U.S. Retail Market Report

RAPAPORT… The past year has proved challenging for many jewelry retailers. However, despite the ups and downs of recent months, most retailers seem happy that there have been at least some ups, and that the downs are not as bad as they were at this time in 2008, when the market simply disappeared. As the holiday season looms, retailers are weighing in on their revised expectations and their plans for making the best of the season.

The Importance of Holiday
Retailers count on the holiday season each year to fill out their bottom lines. “Holiday retail is essential for us,” said John Nichols, sales manager at Huntington Jewelers in Las Vegas, Nevada. “That’s when we have the most traffic, and when we build our database and show the most sales. It’s a matter of growing and not just selling, because people come in and they bring their friends.”

Judith Arnell, owner of Judith Arnell Jewelers, with stores in Portland, Oregon, and Chicago, Illinois, agrees that holiday is a critical time of year. “We pray for holiday to come, and then we pray for it to end,” she said. “We make 25 percent of our annual sales in December, even surpassing bridal.”

Even for stores whose main business is bridal, the end of the year represents a fair amount of business. “We’re not quite as dependent on Christmas as most of the other companies,” said Abraham Frost, president of Frost & Co. Diamonds in Pittsburgh, Pennsylvania. “We’re a 12-month bridal store, so holiday is about 20 percent of our year, and our February is huge.”

Mike Butterfield, owner of Butterfield Jewelers in Albuquerque, New Mexico, is in the same boat. “Like everyone else, holiday is pretty important, but it’s not the end all, break all,” he said. “We’re a bridal store and, like all bridal stores, we have a good spring.”

Tight Inventory
Steve Samaras, president and owner of Zachary’s Jewelers in Annapolis, Maryland, feels that being prepared for the holidays is essential. “Holiday is very important,” he said. “We’re looking at 30 percent of our annual volume during that time.” To that end, he’s made certain his inventory levels are being closely monitored even while he’s being careful about his buying. “We’ve kept a tight lid on our inventory, and we’ve brought in only one new line,” he said. “As far as holiday purchasing is concerned, we’ve been conservative. We’re 3 percent off this year, but you could go into December at 3 percent off and still come out 20 percent off by volume.”

Samaras isn’t the only retailer being cautious about stock. “We’re buying fairly light, and not buying as much memo, because I don’t think anyone has a lot of memo to let,” said Butterfield. “Everyone’s trimmed their inventory, although we have a good supply of memo in our higher-priced section. Still, we think it’ll be lots of small sales for the season.”

Still other stores are looking to transform existing stock into holiday sales without having to expand their inventory. “I’ve been taking a lot of older inventory and redoing it, turning it into more modern pieces,” said Frost. “Certain stones, such as marquise, don’t sell as well as round, so I’m taking them and transforming them into necklaces and such for holiday. We have so much existing stock that isn’t turning, so it’s cost-effective to do this. You have to be creative.”

Reduced Marketing
Stores are also being budget-conscious and creative when it comes to holiday marketing. “We have vendor shows, and there’s little expense involved in that,” said Samaras. “We’ve also had a significant viral presence online with YouTube, Facebook and Twitter.”

Butterfield is taking advantage of the current bargain prices in radio. “We’re getting better rates because radio is hurting, so we’re spending less on radio, but our frequency is about the same,” he said.

For Nichols, spending a lot on holiday advertising just doesn’t make sense. “2010 is going to represent 60 years in business for us, so we don’t want to spend excessively during the holidays,” he said. “We’ll save that for next year and have a grand anniversary. And everyone knows Christmas is here. People will do what they’re going to do. So unless you’re a major player, you can get lost. Why spend the money to get buried in the mix?”

Cautiously Optimistic
Despite the conservative spending, however, most retailers are hopeful about the coming months. “I’ve been in business 37 years, and nothing has even come close to how horrible 2008 was,” said Arnell. “This year, I’m more optimistic. I don’t know if I’ll reach 2006 or 2007 numbers, but it’ll be better than last year.”

The Marketplace

• Round is the best-selling shape, with princess coming in second.
• 1-carat stones are top sellers, though sales of ¾-carat stones are also big.
• SI1 is still the most popular clarity, as customers continue to prefer to spend on color.
• G-H is by far the preferred color range.
• 14- and 18-karat white gold outsells platinum, though jewelers are predicting an upswing in platinum as gold prices rise. Palladium continues to trail far behind.
• The average price for an engagement ring, including stone and setting, is $7,400.