What can jewelers offer the iPod generation? Retailer Mac@Work in Milan and Torino in Italy has created iDiamonds, 18k and diamond earbuds for the iPod. These bejeweled headphones sell for 750 to 660 Euro, about $950 to $840. A pink sapphire version is about $700.
The Sunday New York Times this week had a major feature on leading online jewelry retailer Blue Nile, When Buying Jewelry Starts With a Mouse, which contains some interesting cocktail party factoids (just in time for 24-Karat Club weekend!) One assertion: “Blue Nile ranks behind only Tiffany & Company in diamond ring sales, according to industry analysts. Experts also believe that probably only Tiffany’s and the Zale Corporation….bought more diamonds from wholesalers than Blue Nile last year.” Well, not sure where Sterling fits in here, since they are now bigger than Zale, but undeniably Blue Nile is very successful at selling diamonds (less so for other jewelry, which makes up a significant portion of the sales at other large jewelry retailers.) The article gives an estimate that Blue Nile bought $170 million in diamonds last year. Judging from quotes in the story the source for these assertions is probably Ken Gassman, industry analyst. Blue Nile’s CFO, Diane Irvine, says that the retailer sells a ring costing from $20,000 to $40,000 nearly every day and that this December more than a dozen rings over $50,000 sold. (Another cool factoid: rings above $50,000 are delivered to the consumer by armored car.) Much of the article discusses retailer efforts to pressure suppliers not to sell to Blue Nile. According to the article, Blue Nile’s overhead is just 13 percent of its revenues, allowing the retailer to sell diamonds at 20 percent over cost and still make money. Retailers quoted in the story, Mark Moeller, Gary Gordon, Jerry Robbins, and Zale treasurer David Sternblitz, admit that Blue Nile has dampened profitability and sells diamonds cheaper than brick-and-mortar stores but say that buyers can’t see the diamonds, compare them side-by-side or receive the service they would get in a store. Gassman, who says that Blue Nile is 35 percent less than Zales, delivers the final blow, discussing retailers who can’t or won’t match Blue Nile’s prices: “Their attitude is “Our prices are higher but we provide you services, and we’ll hold your hand, and we’ll wrap it up all pretty and such.” Will that work? the story asks. “I think it’s relevant that we have seen an acceleration in the closure of specialty jewelers in recent months,” Gassman replied.
As the world’s top online retailer, Amazon.com has done pretty well building a one-stop shopping destination, even aggregating other sellers’ merchandise into one huge product database. But the e-commerce giant took a step toward another possible marketing strategy this week with the launch of Endless.com, a website that specializes only in handbags and shoes (many of which are also carried on the main Amazon.com website.) Endless.com provides an enhanced shopping experience for shoe and handbag shoppers, with a very innovative shopping cart, large up-close product views (including every angle including the sole!), and awesomely smooth magnification of every product image. These bells and whistles are combined with the ease and comfort of a standard Amazon.com shopping cart. Frankly, it’s very cool. As any woman will tell you, shopping for shoes and handbags must be a pleasure to be savored, not a chore to be sped through, and this site lives up to the challenge. Of course, my first immediate thought is that this is exactly what Amazon needs to do to create a more luxurious jewelry shopping experience, particularly if they want to engage the female self purchaser. Although Amazon.com’s top holiday jewelry are basics purchased by men, the site does carry a lot of surprisingly beautiful jewelry (including a great selection from trendsetting online store Ylang23. In fact, since I am telling this large corporation what to do now, they should buy Ylang23. Immediately, before Blue Nile does.) Sites like Endless.com, with more emphasis on the shopping experience, are a sign of things to come as women are now the biggest shoppers online (although it sometimes seems they are all selling to each other on eBay.) The most successful jewelry e-commerce sites, like most successful jewelry retail stores, got that way by selling diamonds to men. Perhaps the web (and the real world) can build another model for success?
With large diamonds still one of the hottest part of the markets, supply is tight and time is money (as anyone who has purchased a large stone and sunk almost their entire open-to-buy into it will no doubt agree!) AGS Laboratories recently announced it will speed grading of larger diamonds. Diamonds of more than three carats or more will receive express service at no extra charge. Diamonds of seven carats or more will receive grading results in one business day and diamonds weighing 3.00-6.99 carats will receive grading results in three business days. AGS also will offer performance-based cut grades, already available for round and princess cuts, for emerald cuts too in February.
The important numbers for the holiday season are coming in, with many major retailers releasing holiday sales results today. The International Council of Shopping Centers reported that November and December same-store sales were up around 3 percent from 2005, which is a percentage point lower than original estimates. Visa estimated holiday spending growth (including restaurants, travel and other spending) of 6.5 percent (also down a percent from previous estimates). Visa said the average sale at retail stores declined 1 percent. According to MasterCard’s SpendingPulse survey, retail sales rose 3 percent from 2005, the smallest gain since the survey started in 2003. Electronics and luxury goods had the strongest sales, according to the SpendingPulse survey.
Most jewelry retailers had modest sales growth this year. The Zale Corporation reported same-store sales rose 2.3 percent for November and December. Total revenue rose 3.7 percent to $905 million. Although the Zales brand gained sales momentum, margins were slim thanks to “more aggressive pricing and increased promotional activity,” the company said. Sterling’s results are expected to be better: we’ll know next week.
