Affluent Consumers

The following appeared in JCK Online today.  Please give it a quick read, and then I have a few reflections...

More Affluent Consumers Shopping at Discounters

By JCK Staff

Posted on June 20, 2011

A survey released by Unity Marketing June 20 showed wealthy consumers were more likely to shop at discounters like Target than at high-end department stores.

According to the survey, more ultra-affluent shoppers, defined as those with incomes of $250,000 and above, said they shopped at Target (39.5 percent), Macy’s (34 percent), and J.C. Penney (22.4 percent), than said they shopped at Neiman Marcus (20.1 percent) or Bloomingdales (19.4 percent). 

Affluent shoppers “are just as eager as shoppers with less disposable income to find good quality at reasonable prices,” said a Unity Marketing statement. “That’s why they shop at discounters like Target, Kohl’s, Costco and Wal-Mart, just like everybody else.”

Unity Marketing president Pam Danziger, said luxury shoppers have embraced a new “value orientation.”

Luxury products today must “deliver a meaningful return as measured in greater pleasure, comfort, superior performance, and longevity of wear and use,” Danziger said. “If the product doesn't measure up, [affluent consumers] won't spend the money; rather they will trade down to a cheaper, yet acceptable alternative.”

Danziger said high-end stores like Neiman Marcus have to understand that discounters are increasingly becoming their competitors.

“With Apple's retail innovator Ron Johnson joining J.C. Penney as CEO later this year, I expect to see exciting changes emerging from Penney's, particularly in the area of the customer's shopping experience,” she added.

This is an important sign of the times. Many retailers I know are focusing on "branding" their store either via the lines they carry; or how they advertise. What is branding? It's what you do to achieve the "X-factor" that makes you the cool place to buy jewellery from.

In mathematical equations "X" is an unknown, and mathematicians do complex work to "solve for X." Jewellers are doing complex work to "solve for X" in the problem what will make consumers choose me over my competitors. While many believe that X = prestige, the JCK article is suggesting that X = the perception of a good deal. Is X a constant or a variable?

The answer is this:

"X" is not a single thing that will trigger a viral response to your products and services; rather it's a number of things done consistently well that make your target audience conclude that "I'd have to be a complete moron to buy from anyone else, no matter what the price."  The value question is not a matter of a discounted price.

Value is the feeling that a person gets from weighing all of the factors and making their best possible decision.  Price is only one small factor for most consumers.  Just because the JCK article says that affluent shoppers are looking for discounts, don't think that price is the only way to earn their business.  

Value is justified and proven through salesmanship.  If you can help your client to answer all of the questions they have about a purchase and identify the key factors that they equate with value, then you're on your way to making the sale.  If you know anything about your product or your competitors product and believe that discounting is the best way to make people buy, then in the words of Donald Trump, "your fired."

If you're building a brand around an amazing client experience and you're increasing your product knowledge and salesmanship, then don't even give this dumb article a second thought.  Keep on that track.

If you want a glorious future in this industry there are two more things you need to do.  One is to focus your current energy on product that has a future.  In other words, enjoy the popularity of current trends, but unless they'll see you retired in a year, you'd better think about how you'll be selling diamond and gold jewellery 5, 10 and 20 years from now.  

The second is to learn how to be relevant to a new breed of consumer who think about material goods differently and who have completely new ways to shop for them.  Keep your eyes on Road Reflections Blog to learn more about these two aspects that are critical to your future.

Color in Vegas

As we looked around the Couture show and Luxury show at JCK Las Vegas a comment was made about colored gemstones.  Is that a new trend?  I replied, "not so much in Canada; we're just seeing a lot of designers showing off, and it's really not that strong in our "meat and potatoes" market back home.

Now when I say a lot of color, I'm referring to a lot of these heavily included diamonds in browns and yellows, many different varieties of solid color quartz pieces and large inexpensive gemstones, many accented by medium brown or grey diamonds.  There were also the "big four" sapphire, ruby, emerald and tanzanite.

My reflection on color is this:  If you develop a strategy for selling more color, you can have a bright, shiny, happy future.  If you begin to sew seeds of diversity into a client's jewellery wardrobe, you can sell them all sorts of jewellery for life.  A ruby ring leads to ruby earrings, ruby pendant, ruby bracelet, and "hey, what if I'm wearing green?"  If they only ever buy diamonds from you, they will run into "the wall" at some point and stop desiring more.

