Retail Surveys
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2009 Year-end sales survey: Bouncing back
By Michelle Graff
February 01, 2010
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| Daniel K stacking bands from the "Pret-a-Porter Collection" with diamonds and rubies, tsavorite garnets, blue sapphires, yellow diamonds and orange sapphires; suggested retail prices from $3,000 to $10,505. DanielK.net |
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Editor's Note: This story first appeared in the February issue of National Jeweler. Click here to download the full survey results.
Managed to make it through last year without a trip to bankruptcy court or a rushed retirement? Congratulations, because 2009 was a year in which only the most agile jewelers--those who could coax in gun-shy consumers with one hand, and stave off competition from liquidating rivals with the other--could have endured.
To the survivors went the spoils of an improved holiday season, as the results of National Jeweler's exclusive 2009 Year-End Survey--and reports from jewelers nationwide--reveal.
Those wishing to know what 2009 was really like for many jewelers around the country, might do well to talk to Andy Ramirez, a managing partner at Grayson Allen Fine Jewelers in Southlake, Texas, who gives an accurate--if grim--summation.
"The first half of the year, we basically could have not been open," Ramirez says.
For many, 2009 finished off far better than it started, thanks to holiday results that were at least decent, but by the time the holidays rolled around, the fiscal-year damage was done. Of the 358 retailers who took National Jeweler's exclusive 2009 Year-End Sales Survey, 59 percent reported their same-store revenues for 2009 were flat or down and, among those, the greatest percentage, 34 percent, claimed store sales had dropped by more than 10 percent. Notably, these declines came on the heels of a 2008 that was hardly great.
Last year, 74 percent of retailers surveyed reported same-store sales for all of 2008 were flat or down as compared to 2007.
Still, those with the wherewithal to forge ahead into 2009 after a brutal 2008 gained some sales momentum in the second half of the year.
Of those surveyed, 53 percent reported that their same-store sales were up in November and December, with the greatest percentage, 33 percent, reporting that they welcomed increases of 10 percent or higher.
While these gains may seem minimal because of the comparison to a dismal 2008 holiday--when seasonal sales fell for 80 of percent of respondents --it was enough to kindle some hope.
Sixty-one percent of respondents described themselves as being either somewhat (47 percent) or very optimistic (14 percent) about 2010.
Kenny Gordon, owner of Kenny G and Company Fine Jewelers, with stores in Reno, Nev., and Citrus Heights, Elk Grove and Roseville, Calif., says that in retrospect, 2009 was a necessary exercise in that it forced him to figure out how to trim the fat off of the business, in terms of both inventory and store personnel.
"The outlook is positive," Gordon says of the future. "We'll probably, in the next two to three years, be more profitable than we were during the 2005, 2006 years."
The confidence equation
So what exactly caused the notable shift in consumers' attitudes toward spending at the end of 2009? The answer seems to lie not in complicated economic equations but, simply, in how stable consumers perceived the world around them to be.
When asked what factor most impacted their holiday sales, 34 percent of jewelers surveyed reported that it was lack of consumer confidence, even among those who had neither lost jobs nor seen the values of their homes plummet.
Geography also played a big role for retailers, particularly in states such as California--where unemployment hovered at 12.3 percent versus the 10 percent nationwide average--and for those jewelers who were located near stores that were liquidating.
Philippe Buche of St. Regal Jewelers says holiday sales were down as consumers in the store's hometown of Redwood City, located between San Francisco and San Jose, Calif., struggled to rebound from the housing market collapse.
After a brief burst of bridal sales took place early in December, business at St. Regal slowed in the second half of the month, as even sales for tried-and-true classics such as Journey diamond jewelry and circle pendants fell.
"Those have always been mainstays and they didn't do anything," Buche says. "I didn't sell one. People were hesitant to spend because of the economy."
Others lost business to nearby competitors who were closing up shop and slashing prices.
Ramirez says consumers didn't have any trouble spending in Southlake, Texas, but they chose to do so at nearby stores that were going out of business: a Bailey Banks and Biddle and an independent, both of which had reduced prices by 40 to 80 percent.
Grayson Allen's sales were ultimately flat for the year as a whole, but the store finished the holiday season 20 percent up, a figure that Ramirez said could have been higher had the store not been competing with such extreme discounting.
"A lot of the people who would have walked in here didn't because of those businesses," he says. "I think it could have been better had those two stores not been going out of business."