The big winners? No surprise: luxury retailers had the best growth, once again. (Tiffany releases what are expected to be impressive results on January 10.) Online jewelry sales, like all online sales, increased dramatically, the third year of more than 20 percent growth. According to comScore Networks, online retail spending for the two months rose 26 percent to $24.6 billion. According to comScore Networks, retail e-commerce now accounts for about 7 percent of consumers’ retail spending (more than $100 billion, not including travel.)
Department store winners were Saks, with an 11 percent increase, Nordstrom with 9 percent, and Neiman Marcus, 7.1 percent.
After a dip in sales in November, world’s largest retailer Wal-Mart squeezed out 1.6 percent growth in December. The nation’s second largest retailer, Federated Department Stores Inc., reported a 4.4 percent increase in same-store sales for December 2006. Total sales fell 8.5 percent to about $5 billion for five weeks ending December 30. For both November and December combined, Federated reported same-store sales increased 5.7 percent.
Retailer J.C. Penney Company reported same-store sales for the five weeks ending December 30 rose 2.6 percent. J.C. Penney noted that both fine and fashion jewelry experienced strong sales performance.
The star of the discount world was Costco, which had 9 percent growth, although 3 percent of that was due to a calendar quirk that added a day to the month.
Finlay Enterprises Incorporated, which operates fine jewelry counters at department stores, reported same-store sales for November and December rose 1.6 percent.
The 2006 holiday season was the best ever for Amazon.com. The e-tailer’s busiest day was December 11, when customers ordered more than 4 million items. Top selling jewelry styles on Amazon.com this holiday season included 14k white gold round diamond stud earrings, platinum round diamond four-prong stud earrings, and a sterling silver open double flower pendant. Top watches were a Bulova women’s diamond bezel chronograph watch, Invicta men’s automatic Pro Diver S2 watch and Movado women’s Amarosa watch.
1) Blood Diamond-Inspired Media Coverage of Conflict Diamond Issue: Every journalist knows you need a news hook for every feature. The movie Blood Diamond provided just that for media features on diamonds and conflict stories, providing a timely reason to survey the last ten years of conflict in diamond-producing countries and possible links to the brilliant gems. Global Witness, Amnesty International, and the industry itself helped fuel the fire, even leading to stories about how the other side was spinning stories. Despite all the noise, the movie itself didn’t seem to create much furor or much of an impact on the holiday season, which although not great, was as successful for jewelry as for other products. And thanks to an industry-wide education campaign, most jewelers were well-prepared to answer any questions. Still, when The New York Times devotes three feature stories to conflict diamonds in December, that has to have an impact on the industry’s image.
2) Journey Diamond Jewelry: The new Journey product category, which launched in January 2006, added new excitement to the pendant category. Most retailers report increasing interest in the Journey concept of diamonds that graduate in size to symbolize love that forever grows.
3) Bill Boyajian Leaves GIA, Baker New President: In the aftermath of the grading scandal of 2005, GIA continued to reorganize itself in 2006, culminating in the resignation of President Bill Boyajian, after 20 years of service. Late in the year, temporary president Donna Baker was made permanent by the increasingly activist board of directors of the non-profit institution. Baker has received praise for smoothly moving the institution beyond its turbulent year.
4) Palladium: With increasing price-point pressure of high metals prices, many jewelers started carrying palladium jewelry for the first time in 2006. The first to experiment: jewelers with custom shops and retailers who carry the new ArtCarved engagement line by Frederick Goldman, exclusively available in palladium.
5) Warming Trend: Rose gold, yellow gold, and gemstones in warm tones of brown, orange and gold dominated the palette in 2006 for the first time in years of icy white-on-white styling. A new naturalism inspired by flora and fauna also grew in popularity.
6) GIA Cut Grade: In this case, no news is good news. The first major change in GIA Diamond Grading Reports in a decade, the addition of a cut grade to all reports, went amazingly well. The transition was smooth and seamless. The new reports were quickly accepted in the market.
7) Sterling Now Number One: Thanks in part to turmoil at its biggest rival, Zale, Sterling rode several years of steady and strong growth into the number one specialty jewelry retailer position in 2006. The retailer plans even more growth, including the doubling of its extra-hot Jared division.
Collector’s Universe Enters Gem Lab Business: Public company Collector’s Universe, a force in the collectible coin and sports memorabilia markets, moved strongly into the jewelry market in 2006. After its purchase of Gem Certification & Appraisal Lab in late 2005 and American Gemological Laboratories in 2006, the company started investing for growth, opening new facilities for the two labs and launching marketing campaigns. More is sure to follow in 2007.
9) Fabrikant Files: One of the largest diamond and jewelry companies in the United States, M. Fabrikant & Sons, filed for bankruptcy under Chapter 11, ending a year of negotiating with lenders and swirling rumors. The company’s filing became emblematic of the difficulties inherent in Supplier of Choice: even large companies face cash flow problems when they have to purchase diamond rough in cash and then sell with generous terms to large, increasingly powerful customers. Is this filing the first of many? 2007 will tell.
10) Push Presents: A grassroots phenomenon, the push present from a husband to his wife to celebrate the birth of a child is a fast-growing new occasion for giving jewelry.