Also, don't look at white gold versus yellow gold as a defining trend one-way or another.  They are also components of a jewellery wardrobe.  If you encourage wearing yellow gold with earth-tone gemstones over earth-tone clothing for Fall fund-raisers; and white gold with bright jewel-tones for summer weddings, you're going to become a fashion consultant, rather than a sales clerk.  For inspiration on how to talk to people on these terms, watch "Say Yes to the Dress".  The senior staff (the closers) always relate the appropriateness of the dress to the qualities of the client.

Colored stone jewellery is harder to sell than diamonds or certainly than those soon to be extinct beaded bracelets, but it's worth the effort.  It takes stocking inspiring designs with amazing colored gemstones, highlighting them in your feature cases, including them in your advertising and working with clients to find their favorite colors and expanding on them.  If you don't carry much color, start building an assortment.  When's the best time to plant a tree? -- Ten years ago.  Talk to your staff about colored gems.  Throw the gem guides on the table on your lunch area.  Join the AGTA.

Don't ever, ever, ever, ever, ever forget that when a person walks into your store, you can do what's easy and make a quick-sale today, or you can do what's more challenging and dig deeper into their lives, wants and desires and plant the seeds of future purchases 1,3, 5, 10 and 20 years down the road.

From Las Vegas,


TW :)

I've changed some settings on here, so if you're so inspired, please post a comment by clicking below:

A Call for Integrity - Diamond Certs gone Wild

This stinkin’ thinkin’ has got to go.  Our industry needs a check-up from the neck-up.

A few weeks ago, I started on a rant that won’t die.  I personally witnessed several cases of fraudulent diamond certs; which have effectively taken food off of my children’s plates.  I work for a company that seeks to do the right thing and offer properly graded diamonds at fair market pricing.  Apparently that’s not “competitive enough.”  Evidently some have chosen to take a $1000 diamond and pay someone to certify it as a $1500 diamond and then sell it for 33% off the certified value.

That sounds like an old story.  Chances are you either know a retailer who does this or you are one; having certain product like gold chain “40% off” all year long.  Are we really talking about the same thing?

If I go to The Brick furniture store to buy a sofa, would you think me a shrewd consumer to purchase it at full price?  What about going to Stitches and buying a single shirt for $79 instead of buying 3 for $89?  These retailers create pricing and marketing schemes aimed at maximizing bottom-line profits.  It’s not the way I would endorse running a retail operation because it is against all Canadian consumer guidelines and the competition act to inflate prices and create deceptive discounts.

Our government has more important things to do than to monitor these relatively minor sins.  HOWEVER, if Stitches sells a rayon shirt as a “silk” shirt and sells it at a silk price, that fraud grows from a misdemeanor to a felony.  If The Brick sells a naugahyde sofa as a “genuine leather” sofa, that too would be felonious. 

Adam Smith’s invisible hand should allow a savvy consumer to sort-out the best price no matter what the pricing and discount schemes at work; as long as they can compare apples to apples.

Why do we think that buying an I2-N poorly cut diamond as a SI3-I ideal-cut (with a credible-looking certificate) for an I2-N price is justifiable?  That has nothing to do with the discretionary pricing options that a retailer can exercise.  It’s outright fraud.  It’s fraudulent of the diamond distributor to accept the bogus paper from the grading organization, and it is fraudulent of the retailer to play dumb and pass along that misinformation to the retail client.

Let’s face it folks.  Diamond cutters and dealers know what they’ve got.  They send it to grading labs so that they have a second-hand witness to justify the price they want to charge.  In recent years we have discovered that even the supposedly inviolate GIA was subject to issuing false grading.

At the retail level, how do we truly win the battle against the internet?  We do it by offering a better customer experience.  Customer satisfaction is more than price.  It’s great service, it’s high-quality design, it’s the advantage of seeing your product before you buy, it’s expert advice, it’s after-sale service, it’s creativity, it’s personal contact.  It’s about making yourself a “trusted advisor”, and proving to your market that they’d have to be a fool to deal with anyone else but you no matter what the price.  It’s NOT about trying to match the deceptions and pricing schemes employed on-line.

In a recent discussion with newly hired CJA president, David Ritter I asked him about the issue of Burger King certs (have it your way).  Having come from outside the jewellery industry, his response was, “heaven forbid that the media gets ahold of this issue.”  Imagine the headline in the Globe and Mail, “Massive Fraud Among Canadian Jewellers”, or “Diamond Deception Running Rampant”. 

Could that article be written?  Could I go to 10 cities across Canada and buy a diamond ring whose reported quality was massively overstated?  If I took those diamonds to four different grading labs and got differing results each do you think our industry might look really bad?

