Upscale jewelry retailers widened their marketing target to reach free-spending consumers during the bygone economic boom, but the reversal of fortunes have caused many consumers to postpone such purchases.
"The masses have gone class by making diamonds more affordable to people at all levels of the income spectrum, and the classy jewelers have reached down to the masses a bit," says Don Ziccardi, CEO of New York agency Ziccardi Partners Frierson Mee.
But in tough times, high-end jewelers usually don't slash prices, unlike other luxury retailers that have responded to the recession with deep discounting (see story on Page S-4). Jewelers not only risk tarnishing their own cachet by discounting their merchandise, but they can't win a price war against discounters like Wal-Mart Stores, which industry watchers say is now the nation's leading seller of diamonds costing around $100.
Discounting "becomes a downward spiral ... and as soon as they start discounting, people wait for the sales ... With luxury jewelry, some of what you're paying for is the exclusivity, and part of that exclusivity is bolstered by the price point. ... Discounting is completely inconsistent with maintaining their image," says George Fertitta, president-CEO of MDC Communications Corp.'s Margeotes/Fertitta & Partners, New York.
So until jewelers can reassert their class-to-mass push, many of them are more narrowly promoting their quality, exclusivity and cachet message to consumers who can still afford to buy such baubles.
quality more important
"I think that quality is more important than ever right now," says Mr. Fertitta, whose agency has handled luxury brands including Baume & Mercier watches. "I think cachet is just as important, but cachet because people believe there's value there, not because it's just a name."
Most national jewelry chains have trimmed their ad budgets slightly as consumers have pulled back on purchases. But jewelry retailers are generally maintaining advertising in carefully targeted magazines and national newspapers such as The New York Times, media buyers say.
"Upper-end jewelers are using media more strategically than they were a year ago," says Dene Callas, co-managing director and chief strategic officer for MediaCom, the New York-based media agency of Grey Global Group. "They have tightened their focus to more specific groups and are using more direct mail, catalogs and database marketing."
All jewelers were hit hard by the recession, and many report that store traffic virtually disappeared last September and October after the terrorist attacks, forcing many to invent new marketing strategies.
Their last-minute pre-holiday efforts appear to have worked, because Christmas season sales surged, and momentum continued through Valentine's Day, says a spokeswoman for the Jewelry Information Center, a non-profit trade association representing the fine jewelry industry.
Zale Corp. heavied up on spot TV commercials to promote diamonds in elegance-tinged Valentine's Day-theme advertising. The nation's No. 1 jewelry retailer last month reported a 1.4% increase in same-store sales for the quarter ended Jan. 31. Zale sells jewelry under its own name as well as through chains such as Gordon's Jewelers and Bailey Banks & Biddle.
Mr. Ziccardi cites Tiffany & Co. as a retailer that has cultivated a very exclusive image but has steadily invaded shopping malls to reach a wider clientele. Since 1997, Tiffany has boosted its number of U.S. stores by 57% to 44, and two years ago introduced a Web site (tiffany.com) where it does a brisk business selling items online for less than $500.
Like all jewelers, Tiffany saw its sales flatten last year, last month reporting a 2% decline in fourth-quarter earnings vs. the previous year.
But in general, its broader-market strategy had paid off, with worldwide sales increasing 13% in 2000, says Mark Aaron, VP-investor relations. In daily print ads in The New York Times, Tiffany advertises items ranging from $200 to $100,000; the company also advertises in upscale fashion and lifestyle magazines. Tiffany handles most advertising in-house.
"We believe advertising a wide range of price points helps build long-term relationships with people, including among those who merely aspire to be Tiffany customers," Mr. Aaron says.
But Mr. Ziccardi says Tiffany is making a mistake.
"By making itself accessible to the lower end, Tiffany has watered down what was once a truly exclusive brand-there's no going back," he says.
The House of Harry Winston has only two stores-one at its New York headquarters and one in Beverly Hills, Calif.-but even this top-of-the-line jeweler isn't ruling out the idea of opening more stores when the economy improves. For now, it must grapple with the "anxiety threshold" that its customers suffer when they encounter jewelry prices ranging from $6,500 to $10 million. Harry Winston caters to people with a net worth exceeding $2 million, and even some of these folks "quiver with fear" when they enter the store, says Jim Haag, global marketing director and U.S. sales director.
To address that problem, Winston last November introduced a print campaign from Laspata/Decaro, New York, featuring a close-up photo of a beautiful woman and the theme, "Talk to me, Harry Winston ..."
sales pick up
Privately held Harry Winston won't release its sales figures, but Mr. Haag says sales have picked up in the first quarter of 2002 and the company is developing expansion plans.
A major part of Winston's brand strategy involves getting celebrities to wear its items at major televised entertainment awards ceremonies, says Mr. Haag. The company uses faxes and e-mails to tell its customers which items celebrities will wear to such events.
Mainstream jewelers feared precipitous sales declines after the events of Sept. 11, but Diamond Trading Co. says its fall campaign, which began before the terrorist attacks, helped avert such a downturn for jewelers. The campaign from WPP Group's J. Walter Thompson USA, New York, spotlighted three-stone diamond necklaces.
Planned to symbolize the past, present and future, the three-stone necklace concept was promoted to jewelry retailers and advertised via print and TV, says Joan Parker, a director of the Diamond Trading Co.'s Diamond Information Center. "TV spots for three-stone necklaces broke on Nov. 3, and although store traffic had been very dead before then, retailers reported an immediate jump in sales," she says.
The events of Sept. 11 may even have given the jewelry industry a little lift in the midst of recession, as couples moved up engagements and weddings, and other planned purchases of jewelry were hastened in an uncertain world.
"Simple items that made a statement-diamonds, hearts and symbols of life and faith-sold unusually well, and we think that's going to continue this year," says the the Jewelry Information Center spokeswoman. "After a slowdown, we believe jewelry sales are slowly coming back to normal, but there will be more of an emphasis on sentiment, emotions and simplicity for the rest of the year."