Elizabeth Chatelain, President-MVI Marketing Ltd, JCOC & Co-Founder IADC, delivered a comprehensive presentation on the current & future condition of major fine jewellery retailers in the US under the title, ‘State of the US Major Jewellery Retailers’ at Mumbai. Let’s view-n-review the scenario!

Elizabeth set relation by focusing two things in the beginning, “You can shift away focus from US market that not getting enough profit.” Secondly she said amid major jewellery manufacturers, most probably they exports to US market, they do have concern about jewellery retail index, buyers confidence index-in short very much cautions about US retail, retailer, sales-n-buyer behaviour of the us, “You are in retail.” Here Elizabeth set a link and said at last everybody concern with the heath of retail.

Appeal:

“Our collective job is to bring back customer in to retail” Chatelain appealed on January 22, 2008. She emphasized on ‘collective work, efforts’ by keeping global jewellery industry interest in mind! Elizabeth wanted to say a health of major manufacturers, exporters of jewellery could remain fine only if US retail is in proper order-n-condition! In the same week, global mammoths get together including economist, political players, trade-n-industry barons and many…in Davos!

They addressed talk of the global town, in the round-table discussion under the leadership of Dominique Strauss- kahn, Head-IMF that of a US recession! Because the recession could be potential enough to bring rest of the globe under its influence! And therefore Japanese Prime Minister Yasuo Fukuda appealed in a keynote speech to the globe to go for a collective response to the recent turmoil. Defacto, the demand of an hour says to go collective!

Before the appeal to go collective job to bring back customer Elizabeth Chatelain presented the picture of US retail market, US consumer and US economy too! Let’s glance over US retail!

US Retail:

US retail is the second largest industry of the nation, in the term of establishments & employment.  $4.00 trillion worth the retail is employing about 12% of the total US employment with the per capital of around $12k.

It is known us that the US market is the largest destination for jewellery enjoying 45% share of the global diamond jewellery consumption and contribute about 19% global share for plain gold jewellery in value term.

Being a giant buyer of jewellery any uncertain in the US, may adversely affect the global manufacturing & exporting jewellery nations! According to KPMG, “Every 10% drop in JAF (Jewellery Affinity Factor) for the US shall result in US $7bn worth of potential jewellery market in 2015 getting eroded!”

According to Market esearch.com. ‘Consumers spent $62.2bn buying jewellery & watches, 6.5% increase over sales in 2005 of $58.4bn. ‘Fine jewellery segment grew up to 10%! Such potential market is projected by KPMG to be of worth $77bn by 2015, shall remain single largest jewellery market in the globe!

US retail today:

Every jewellery export player knows, jewellery sale in US is Seasonal, to eye on Christmas and Valentine’s Day-the largest spending occasions. Virtually every player right from US retailer & up to jewellery manufacturer of the globe get set to bag their pie from the season in US. Therefore let’s go through the holiday spending of the year 2007.
Overall ‘online’ sales up by 19% in 2007 then the previous year’s sales growth of 26%. Though few categories grew up on line, jewellery-watches were down! Barry Ritholtz wrote on December 26, 2007: ‘Real holiday spending was negative in 2007.’ Now look at the summery that says luxury goods segment grew by 7.1 that could be seen as a negative growth by -1.9% if we include jewellery! In the presentation Elizabeth said, ‘Jewellery Luxury grew 6% in December 2007 was 35% up in term of MoM.’ ‘Although the US market is sluggish or unsettle!’
She said sluggish because, she must have seen full page advertisements released by many retail players right from high to low end that announced maximum discount up to 70% or more! e.g. Bloomingdales released advertisements over 5 full pages in the NYT a section and announced 30 to 75% off!
Accordingly to Sherif Mityas, A. T. Kearney, ‘Stores are buying those sales at a cost of profit in the final three months of year! ‘Retail players have gone in the direction of heavy discounts to see back customer to step-up their stores!’

US consumer today:

What went wrong to US consumers who have been spending about 72%p.a. of national income! What factor stops their affinity to go on spending! All the answers are lying in the US economy today.
Let glance consumer behaviour until we reach to US economy today!

Elizabeth Chatelain delivered three dimensions of US buyer psychology

I:  “Buyer doesn’t spend unless feel right”
II:  “People instead of visiting restaurants go fast food!”
III: “There is secondary markets’ ‘e.g. Amazon.com, QVC TV shopping…”
‘Lux ranges are available at $99.’