The big question is not if that article will get written; rather when.  When it does and consumers become even more suspicious of their local retailer, how will we answer their concerns?  Who’s going to write that script?  We’re in deep doo-doo and we don’t know it yet.

If you want to become part of the solution, here’s what you do:

1.     Stop buying from dealers who constantly try to defraud your customers with their grading

2.     If you belong to a buying group or jewellers’ organization, report such dealers to your organization and work towards cutting them off on a larger scale.

3.     Like my friend Matt in Lloydminster, go take some diamond grading courses so that you can authoritatively tell your customers that you can verify the quality of their new diamond.

4.     Don’t sweep anything under the carpet.  If that article is written, everything we do will be scrutinized by the public, so implement new policies to ensure the highest level of professional integrity is in your store.

5.     Make sure to forward this message to other retailers; especially your enemies.  The more people hear this message, the better for our whole industry.

Diamond Cert Rant #1

“I’ve had all I can stands, and I can’t stands no more!”  (Pass the spinach.)

                        -Popeye-

The level of integrity in this industry that I love has sunk to a new low.  Deceptive diamond certificates are not only annoying; they’re illegal.  We’ve been duped into thinking that a dishonest diamond cert is nothing but a “more generous opinion” and rightly deserves a bit of a discount.  The fact is that while diamond grading is indeed subjective, gem labs should only ever differ by extremely slight margins; and the top ones do.

What do you think would happen to a Chevy dealer who sells brand new 2011 Cameros, based on the claim that they come with a 1000 horsepower?  Anyone can check their website to find-out that new Cameros have 312, 400 or 426hp.  Jewellery clients don’t have that option; they can only rely on the integrity of their retailer. 

While I’m currently a lowly sales-rep, I used to be a retailer.  I know what it’s like to want the best quality diamond for the lowest price.  I still want that for my wholesale clients.  I know what it’s like to receive a diamond that a customer has eagerly awaited; only to recognize that it doesn’t live-up to the reported quality.  Sometimes it’s just easier to make the sale, and hope the truth is never discovered; after-all you’ve got the paperwork in your hand to support the deception.

Whenever clients refer to jewellery that they bought from someone other than me we refer to it as “Brand-X”.  In the past two weeks I’ve been shown diamonds that two retailers have purchased from Brand X.  One dealer had doubts about the reported quality and the other boasted about the spectacular bargain they got.  These diamonds came with “Burger King” certificates (…have it YOUR way – for those of you who are too young to recall the famous ads.)  Having been a Fellow of the Canadian Gemological Association, and having purchased diamonds as a wholesaler and retailer since 1987, I can recognize a diamond whose color is in the latter half of the alphabet, and I know the difference between SI2 and I2.  Some of the diamonds I’ve seen are not a single color or clarity grade out; they’re 4-7 color grades and 1-2 clarity levels below their certs.  These deserve more than a small discount; they deserve a prison sentence.

Have you ever said to a supplier, “Okay, so sometimes Brand-X diamonds don’t live up to the paperwork, but your diamonds are more expensive”?  Huh?  Think about what you just said!  You’ve just said, “these people regularly screw us, but mostly we just put up with it so that our clients can feel that they’re getting a great deal.”  In this case, you are complicit in the fraud.

Here’s the reality.  The people writing these Burger King certs know that what they’re claiming is bogus because they’re being paid to do so.  The diamond producers and/or dealers that pay for these certs know that they’re paying for misinformation – after-all could they be diamond dealers if they didn’t know the difference between an H and an L color?

Guess who has to answer to the consumer if and when the truth is revealed?  It’s the retailer.  If 5 or 6 of retail clients separately discovered that you’ve sold them inferior diamonds, they’ll get together and make sure everyone in your city or town knows what a crook you are.  You’ll be out of business in no time.  Even if you only had a faint inkling that you had sold diamonds inferior to their certs, you’d well-deserve to be black-listed.

Why isn’t this happening on the wholesale side?  There are certain names that come-up over and over and over again.  Why do they still exist?  Because we drink the Kool-aid.  We want to believe their lies.  We eagerly claim the vindication offered by the fraudulent paperwork.

If you have product in your store from someone whose integrity is in question, send a couple of these diamonds to a trusted gem-lab.  Make sure they are micro-engraved so that nobody can say it’s not the same diamond and make sure they are unset.  Tell other jewelers about your results, good, bad or ugly.  Prove me wrong, or prove them fraudulent.  It’s a small price to pay in order to stand-up for your clients, and ensure your clients receive what they pay for.

