You are probably familiar with the mob scenes at retail stores in the U.S. as doors open for Black Friday shopping. As the year-end shopping season begins, stores offer low prices on many items. All over the U.S., mobs scramble for a limited number of heavily-discounted ‘door-crasher’ deals. This mayhem made me think about jewelry stores and the jewlery shopping experience.
You could argue that the very low retail prices that cause these Black Friday scenes are the core driver of retail sales. But that is not the full story. Although price is a key component in deciding on buying an item, the shopping experience is also a crucial factor.
The classic example is the Apple Store. Apple phones, computers, music players, accessories and other devices are far from being the low-cost option. With low-cost set aside, we know that the retail experience is, among other factors, a key driver for buying at an Apple Store. This retail experience complements other attributes associated with Apple products, such as quality of production, ease of use and status.
The heavy discounts and large volumes at a multi-item retailer differ from the jewelry retail experience and from many other forms of retail. A piece of jewelry, and a piece of diamond jewelry especially, is a luxury item. It is the antithesis of a heavily-discounted big-screen TV sold at Target.
A situation where large mobs come crashing through the entrance of a high-end diamond store should be avoided at all costs, because what that store is selling is not a mass-produced consumer product. Jewelry retailers in the U.S. and throughout the world are offering a unique and highly designed item that is made of rare and high- value components – gold, platinum and diamonds.
In our series on diamond retailing, we have looked at retailer demographics around the world, and at some of the large players in the industry and their impact on consumers. We have also looked at the profitability of the industry and have analyzed how specialty jewelers have fared in the last few years. Now, I want to take a slightly different look at our industry, and talk about diamond jewelry retailers who create a shopping experience that complements the special creations they offer their customers.
Although our product is beautiful and unique, we still compete in a crowded retail space. The shopping experience is a critical opportunity to convert potential customers into buying clients, and for some consumers, the experience may even be more important than the item itself.
It’s hard to talk about the shopping experience in the diamond industry without starting at the top. A small number of the world’s elite retailers set the bar. A walk into the Harry Winston Salon on Fifth Avenue in New York or the Chopard Boutique on Place Vendôme in Paris will transport you into a world of luxury.
The shopping experience for a customer at one of these elite locales emanates status at every turn. From the ornate doorways to the lavish window coverings, no expense is spared to present customers with the feeling of success and prestige.
There is a reason why Chopard’s Bond Street store set the record in 2013 for the highest commercial rent paid in Britain, and upper Fifth Avenue addresses command some of the highest commercial rents for any city. These stores sell some of the most expensive diamonds in the world to some of the world’s wealthiest diamond buyers. The vast majority of specialty jewelry retail stores serve a different customer base and cannot justify expenditure on gold-plated door-knobs.
For some, Tiffany & Co. represents the fusion of luxury diamond jewelry branding with Main Street access. Tiffany has established itself as a premium jewelry retailer, but also one that is more accessible to the public than Chopard and Harry Winston. Tiffany’s six-story Fifth Avenue flagship store draws in countless customers each year and is a key stopping point on a number of guided shopping tours to Manhattan.
The Tiffany Diamond, a 128.54 carat fancy yellow diamond was put on display on the main floor of the Fifth Avenue store in 2012 for the company’s 175th anniversary, where it remains today. This stone alone has become something of a tourist attraction in the city, and is the starting point for the Tiffany shopping experience.
But even the strongest luxury retail brands falter from time to time, and despite the great lengths taken to ensure an impeccable shopping experience, many established companies struggle to maintain customer loyalty. According to a 2012 study by the Luxury Institute, “Most luxury brands lose eighty to ninety percent of customers in any given year, and are deficient in retaining even half of their top customers.” What, then, are the less-established brands supposed to do? The majority of diamond retailers do not have the same level of ‘star appeal’ and must find other ways to draw in customers, often from within the same shopping center as their competitors.
Sustaining and Extending the Experience
In the last few years, specialty jewelry retailers have begun to realize that it isn’t enough to compete only on the basis of product offerings, but that they must also turn their stores into a place where customers want to come and spend some time. In a restaurant, for example, table turnover is considered a key success variable. It is generally considered advantageous to get customers in and out as quickly as possible so that more guests can be seated, and more revenue generated. Just the opposite is true for a diamond jewelry retailer.
