Jewelers retail is a highly competitive sector in which sales and profitability depend on merchandising and marketing. The industry is composed of a mix of small, local independents that focus on craftsmanship and value-added services, as well as large chains that provide convenience and brand recognition. The largest companies generate about 45% of revenue. Competition comes from department stores, mass merchants and warehouse clubs, home shopping TV channels, and online retailers.
Jewelry is often a significant purchase, and jewelers need to balance offering an array of styles and price points with maintaining adequate inventory. This can be challenging given the limited shelf life of precious metals and gemstones and the high cost of purchasing and stocking merchandise. In addition, consumers are becoming more skeptical of the integrity of the product, and jewelers need to be transparent about sourcing, craftsmanship, and design.
Many jewelers also have to pay a lot of money to secure retail space and meet security and aesthetic standards. These expenses can quickly deplete cash reserves. Additionally, the nature of the business requires an expensive tool set, including grinders, a professional workbench, various gemological tools, hammers and mallets, a laser welder, scales and gauges, molds, engraving tools, burst drills, and beading supplies. This can easily cost a retail jeweler $10,000 or more.
While the upfront investment can be high, jewelers often find the benefits of the business outweigh the costs. For example, local jewelers are able to offer personalized and attentive customer service that is not always available at chain jewelry stores. They can also be more selective about the products they carry, selecting items that match the interests of their core customer base. Moreover, they can offer warranties and guarantees that are far more comprehensive than the warranties offered by big box and online retailers.
Knowing Your Customers is Key
A retail jeweler’s understanding of its customers is essential to the success of the business. Understanding their preferences, shopping habits, and communication behaviors is critical to creating a successful strategy. For example, if you understand that your core customers value sustainable sourcing and craftsmanship, you can use your marketing to communicate your commitment to these values.
Having a clear idea of your core customer base also helps you develop a pricing strategy. You can determine whether you want to price your jewelry to match or undercut your competitors or premium-price your items for a higher perceived value. You can also focus your marketing efforts on a specific target audience to ensure you’re getting the most return on your investment.