In pinpointing the biggest factor impacting their holiday sales, 24 percent of respondents said it was their own marketing efforts, in-store events and strong sales tactics that boosted the bottom line, while 6 percent claimed they actually benefited from competitors going out of business.
And quite a few survey-takers noted that it was not a lack of consumer confidence but rather its return that helped make the holidays bright.
At Wright's Jewelers in Lincoln, Neb., Thomas Wright says holiday sales were up 12 to 15 percent over 2008.
He says last year was one of the worst holidays in the store's 30-year history because his customers were scared to spend, even though the Midwest city where his store is located was somewhat shielded from the recession. This year, the fear subsided.
"Even though they had the same money, they weren't about to spend it last year," Wright says. "This year, we did see a much happier client than we did last year."
Kenny G and Company's Gordon also noted a more upbeat mood among customers, with sales up in three of his four stores.
"I think people took a deep breath and said, 'Things are going to be OK,'" Gordon says.
Price-point declines
While more consumers opened up their wallets this holiday season, it seems they weren't all pulling out the big bills.
A total of 68 percent of respondents reported that their average price point per item was either flat or down, the second year of substantial declines in average tickets. Fourteen percent reported flat prices, 32 percent said average prices were down slightly and 22 percent said they fell significantly.
In 2008, 71 percent of respondents reported their price points were down slightly (30 percent) or significantly (41 percent) as compared to 2007.
Ray Holliday, owner of Holliday Jewelry in Klamath Falls, Ore., says the demand for lower-priced jewelry started to surface in his store around 2007.
Consumers would enter the store asking for items priced around $100 at a time when the store barely stocked any items in the $200 to $300 range.
"We were caught flat-footed," Holliday says.
In response to the demand, the storeowner shifted his merchandise mix to include more affordable price-point pieces.
The result: Holiday sales were up 10 percent and foot traffic increased 27 percent. Among Holliday's hot-sellers was Pandora, the popular line of personalized bead jewelry that higher-end jewelers have been (in some cases, reluctantly) adding to their showcases.
Component bead jewelry lines such as Pandora, Chamilia and Trollbeads were write-in favorites among survey-takers who listed specific products that stood out this holiday season.
Holliday says he started carrying Pandora in September and that by December, the collection comprised 7.75 percent of his total sales.
"If I didn't have Pandora, my [sales] increases probably would have been less," he says.
Still, the Oregon jeweler understands why some jewelers would question whether bead jewelry really belongs in the same store as pieces crafted of platinum and diamonds.
"That's their choice to make," he says of those who won't stock bead jewelry. "I was there for a long time. I thought it was a fad that was going to go away but I changed my mind."
At Humes Jewelers in Hopkinsville, Ky., Rodney Humes estimates he sold $100,000 worth of Pandora in December, boosting the bottom line for that month by 30 percent.
"We were two to three deep on the Pandora counter open to close every day," Humes says.
Another write-in favorite among respondents was, not surprisingly, sterling silver.
At Cooper Jewelers in Woburn, Mass., Robert Sack says sterling silver now accounts for 30 percent of sales, a remarkable shift considering that six or seven years ago, the store didn't even stock sterling.
In addition, Chamilia did "phenomenally well" for the retailer over the holidays.
"You got to keep moving with the trends and staying ahead of them," he says.
Diamond sales rebound
Sales picked up in every category for survey respondents in 2009, but, to the relief of many jewelers, diamonds were the greatest rags-to-riches story of the holiday season.
The stones seemingly lost their fire during the final two months of 2008 when only 17 percent of respondents reported sales of diamond jewelry, including bridal, were up either slightly (14 percent) or significantly (3 percent), and a mere 13 percent reported loose diamond sales were up either slightly (11 percent) or significantly (2 percent).
Diamonds regained their sparkle in 2009, with 42 percent of surveyed retailers reporting that finished jewelry sales were up either slightly (32 percent) or significantly (10 percent). For loose stones, those figures improved to 19 and 9 percent, respectively.
Sack says he saw an increase in sales of larger stones for non-bridal pieces, as female customers filed in to buy 2-carat diamond fashion rings just because.
"These are people, women typically in their 50s to 70s, who, I guess, just wanted to do something for themselves," Sack says.
Humes says sales of diamond studs were brisk in his shop.