My hope is that after reading this letter, less retailers will be tempted to fool themselves.  The responsibility is yours to support dealers with integrity and cut-off ones without.  If a company consistently displays a lack of integrity in their grading, what else aren’t they telling you?  Let’s clean up the industry.  A lack of integrity is a lack of integrity.  Period.  Dump them now and forever.

Are Beads Just Jewellery Fast-Food?

**This article was submitted to In Store Magazine, and was edited down to 450 words in order to be featured in "The Great Debate."  The feature was scrubbed, so here is the larger version that not only rants against beads, but gives you some ways to transition your retail jewellery business into the post-bead era.**

I’ve had it up to HERE (between unibrow and receding hairline) with those stupid beaded bracelets.

Retailers are always on the hunt for profitable new trends.  Beaded bracelets have become exactly that; in a time when gold prices are at record highs, and the economy is dampening diamond sales.  But wait … don’t shoot my journalistic integrity down for that last comment.  Some of you will assert that diamonds and gold are doing just dandy.  Some of you have actually grown through the recession.  It’s actually the easiest time to distinguish yourself from your weaker competitors.  The sharpest (and in some cases luckiest) operators are the ones who have kept their inventory levels from getting away from them before things went bust and who kept-up their marketing to drive sales.

Many retailers I speak with say “business isn’t where it was a few years ago, but thank goodness for those bracelets.”  For those of you whose business has grown during the recession, I have a critical question.  Did your business grow because of your beaded bracelet line?  If the answer is “yes,” you’re in huge trouble.  Here’s why: “HELLO, it’s a trend!”  When the bead-train comes to a screeching halt, what kind of shape is your inventory, your staff and your diamond business going to be in?  You’ve diverted cash-flow, square footage, marketing dollars and staff training all around what I like to call, “the fast-food of the jewellery industry.”

In my part of the world (Western Canada) the largest bead company – their name starts with a “P” and rhymes with “Zandora” have clients pre-paying for their orders.  In one case, they have asked a retailer to acquire a separate credit card so that it can automatically be charged for their orders only; and the never-ending cycle of back-orders that come along.  They feel that because they’re providing a successful profit centre for retailers, they have earned signing authority on retailers’ bank accounts.

Here’s some simple business math.  When you go from averaging 60 to 75 days with your suppliers, and then someone comes along whose product is selling like hotcakes (At IHOP, they say their breakfasts are selling like beads) demands prepayment, what happens?  Well, their pay-or-die policy sucks cash-flow from your business so that your other suppliers have to wait longer for their cash.  You might argue that the increased profit allows you more money to pay other suppliers, but most jewellers I talk to have increasing inventories, increased marketing co-ops to spend and have even built displays and showcases specifically for their beaded bracelet programs.

Now your gold and diamond suppliers are waiting 90 to 120 days for their payments.  It’s like the household bills when Mommy or Daddy develops a drug or gambling addiction.  When these suppliers have to wait longer to get paid, are they going to give you better service, or will they have to cut back?  Are they going to develop more new designs or less?

I asked a retailer about to make a major investment in one of the beaded bracelet lines what happens when the party’s over and they’re sitting on $50,000 in merchandise that nobody wants?  His response was “if it’s been turning at 4-5 times per year, I can afford to just throw the rest away.”  Huh???  When you write-off that inventory; subtract one full turn, and subtract money spent on additional staff incentives, advertising, banners, showcases and displays, then you can start pondering the other ways in which your business is hurt by the end of a trend.

When a person is used to eating fast-food, they get addicted to salt, grease and/or sugar; and consequently become obese.  These foods give the body a false sense of satisfaction.  They cure hunger in a hurry, but offer little in terms of long-term health benefits.  When your jewellery customer is addicted to jewellery that they can get in $30 and $50 “hits,” they’ll end-up with an overweight jewellery box.  Their hunger for jewellery purchasing will temporarily be quenched, but they’ll end-up with little of lasting value.  They’ll also have made so many purchases to accumulate a full bracelet or two that next year will be a clothing, travel or electronics Christmas rather than a “jewellery Christmas.”  That beaded bracelet will sit and stare-up from their jewellery box as a reminder that their jewellery judgement is not very good, and might cause them to think that jewellery is too trendy for them to invest in.

I’ve always trained jewellers to use a top-down selling approach.  You always flatter a client when you show them the most expensive piece of jewellery in the store and then have fun working your way down the price-points until you reach their comfort level.  It has the lasting effect of promoting higher and higher-end product; either for the current purchase or for future considerations.  That 3ct diamond is going to stick in their mind, and then one-day when someone makes them a generous offer for their company, they’ll think of you and that $50,000 diamond.

