In the last 10 years, so many things have changed in the jewelry business, some for the good of the industry and others to its detriment. The Internet has accelerated the transfer of information and has made products readily available. National chain stores have changed their business models to become more aggressive, and today’s consumers have modified their shopping habits accordingly. Industry veterans suggest that 10,000 private stores could close in the next 7 to 10 years.
Simply put, the jewelry business is not the same as it was 10 years ago, and independent jewelry store owners need to respond quickly. With this article, I hope to offer advice on how to overcome the many challenges freelancers will face.
Consumers today can be categorized as either value or experience driven. The value-driven consumer rarely cares about store image, product branding, or after-sale service. He cares about one thing and one thing only and that is “the lowest possible price”. The Internet is better equipped for these types of customers and has done a great job of serving them. The attraction for potential Internet consumers may be the value and anonymity of comparing products and prices without human interaction.
Some people have told me that they feel compelled to buy after spending time with salespeople in physical stores, adding undue pressure to make a quick decision. Thrifty consumers can also make methodical decisions and require time to feel good about their decisions; The Internet offers this, while physical stores do not. Generally speaking, a retail store’s operating expenses represent a high percentage of its total revenue. They simply have to sell their diamonds and jewelry for more – competing with Internet retailers on price and shopping spree becomes a difficult task.
So in turn, the independently owned stores have lost market share every year for the last 9 years. In fact, independent retailers have shown only modest growth of 2% to 5% per year, while Internet retailers have grown 25%.
The experience-driven consumer is highly concerned with selection, convenience, branding, availability, and service. Recognizing this are national department store chains, including Jared Jewelers, Helzberg, Bailey Banks & Biddle, and the like. These companies are building bigger and better stores with millions of dollars in inventory rolling off the windows. All possible jewelry options are available and your customers don’t have to shop anywhere else.
In addition, they are placing a greater emphasis on training their employees than in the past. The days of receiving second-rate advice and service at national chain stores are becoming a thing of the past. This is something that independent retailers have always hung their hat on: they can no longer say that you’ll only get great service from private stores. This is all made possible by an aggressive plan to take over a market previously controlled by mom and pop stores and then invest in that plan. Independent jewelry cannot offer the same selection of size products because they do not have the financial resources. Chain stores have better real estate, a better selection of products, and more money for advertising.
Internet retailers have arguably opened the door to chain stores by fragmenting the market and putting independents on the ropes. The recent growth of chain stores and Internet retailers has put independents in a bad light. They can’t sell their jewelry at the same price as Internet retailers and can’t afford to offer the same product selection as chains. Without careful planning and adjustments to their business model, independently owned stores could be on the brink of extinction. There are some who would strongly disagree with this perspective and think that it would be impossible for it to happen.
To that I ask a question…”When was the last time you bought home improvement items at a family-owned hardware store?” Or “When was the last time you bought electronics at a family electronics store?” These stores existed until the consolidation of their industries occurred. It just took longer to happen in the jewelry business, but I assure you it will continue to happen. The future for freelancers looks bleak, but there are things that can be done to ensure their healthy existence in the industry.
Regaining market share will be a very important part of the process and this should start with the Internet. Most freelancers have done nothing to create an Internet presence; I’m surprised to hear that some jewelers don’t even have a website. I think this is largely due to their reluctance to adopt a business practice that has taken so much from them.
An example of an internet jewelry website done right is designing your engagement ring.
Internet retailers have grown rapidly because they have not been challenged, it is time for independents to step up and create a much more competitive environment for Internet retailers. The area that needs improvement the most is selling diamonds and engagement rings online. Margins, of course, have been squeezed considerably on loose diamonds due to the availability of aggressively priced products.
Independents have a real problem accepting the notation of selling diamonds for much less than they have in the past. To be successful, they will need to understand that diamonds can sell for more in a store and less online. Why not do business with both types of customers and regain some of the market share that was previously lost to competitors? Putting together an effective website involves more than listing jewelry on web pages. Content is very important just like search engine optimization, I recommend hiring an SEO specialist before hiring web programmers. They will give you valuable information on how to create a successful website.
Dealing with large stores requires a different approach and a lot of courage. Most independent stores will never have the funds to compete on the same level as the big box stores. That’s not to say they can’t fend for themselves and earn a living. It will require choosing a category of jewelry that is possible to master or own a great piece of. Dealing with chain store advertising budgets, inventory, prime locations, and trying to be all things to all customers will be next to impossible. I believe that successful store owners will take advantage of their passion and strengths in certain product categories and try to own that market.
I have owned a retail jewelry store for 13 years and have witnessed the decline of the private store market. I am also experiencing firsthand the problems my counterparts face and have wavered on the proper course of action. I decided to stay true to my passion and continued to promote my bridal and diamond business. I know that in the end it will be the right decision because I have a good opportunity to create a strong presence in a product category. This presence will be hard to take away from me and I should always be able to earn a good living. I hope all freelancers can do the same, but it’s obvious at this point that it will take courage and commitment.