According to CEO, Tiffany’s, ‘US spending likely reflected “a more cautions attitude “among customers about near-term direction of the economy’ today every customer is thinking before every spending. Wangfeng Zhou wrote, “There is growing evidence that even the well-heeled shoppers are beginning to tighten their purse strings!

Because of uncertainties ‘Cautions attitude’ is influencing on buyer shopping decision in US. The behavioral changes seen even in the last holidays, buyer waited until Christmas Eve, hopping announcement of more ‘off’ to make even a single purchase!
Buyer appeared on instead to drive a mall or any retail that to save $3 per gallon! This attitude pulled down sales at retail by 0.4% in December. Chatelain highlighted uncertainties in consumers’ mind about inflation, housing slump, tightening of credit, interest rate…

Defacto, US oil prices are low by 8% from their all-time peak perhaps, consumer preferred to go gas purchase in holiday! According to the derivation during November 01 to December 31, by Anthony DeMarco, ‘Excluding the gas purchase, holiday sales rose 2.4%, if we back out restaurant sales rose by 2% or a bit below the core rate of inflation.”

According to Associated Press Analysis, “Americans are increasingly falling behind on their credit card payment. Credit Card delinquencies & defaults are surging by “double-digit percentages.”
Today US buyer of ‘Spending Affinity’ is pushed in to “Cautions Attitude” because of near-term economic direction!

US economy today:

Let’s understand the US economy in two aspects:

1: Presentation: that delivered by Chatelain for 2008
2: Outlook 2008: by economists & analyst.

1: Presentation:

She presented about Zale: ‘Merger talk rejected by Zale’ in the year 2006.’ Another quotation is of Ed Hrebak, Sr VP-Sterling Jewellery: “We will be adding nearly 100 new stores this year”
By the above examples Elizabeth conveyed, ‘large multi product retail don’t worry about payroll.’ Elizabeth Chatelain said, “Economics is all about perception!’ She presented consumer surrounded several economical issues including ‘Housing-price.’ Equally Chatelain exhibited a picture of development & existing secondary market. Also said to watch out Friedman’s & Whitehall, ‘Their vendors are in trouble.’

Because of recent-term economical directions, ‘sales have become very challenging in 2008!’ According to Charleen Wuellner, Stanboard Crusiser, “2008 is survival of fittest.” These two views also have been referred by Elizabeth along with DeBeers, ‘DeBeers pulled back generic Ad!’  ‘Has godfather left the room?’

And therefore, she delivered related steps to be taken by the industry to avoid crashed down. One of the major step is ‘innovation’ that highlighted including to launch new trends e.g. to go Diamond studded silver jewellery! ‘May be we need to set the trend in silver or…’ She referred non-traditional metals that are not used much more in jewellery!

Another notable step she highlighted to face the peril is go ‘Generic Ad’ as ‘Media’- the most influencing factor.

She presented moderate picture of economy and to come-out or to keep appearance or to avoid crashed down the industry must get evaluated and must go for generic Ads! And, all these exercise to be carried on ‘collectively’ to bring back customer in to jewellery retail!

Zale in 2007 & 2008!

Zale, that get referred in the presentation of Elizabeth, ‘…Merger talk rejected by Zale in the year 2006’

Then, Zale’s announce in the year to sell Bailey Banks that get shaped up in the mid-November with Finlay Fine Jewellery that worth $200mn!

Zale’s sold-out Bailey Banks & Biddle divisions too! Both include 70 stand alone retail stores that cater high-end jewellery & watch spread in 24 states of USA! Zale’s adopted the way to return value to shareholders, the strategic way also to reflect confidence in the future…that slipped down sales by 9% during the November & December 2007! Resultant, the Board resolved in the January 2008, to shut down about 60 stores on or before March’08!

Bottom Line:

Media sources says few more corporate may go the ‘strategic’ way that to shutter-down their stores in ’08 that also could be counted in multiple of dozens!

Dead End: “I believe that US corporate profits will decline by 5 to 10 percent in 2008.”
-Jeff Humphreys, Economist: on Jan 11.

2: Outlook-2008:

Background: until 2007!
According to CPB Netherlands Bureau for economic policy analysis about ‘The European economy in the medium-term’ released in the May 2002 that analyzed up to 2010, “Potential output growth in the US is projected at 3.25% p.a. up to 2010. Hourly productivity in the American economy increases by slightly more than 2% & potential employment by a bit over 1% p.a.”