When you take a beaded bracelet customer; who started out with a $250 starter bracelet, and has only spent $30 to $100 at a time since then, and show them a $1,500 gold bracelet, it will seem like the crown jewels!  Heaven forbid you should show them a $3,500 diamond tennis bracelet.  Do you see what we’ve set ourselves up for?

Fashion shows feature haut couture creations worth thousands of dollars in order to drive demand for designer brands.  By the time those designs reach your local clothing stores, the styles and the price-points have been diluted significantly, but those who buy the $150 dress can imagine themselves looking like the model who wore the couture version on the runway in Milan.  Home reno shows drive demand for exotic hardwood flooring, granite countertops, barrel-vaulted roof-lines and professional grade appliances.  What kind of lunatics are we for letting the latest jewellery trend drag price points into the basement?!?

Yes, beads are successful.  Yes, they’re filling the till.  Yes, they’re keeping the staff jumping.

The trend will end.  Our customers will be looking for something to replace that $30 to $50 price point.  Your staff will have forgotten how to spend time nurturing clients to make big purchases. When customers stop buying this tuff, the back-orders will still be coming in, your other suppliers will still be hounding you to catch-up on your bills, which will be hard to do without all of those beads going out the door.

How do we transition back to good old diamonds and gold?  There’s no reality show called “The Beadiest Loser” to inspire you (sorry couldn’t stop that pun from coming;) just my lone voice in the wilderness.  Listen to Todd’s top 9 list of things you need to do to help your clients kick the junk-food-jewellery habit.

1.     Make bead customers look at fine jewellery pieces while you’re writing-up their purchase.  If you need to learn how, just visit www.ex-sell-ence.com to learn from the master, Shane Decker.

2.     Stop your lazy staff from selling what’s easy.  It’s easy to sell cheap stuff – it’s profitable to nurture a passion for fine jewellery in your clients.  Make beads or a new beaded bracelet a last resort sale; show them the good-stuff, and then if you’ve exhausted all other possibilities, take them to the bead counter.

3.  Don’t let beads monopolize your marketing budget.  Because it’s the easiest thing to sell, it should be advertised the least.  The heart and soul of advertising is a BIG PROMISE. Make big promises with your advertising.  When clients come in to take advantage of your big promise, if nothing-else, you can sell them a beaded bracelet, or a couple of beads for an existing bracelet.

4.    Reorder fast-selling fine jewellery as judiciously as you do beads. 

a.     A $2,000 diamond ring which sells 2.5 times per year at a 2.5X markup will generate $3,000 in gross profit.  You’ll have to make 2-3 sales, and have $800 tied up in inventory.

b.     In order to generate the same gross profit from beads, you have to stock 30 different beads (averaging two in stock at a time) from $30 to $50, and sell five each per year.  You’ll have to do way more ordering and restocking (including putting up with backorders) and you’ll have to make 150 sales.  You’ll also require 50% more tied-up in inventory.

5.     Invite your fine jewellery suppliers to do product knowledge sessions, and learn their unique story.  Branding is all about the story.  Every one of your suppliers has a story to tell, and the result will be your ticket to selling better merchandise.  Only one competitive item can have the lowest price; all others’ value must be justified on some other merit.

6.    Develop a 5-10 year plan for building your fine jewellery business, then put your effort and money into making it happen.  Would beaded bracelets figure into any sort of 5-10 year plan for any type of jeweller?

7.    Remember the 70s silver charm bracelet.  Remember the 80s herringbone chains and diamond cluster rings.  Remember the 90s “Tin-Cup” pearl necklace.   Remember the more recent “Italian charm bracelet”.  All of these were profitable (for a time), unserviceable (or nearly so), and rank extremely low on the recyclability scale.  Who has ever thrown away a big diamond because it was out of style?

8.  Use rising gold prices to your advantage.  Give trade-in for old-gold towards new jewellery, and stress the long-term value of owning gold.  It is valuable enough to recycle.

9.     Have your sales staff buy-into the concept of jewellery as a wardrobe.  If they don’t ask a client about their jewellery wardrobe when making a sales presentation, they’re missing-out on future sales.  If you’re selling a couch, you need to talk to the client about how much room they have, functionality, what colors and textures are in the living room, and what changes they might be considering to their décor in the future.  In the same way jewellers need to work with clients to make jewellery purchases fit into a life-long quest for the ultimate jewellery wardrobe.