz at Lincoln Center is bound to be memorable, but Movado hopes to help make it more so with a new version of its iconic "Museum" watch. Read More
|
Small multi video player located on right rail of NJN site
|
Save
E-mail
Print
Most Popular
RSS
Reprints