In the month of July 2003, I inked two stories one about ‘growing Indian rupee’ and another ‘US: a bubble like economy!’ I wrote: ‘I think the continued dollar value is rectified.’ ‘…the rectification will be continued until rupee is under-valued according to darkner, rupee will rise slowly & up to Rs.40 by 2007 to a dollar!’ Later I inked, ‘India in global village: 2007’ wide in a three chapters in March 2004, I wrote: “by 2007… China will be in a hot water of inflation. There by have to push down dollar by evaluating their currency. China will do else will face hot inflation.”
China evaluated Yuan, far before 2007 that were firmly fixed @ 8.28 to dollar since 1996. That happened because initially US dollar was overvalued. In the global village no ‘over’ valued material is valid.

Along with the several causes of ‘over’ & ‘over-valued’ is the prime cause of the US recession. On January 11, 2008 Economist Jeff Humphreys said for the topic: ‘The 2008 Economic Outlook for Columbus.’ He referred existing home price grew during 2001 to 2006 were about 55% nationwide & doubling in Florida! He talked about ‘over.’ Andrew Lipsman said to JCK on January 07, 2008: “The declines are likely a function of two things. First, jewellery & watches saw unusually strong 2006 holiday season…” the jewellery & watch category recorded a 66% growth in YoY term!

When Elizabeth talked about ‘collective job’ in India, Fed announced rate cut in the same week by three quarter point in US interest rate. During the same week Davos get focused over US economy & recession! According to Nouriel Roubini, “The recession is going to be deeper & lasting at least four quarters… It’s going to be a severe recession.” “The Fed’s rate cut this week was ‘too little’, ‘too late’ to stop consumer led slump in the US economy since American consumer were ‘shopped-out’ laden with heavy debts and the financial system was under severe stress.’ Stephen Roach, former chief economist Morgan Stanley said: “It was likely that consumer spending would fall in this way, although over several years, and that this was a necessary adjustment from behaviour that had become unsustainable.” “We have used the overvalued home like an ATM machine, and in doing that we have taken debt loads up to record highs. None of that is sustainable. So we have got to take the excess out of consumption.”

Synopsis:

Stephen focused on ‘behavior’ that became ‘unsustainable’ resultant tumbling consumer spending! Initially, US consumer spending from 67% that they grew up their spending habits up to 72% of national income during over recent decades!

Buyers get shrink as they fill heat: “Buyer don’t spend unless feel right!” Now, Roach’s finding says: “If spending patterns now fell back to historic levels (67%) in a year, it would be the mother of all recession. “Ronbini also refers the recession: ‘consumer-led-slump.’ Elizabeth Chatelain says: “Our collective job is to bring back customer in to retail”  Apart from the several required steps that to be taken to up-grade the retail industry US including “innovation” Chatelain said more about, The vacancy for the post of ‘Godfather’ the required quality & qualification is to be capable enough, at least able to go releasing ‘Generic Ads’, that to be filled up by the global industry player.

Now the real issue is who could step up to the vacant seat left by DeBeers?

According to Elizabeth, small or individual jewellery retail player could not go to media to divert their advertisement. Even if, looking at retail industry profile in US one can understand that single stores acquires business establishment grater than 95% and contributes less than 50% of all retail store sales! All together single stores holds about 11.78% establish of the total establishments accounts for retail trade in the US!

On the other hand during Qs’ session to Chatelain, good listener, gentlemen put the question…why we exporters here to go for such generic advertisement which may not be good for our expert health!

Though US in a hot water of economics & recession, every global player do express their worry and need to go collective from global platform that to save global economic slowdown or recession perhaps, when they return local, start thinking to find out other available options to save or protect their home economy and to be saved from the global recession!
This is to say every concern players, it is true everybody is a retailer is said by Elizabeth, whatever be the economics in the US, their jewellery affinity is capable enough to set US a single largest global market until 2015! Now dear players, it is up to you!

Well, if you think global I could go ahead to say who could be seated on the vacant chair of DeBeers!

I think global players and federations should take lead to form a global federation to go generic advertisements just not to shootout the recent recession peril but also even in long run too and just not to play a limited role but precisely the demand of the hour says, to carry on many activities. I think widely it is expressed in the global gems & jewellery market vision 2015 a GJEPC-KPMG report to go for unify body such as ‘World Jewellery Federation’

Bottom Line:

Not only Diamond Sector but also the global jewellery sector is transforming too. This is the time period- the years 2008 & 2010, where every player should manage their role-n-space in a strategic way to enjoy specified supremacy. Those who lost ground will be out of the seen are saying the rule of ‘Hyper Competition!’