Article by Thomas Byelick.
Many have described 2016 as the worst year in the jewelry industry in their lifetime. The industry as a whole has now seen the number of business units decline for the ninth straight year, and the prognosticators are predicting that the contraction will continue in the brick and mortar segment in 2017. The statistics are disheartening, and the industry continues to wait for the panacea to cure stagnant variables out of our control when the tactics should be to dissect and diagnose the problems we can control, and propose viable solutions.
In 2016, 1,564 businesses closed their doors according to the Jewelers Board of Trade which was broken down to 1,190 retailers, 235 wholesalers, and 139 manufacturers. Industry writers focus on the 50% increase in retail closures which is a frightening statistic, but this percentage pales in comparison to the 190% increase in closures on the supply side. It is imperative that the entire industry not skims over the 374 vendors that vanished in 2016 and realize the ramifications of these losses and correlation with store closures.
Suppliers are far more than a delivery system to fill showcases. They are a support mechanism for the retailer that provides product, marketing, merchandising, education, financing as well as other services to their accounts. A retailer without vendors is akin to a farm without water. One key to mutual survival will be for vendors and retailers to work together in an effort to mitigate the decline for both sides.
There are fewer salespeople on the road which is partially the choice of the vendor, and unfortunately, with eroding commissions and the ever-present danger of traveling with the product, many salespeople have left the industry. Only a few companies (major suppliers) are offering salaries to fulltime sales staff. The remaining reps on the road (average age 62) are 1099 contract arrangements. who carry multiple lines and can only offer a subset of their total workweek to each vendor they represent. Good salespeople are not just there to write an order: They provide guidance for proper ordering, monitor inventory aging to keep the inventory and appearance fresh, serve as your go-between and advocate with the home office, merchandise, and salespeople inevitably provide free consulting.
Many suppliers have elected to go without a sales staff which is proving to be a mistake. They have taken the approach of servicing their customers over the phone or email and planning on seeing customers at the shows. The problem with this model is two-fold: If a vendor does not walk into the store, sales will decrease for both the buyer and seller, and ultimately a competitor will make an appearance and take over the business. The second problem is both wholesalers and retailers are on an austerity budget and are foregoing tradeshows due to the cost of travel and lodging.
Vendors have also pared back on trunk shows, and if they elect to participate, the supplier sends a sparse selection of memo product for a finite period of time, and rarely the support of a salesperson or someone from the home office. Trunk shows historically have been a way for retailers to increase traffic, create a call-to-buy, and bolster their inventory with show-piece items a merchant would never consider purchasing. The challenge is vendors have realized that trunk shows have to make financial sense, and the onus is on the retailer to create a successful trunk show. Special events are not successful unless the retailer makes the calls and make appointments to ensure customers attend. Email blasts and mailing postcards just don’t work.
Historically, training was an integral part of the marketing budget for every brand, but the trainers have disappeared. In lieu of hiring trainers, brands (even big ones) have made videos which if they have been viewed, are not effective. Other companies have taken the fallback approach of asking their salesperson to do the job. Salespeople are not necessarily trainers, and a 1099 Sales rep does not want to spend time training because there is no remuneration for their time and effort.
Retail Jewelry is one of the few business models where the retailer relies on the vendor for financing (the auto industry is another). In most industries, the payment timeline is short, and if the buyer needs time to pay, he or she will reach out to a bank for a loan or line of credit. Jewelers are fortunate to have subsidized financing, but vendors often feel taken advantage of by retailers that abuse agreed-upon terms. Keep in mind that late payments stress the vendor’s cash flow.
Jewelers also benefit from the marketing and merchandising provided by their suppliers. Retailers have come to expect the vendor to supply in-case displays, including pads, pillows, busts, collars as well as Duratrans, window-clings, and co-op advertising. Retailers understand the cost of outfitting their cases and need to realize that a brand is bearing the financial burden can easily exceed $1,000 dollars per location. As a result, vendors are now evaluating whether there is a reasonable payback period for this investment because Duratrans fade, displays become dirty and tattered and there need to be measurable results to justify the expense.
Vendors also serve as a bench jeweler for the retailer. Over 80% of bridal sales are considered special orders, and with the advent of Micro-Pave, nearly everything has to be made-to-order because it can’t be sized in-house. Some vendors even offer CAD services. If the store owner is not a jeweler, he or she probably can’t afford to hire a jeweler, and either needs to rely on a repair shop or the supplier.
Industry publications trumpeted the loss of many notable retailers closed in 2016, but the majority of the retailers we lost were the lesser-known names in rural areas of the country. The rural jeweler is less likely to see a salesperson because they maybe 30 minutes or more each way off the interstate, and the independent sales rep may believe the time invested will not net a large-enough commission to justify the time and travel expense. This means that the rural jeweler’s options are to attend trade shows that they can’t afford, and taking the antiquated approach of ordering from one of the phonebook-sized catalogs that inhabit one of the bookshelves in their store. Of course, catalogs supply the basics and not the styles customers see in fashion magazines or television.
These rural “out of sight, out of mind” merchants also have little chance of vendor support initiatives listed earlier and are out of the loop when it comes to industry trends because they have little to no interaction with manufacturers or salespeople. The same situations exist to a lesser extent in the suburbs and cities as well. Some retailers are relegated to a lack of service due to geography, but there are recluse merchants in the suburbs or cities that don’t explore the industry beyond their front door. In both cases, they are out behind the times and out of touch. Being out of style in jewelry is the same as being out of style in the fashion industry.
Retailers need to seek out if not demand a value-added proposition from their suppliers to partner in building both businesses. We confuse technology with customer service (a website is not service), and the result is both wholesale and retail are losing. This may mean doing business with fewer suppliers and becoming a more important customer to those remaining. It is incumbent for the retailer to be regularly involved with their suppliers, and this is even more important to the jewelers in rural areas. Providing monthly reports such including inventory, sell-through and aging keep both parties informed, and ultimately more successful.
Jewelers talk about how business was good in the past and looking back, one of the differences was vendor service. Vendors need to abandon the “Customer No-Service” model offered by the low-cost suppliers which are nothing more than a race to the bottom. The classic, but still successful business model where vendors communicate with their customer to learn their pains should be reinstated and inculcated into the business model. For vendors to survive and garner the attention of the retail community, the catchphrase “Retail Partner” needs to be an everyday practice and not just a name on an account list.
The article was written by Thomas Byelick, National Sales Manager – Four Grainer Contributing Author
Contact Thomas Byelick: Linkedin
Our “Inside the Jewelry Trade” Radio Show Episodes
The host of “Inside the Jewelry Trade” Radio Show – Jewelry Business Strategist – President of Four Grainer LLC. Author of the business books “A Reason To Chant,” and “A Reason to Chant – Jewelry Trade Edition.” Rod lives in Atlanta with his wife and two almost-human cats.