Authors Jeffrey Stamp and Doug Hall revealed in their book, Meaningful Marketing, that “volume per purchase is 3.4 times more important than frequency of purchase in explaining the total amount that a customer purchases each year.” In other words, setting the scene for a luxury product is the starting point. Once in the store, the experience should be such that a customer feels comfortable buying more than one item.
Most of the larger chain stores acutely understand this. These stores are increasingly clean, modern and spacious. Jewelry display counters have been raised, taking into account the high-spending baby boomers who may not feel comfortable leaning over onto 0.8 meter display counters. Cold, intimidating security guards are either being eliminated altogether, or are being replaced by smiling, accommodating professionals, who convey a more welcoming attitude.
Canadian retailer Spence Diamonds is an example of a diamond store that understands the need to create a more interactive experience for its customers. Spence, which focuses largely on the bridal and engagement segment, employs an unusual strategy of all-open display cases, where customers can try on any one of the hundreds of ring styles available without the need for a staff member to be present. Sales associates do not stand behind display counters; instead, they walk amongst the customers and assist as needed. It is not uncommon to see dozens of excited young couples spending hours in the store trying on different rings and looking at diamonds up close through microscopes. This formula seems to be working as Lion Capital purchased the company earlier this year for an estimated $125 million.
Good sales staff need to know that for many consumers, diamonds are a very personal purchase and that the simple act of letting a person see what the piece will look like on her body is often enough to secure the sale. Sales people should take steps to keep interested customers in their store by helping them try on different pieces of jewelry. Customers appreciate being guided, not goaded into a purchase. Anyone with a smart phone can find a wealth of information on the 4Cs. A sales person who simply regurgitates this information has not helped the customer. What’s important is to find out how that ring makes her feel, not how it makes her think.
The large jewelry auctions held by Sotheby’s and Christie’s are a seemingly remote experience for most jewelry buyers, yet there is a lot to learn from how they sell a diamond. They carefully photograph each item. If there is a story behind it, usually an interesting previous owner, they share it, together with all the relevant information on the diamond’s characteristics.
When Sotheby’s recently offered the Blue Moon, they made a short video about it, took it to several different cities so potential buyers could view it, and made sure there was awareness of it. Then, the auction itself took place at a beautifully-designed auction room and they built up the mood slowly and steadily until the stone was sold for a record-shattering price.
While this is an experience we wouldn’t expect to see in a mall store, there is much to learn from it: creating a mood, creating awareness, and treating potential buyers in a manner complementing the unique items being sold.
Go to any shopping center anywhere in the world where there is an Apple Store, and you will most likely find a store full of people. While Apple is one of the most recognized brands in existence, the company has also figured out a blueprint for stores that can keep people entertained for hours.
Diamond jewelry retailers should create the right setting and mood, and provide enough information so that when a potential customer walks into the store, she feels comfortable making a purchase of several items while knowing the value of the diamond she purchased, with cost being a consideration, but not the overriding one. If diamond retailers don’t put in this extra effort, they risk being marginalized.
The views expressed here are solely those of the author in his private capacity. None of the information made available here shall constitute in any manner an offer or invitation or promotion to buy or to sell diamonds. No one should act upon any opinion or information in this website (including with respect to diamonds values) without consulting a professional qualified adviser.
Diamond industrialist Ehud Arye Laniado is a man passionate about diamonds. From his early 20s in Africa and later in Belgium honing his expertise in forecasting the value of polished diamonds by examining rough diamonds by hand, till today four decades later, as chairman of his international diamond businesses spanning mining, exploration, rough and polished diamond valuation, trading, manufacturing, retail and consultancy services, Laniado has mastered both the miniscule details of evaluating and pricing individual rough diamonds and the entire structure of the diamond industry. Today, his global operations are at the forefront of the industry, recognised in diamond capitals from Mumbai to Tel Aviv and Hong Kong to New York.
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