The jewelry retail industry is highly competitive. The top two chains, Zale Corp. and Sterling Inc., control about five percent of the country’s $40 billion a year market. The remainder of the business is divided among independent jewelers, home shopping channels and mail-order firms. Some jewelers also operate as wholesalers, making their own jewelry and then selling it to other retail jewelers. An intimate knowledge of wholesale and retail prices can help a jeweler maximize his profit or save him money when purchasing jewelry from other retailers.
A jeweler can purchase diamonds and gemstones at a lower price if he knows what the price is at the wholesale level. If he knows that his local competition is offering the same piece at a higher price, he can try to bargain with his supplier to bring down the cost. Often, a jeweler will offer to pay for a portion of the stones or materials in order to sell the piece at a better price.
An independent jeweler can also gain an edge by specializing in certain types of jewelry. For example, he might focus on bridal jewelry or fine fashion pieces. By doing so, he can differentiate himself from his competitors and make it easier for customers to find what they are looking for.
Many jewelers have a well-planned inventory control system in place to manage the amount of jewelry they purchase and sell. This usually includes inventory program software that interfaces with the point of sale and accounting systems in order to track purchases, sell-through rates and other relevant information. The software helps a jeweler profile his customer spending habits, order stock that satisfies those preferences and discontinue aging items.
One major challenge facing jewelers is the growth of mass merchants, such as home shopping channels and mail-order firms. These companies, which did not exist 30 years ago, now account for 25 percent of the nation’s jewelry sales. This competition has forced some jewelry retailers to rethink their businesses.
Retail jewelers can differentiate themselves by focusing on mono-brand retail, which offers greater brand control and close contact with consumers. In addition, large jewelry players are partnering with celebrities and other equities to create exclusive lines of jewelry. For example, Sterling Jewelers has a Jane Seymour line and JCPenney has an exclusive Cadenzza store concept that features high-end designer jewelry.
Another strategy involves introducing new product categories such as a line of watches or a celebrity costume and fine jewelry collection. This can help attract new customers and increase the profitability of existing products. In addition, some retail jewelers have expanded their product line to include accessories such as scarves or handbags to boost overall sales and profits. These product extensions can also give the retailer an opportunity to introduce new marketing programs, such as gift-giving initiatives or a loyalty program, that enhance the brand’s value to the consumer. This can also increase margins by lowering operating expenses. This is a particularly attractive strategy for small and midsized jewelry stores that may be struggling to compete with the larger chains.