Capitalizing on growth opportunities

By Andrea Hill, Strategywerx.com

A key consideration of any business strategy is to anticipate how external opportunities —economic, social, and political conditions—will influence the business in years to come. Here are some ways to turn future trends into bottom-line profit.

Target and Pursue Specialty Stores

Despite higher commodity and diamond prices and very little discounting at the end of 2011, specialty stores as a group posted higher growth than nearly all other jewelry retailers last year. For small manufacturers this is good news, because sales to specialty stores are higher margin with significantly lower risk of returns. But with no central buying office to sell to, small manufacturing firms who want to capitalize on this opportunity must revamp their selling behaviors and selling strategy. If your only sales efforts each year involve selling at a few major trade shows and a regional show or two, you will miss this market. Here are suggested action steps for tapping it:

• Pick your pleasure. Specialty stores come in several flavors: very high-end traditional, mid-range/family jeweler, bridal/diamond/ring store, low end, designer focus, and high-end boutique/gallery. Decide which flavor of specialty retailer is your target, then pursue that group with discipline and intelligence.

• Develop lists of stores. Cull trade magazines, blogs, trade show impressions, and any other sources to help you categorize and record store news and information, preferably in a CRM (customer relationship management) system.

• Map it out. Upload the data into software such as Microsoft Map Point or Maptitude, using different colored pointers or “push pins” to indicate different types of retail stores.

• Launch regional brand-building efforts. Target desirable areas with advertising and promotion. By intentionally choosing which type of specialty retailer to target, then tackling the market one region at a time, you can build your brand regionally—with less cash resources out and more cash-flow in along the way.

Take Advantage of the Family Jeweler Model

It’s tempting to think of the era of the family jeweler as the good old days, but those days are now. When you take into account the following ingredients: population growth, younger jewelry purchasers, more marriages, declining divorce rate, and longer life-span, and combine them with consumers who purchase more jewelry more frequently between the ages of 20 and 50 than their grandparents did, you get the ideal environment for strong family jeweler offerings. How can you participate?

• Differentiate your bridal line. If your bridal offering consists of a selection of rings that could be merchandised as either fashion or bridal, you are missing a significant opportunity. Focus on creating a tightly merchandised, design-differentiated line with a story that sells. Do not try to be all things to all brides. Today and tomorrow’s consumer is more interested than ever in uniqueness. If you closed just 0.1 percent (one tenth of one percent) of the bridal market you would sell 2,400 rings each year. So develop a look and a price point that is currently not owned by any other bridal firm, and figure out which stores your line will be important to.

• Do the same to your fashion line. Take the same advice in the paragraph above and apply it to your fashion line, because Gassman’s data shows us that brides don’t wait until they are 50 years old to buy more jewelry. Today’s female consumers buy more jewelry more often throughout their lifetimes, for themselves and their loved ones. And they’ll often return to the family jeweler to make those purchases.

• Create promotional opportunities for your retailers. Help your retailers merchandise and promote segments of your line for the increasing number of lifecycle milestone events predicted in Gassman’s data. You may release only a few collections each year, but you can create promotions around subsets of your collections at any time. For instance, you could send a plan-o-gram for a summer or cruise-season promotion on vow renewal jewelry (many vow renewal ceremonies take place on vacations). Highlight a portion of your current collection that is ideal for an older woman, and offer a few suggestions of items to buy from your catalog to supplement the promotion. Create a postcard as a store take-away. You can do different versions of this type of promotion for confirmation season, graduation season, or just-because “special occasion” promotions. The more creative you are about creating promotional opportunities for your retailers, the more likely they will be to offer your jewelry to consumers who wander into their stores looking for special gifts.

When you incorporate better merchandising, line development, and promotional support into your offering, you will cultivate devoted jewelry buyers who will be returning to their family jeweler repeatedly throughout the years of their longer marriages and longer lifetimes.

Be Quick to React to Trends with Exciting Merchandise

If you walked into your favorite clothing store and found the same items month after month after month, you would stop going. Americans shop for entertainment, and we’re good at it. The jewelry store has been a boring environment for many years, and while some retailers tried to solve that with wet bars and monthly parties, the Great Recession finally taught them that (1) it’s about the merchandise, and (2) it’s about the cash.

As jewelry specialty retailers finally develop their knowledge of leveraging overhead and deleveraging inventories, forward-thinking manufacturers will figure out how to produce and sell in ways that provide more new merchandise opportunities more frequently. 

This is an area in which small manufacturers can claim a significant advantage. Most small manufacturers are producing in the United States and Canada and can quickly react to market requirements and produce in small, efficient batches. Offshore manufacturers cannot. Using your newly developing market intelligence, identify retailers who are approaching their businesses like savvy merchants, looking for higher turns and more exciting inventory to entice buyers. There aren’t a lot of them yet, but their numbers are growing.

Kill the Sacred Cow

Of course, if you are going to move more merchandise more frequently, you’ll have to confront one of our industry’s favorite sacred cows. It is okay for brand and designer merchandise to go on sale occasionally. The apparel market depends on its bottom feeders to clear the racks and make way for new merchandise, and it has long demonstrated that there are buyers for both full-price and sale merchandise. Being on sale as a matter of course is poor business, because it erodes your margins. Promoting sales to develop new customers is unwise, because it cultivates customers who primarily buy on sale. But smart strategies to eliminate inventory ahead of new collections will help free up cash and clear display space for new product offerings. If you help your dealers develop exciting promotions around new product offerings, you will continue to cultivate customers who are eager to buy them. Regular new offerings of well-defined collections are your best defense against any brand erosion due to sale prices on your older lines.

Focus on Business Fundamentals

If exciting growth lies ahead, so does a lot of hard work. I tell my clients repeatedly to lay track ahead of the train because there’s no time to do it when the train is flying along at full speed. Take time now to imagine how you might change your business to incorporate these or other forward-thinking practices into your business, then assess what you must develop to be successful with those practices. Make sure you have the systems, expertise, and support you need to pursue a growth course before the growth takes off. That type of planning will make your growth more affordable, less risky, more profitable, and significantly more fun.