Like it or not, you are in direct competition with the Major Chains and Department Stores for engagement ring sales. If growing the bridal component of your business is an important objective, then the extent to which you’ll accomplish your goal will be dependent on the development of an effective strategy. In this article and the next, we will consider how to build that strategy.
We know from DeBeers focus group studies that when a pre-bridal female consumer starts to shop for her engagement ring (and according to the Knot, she now drives the purchase the majority of the time), she is likely to visit at least six stores. In a majority of cases, she will visit a Regional Mall, and nearly half the time, she’ll end up buying her ring from a chain store. This fact has prompted me to do extensive research regarding chain store merchandising behavior, in order to assist our customers in battling their chain store competition. And while I’ve taken a hard look at all of the various chain stores present in the mall retailing environment, for our purposes, let’s consider Sterling to be the archetypical mall jeweler.
They are demonstrably the best of the bunch, and operate under two basic retailing models: the “Kay” model (standard mall store operating under about 10 different names, but carrying the same merchandise), and the “Jared” model (free standing super store adjacent to the mall, in higher density population markets). Zales, Gordon, Helzberg, and Fred Meyer are also players, but to a very large extent, Kay is driving the merchandising train, so when we study them, we are also developing a parallel understanding of the others. And while Federated and JC Penny are also increasingly pursuing bridal, they also see Sterling as the 400 pound gorilla, so when you come to a clear understanding of what Sterling is doing, you have developed a pretty good handle on the rest of them as well.
One of the areas you need to understand is solitaires, and in order to help, I’ve created a matrix for your review represented in Figure 1. You’ll notice they start with the “Special Value” category. As you might imagine, these are highly included off-color stones. Special Value represents the lowest tier of an ongoing Good-Better-Best program. Above “Best” lies the Leo, a very pretty proprietary cut that takes advantage of extra facets to create a brighter, more “sparkly” diamond.
And then finally, at the top, is Tolkowsky. I watched the initial launch of this product into the first two hundred stores with great interest, since the move to introduce Tolkowsky provided a fascinating window into the thinking of Sterling’s senior management. You need to remember that Sterling has been kicking butt for quite some time. In fact, when you compare the performance of Sterling to the other Majors, it’s just a fact that year in and year out, in the same malls, with personnel drawn from the same labor pool, selling to the same audience, Sterling has been just plain better at what they do than their competitors. In many ways, Sterling is the “Apple” of chain store jewelry companies.
But as Sterling’s consistent market share advance has eaten up more and more of the “classic” mall store consumer group, they must have increasingly been thinking about where to go next to satisfy their insatiable market share appetite. One direction is downscale, but that way lies Wal-Mart. The other direction is upscale, and that way lies…You! And given a choice, who would you really rather compete against? The biggest retailer on the planet? Or a rag-tag group of charmingly delightful independent retailers with no collective game plan, uneven marketing, merchandising, and selling skills, and ownership demographics that, from an actuarial point of view, suggest that within 10 years, about half will be gone?
Yep…they picked You! And Tolkowsky represented the first shot over your bow, to see whether deployment of an ideal cut upgraded solitaire grouping would work. And it did, to the point where today, Tolkowsky is in every store.
If you aren’t selling solitaires, it’s not because solitaires stopped selling. It’s because you’re not selling them properly. If you look at Sterling’s merchandise mix, and you visit their stores and hear their selling scripts (as I have), what you’ll discover is that they are doing three basic things that are working:
1) For the size-is-everything shopper, there’s Special Value. The stones may be awful, but if all you want is the biggest stone for the money, this is for you.
2) For the consumer who actually wants something better, there’s the step up to Better-Best, which also entails a discussion about the 4-Cs. Here it’s just a matter of adjusting the Cs until you hit the right combination of price, stone size, and quality.
3) For the consumer who wants something better still, you’ve got Leo and Tolkowsky. Here, the discussion moves to the wonders of geometry. With the Leo, it’s all about how the magical positioning of those extra facets provides more scintillation. And with the Tolkowsky, it’s all about how putting the facets in exactly the right places makes for a much prettier stone.
So, armed with this knowledge, how do you compete most effectively? It’s surprisingly simple: by lining up your diamond solitaires, size for size and grade for grade, against theirs. For “Special Value” I suggest dipping your toe into the “Clarity Enhanced” waters (if you haven’t already). This allows you to sell a diamond that’s actually quite pretty at these sizes and price points, and it’s an extremely margin-friendly category.
For “Better” and “Best” I suggest you match their price points and clarities. If you don’t know the right characteristics, don’t worry. We do.
For Leo, you might consider bringing in a specialty cut diamond, if you haven’t already. Just avoid over-paying for specialty cuts. Remember, it costs less than 100 dollars to put 16 extra pavilion facets on a 58 facet brilliant, and the loss for doing so is typically less than 3 points, so if you’re paying a lot extra for a 74 facet diamond, perhaps you might rethink your source of supply. Just make sure that your specialty cut diamond lines up properly with the Leo price points.
And at the top, you really might benefit from consideration of an ideal cut program. No, Hearts on Fire isn’t going to help you compete against Tolkowsky. HOF is a wonderful brand, but in a world where price matters, you’ve got to consider alternatives for sourcing ideal cut stones that can actually allow you to create a program that will allow you to become price competitive with Sterling.
We have many of these things at Gems One, of course, as well as a consumer financing program to help you sell them (as well as everything else in your store!), so if beating the Chains at Bridal is important, give us a call. There are few categories that are more transparent than solitaires. Just remember: if you’re not selling them, then you have a wonderful opportunity to increase your store’s sales without cannibalizing an existing profit center. Having the right prices at the right qualities in your solitaire department also legitimizes the prices of everything else you sell. Get aggressive, and merchandise the right qualities at the right price points, and you may find a brand new revenue stream.
Of course, price isn’t always the key element in her decision about which ring to buy. There are a variety of other potential factors in her decision-making process, and if you can appeal to her romantic side, you may discover a massive attractor that turns on her buying reflex. Next month, we’ll take a look at a new strategy that may change the way we all sell diamond engagement rings.
George Prout is Vice President of Sales and Marketing for Gems One Corporation, and can be reached via e-mail at firstname.lastname@example.org, or at Gems One’s New York office at (800) 436-7787.