"That's a staple," he says. "We always do well with diamond stud earrings."
On top of that, he made a number of colored gemstone jewelry sales in the $3,000 to $5,000 range, with peridot seeing the most action.
A total of 32 percent of respondents reported an increase in colored gemstone jewelry sales in 2009, compared to 21 percent who saw increases in 2008.
As diamond jewelry regained ground and color sales headed north, in-store, custom-designed benchwork jewelry continued to shine, snagging the top-performing spot for the second year in a row.
Some 45 percent of respondents reported sales of custom jewelry were up slightly (33 percent) or significantly (12 percent). Region didn't seem to matter, but it was a particular sweet spot for stores in the $500,000 to $750,000 annual sales per year range, a group that saw custom-design sales rise either slightly (52.2 percent) or significantly (17. 4 percent). See chart 4, previous page.
Wright, of Wright's Jewelers, says he has relied heavily on custom work throughout his entire 43 years in business, but the offerings are starting to appeal to more consumers, who seem to better understand and appreciate what sets custom pieces apart from other goods.
The Midwest jeweler compares the custom sales increase to the public's growing appreciation for personalized service, evidenced by the success of even non-luxury companies such as fast-food chain Subway, where customers are encouraged to have it "your way," by hand-picking each and every topping for their sandwiches.
"At the end of that line, your sandwich is different than everybody else's," Wright says. "There is a certain percentage of people who don't want to be like the masses."
Marketing mavens
National Jeweler's Holiday/Q4 Inventory and Marketing Survey, conducted in the summer of 2009, revealed that the majority of jewelers planned to spend less on marketing for the 2009 holidays.
But in the end, ramped-up marketing appeared to buoy sales totals.
Of those jewelers who reported sales increases of 20 percent or more for the holiday season, 37.9 percent reported that their marketing spend was slightly more (31.1 percent) or significantly more (6.8 percent) than in 2008. Meanwhile, 28.4 percent enjoyed a 20-percent sales boost even though their marketing spend was flat. But perhaps more
surprising is this: A full 33.8 percent managed to bring sales up by 20 percent despite spending slightly less (18.9 percent) or significantly less (14.9 percent) on marketing.
On the other hand, the survey showed that those who spent significantly less or even slightly less on marketing were more likely than others to get clobbered on their holiday sales numbers.
Among retailers who reported their holiday sales were down by 20 percent or more, 52.8 percent had spent slightly (17 percent) or significantly less (35.8 percent) on marketing.
Western region jeweler Gordon credits strong print and radio marketing campaigns for the holiday sales increases he experienced in three of his four stores. (Sales fell at the fourth store--which is located in a strip mall where a lot of other stores had closed--because of the lack of overall foot traffic.)
"I think we did some very consistent, creative advertising," he says.
Instead of resorting to marking down his entire inventory and advertising deeply discounted prices, Gordon brought a personal touch to his ads.
He used the ads to say "thank you" to customers for sticking by Kenny G and Company Fine Jewelers throughout a tough year.
"I heard over and over that our customers were appreciative of being recognized," Gordon says. "I think a lot of people appreciate that marketing instead of 'Here's what we have on sale.'"
Even more unique than Gordon's thoughtful approach to marketing is how much the campaign cost him: half of what he spent last year.
The reason: Advertising rates in 2009 allowed retailers to get more space or airtime for less, as struggling radio stations and newspapers slashed prices in order to attract advertisers.
"We were very fortunate that the economy allowed us to run a fairly good schedule with the small budget we had," Gordon says.
At Grayson Allen, Ramirez says the jeweler spent its marketing dollars to target consumers in the immediate area, choosing to run ads in local magazines and newspapers over more widely broadcast TV and radio spots.
In addition, the store hosted its two annual, invitation-only parties in December. The parties are put together using two separate customer lists with specific vendors brought in each night.
The evening soirees include food, drink and "as much jewelry as they could possibly want to see," with a portion of the event proceeds funneled to a local charity, Ramirez says.
Although event attendance was down from 2008, sales were up, though the Texas-based jeweler is hard-pressed to pinpoint exactly why.
"We just had people that were in the mood to buy," he says.
Looking ahead to 2010, he says he expects the good times to keep rolling at Grayson Allen, which has two fewer competitors than it did in years past.
"We're in the strongest position we've been in since we opened five years ago," he says.
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