On a Friday in late September of 2008, I used my three-hour drive home from New York City to call a group of close friends who owned jewelry stores and warn them that I was seeing extraordinary signs of an impending economic collapse, causing me to re-evaluate likely forecasts of Christmas sales in their stores. One of them chided me for being overly pessimistic, but promised to poll a group of about a dozen friends with whom she was having a getaway weekend to see how they were feeling about Christmas. She didn’t wait until Monday to report her findings. She actually called me in a panic that Saturday night to report that to her extreme alarm, every single one of them had simultaneously decided to put a halt on “extravagant” (read: Jewelry) Christmas purchases. Her subsequent sales that December were down over 40 percent, and average independent jewelry store sales were down about 35 percent nationally.
Coming to grips with the stock market plunge and the collapse of retail jewelry sales was really difficult for almost all of us, wasn’t it? And in early January of 2009, I remember with great clarity coming to the shocking realization that the American economy had taken a hit of massive proportions, and that we now faced a “new normal” that would continue for an indeterminate time. I did not then realize that the duration of this new, ongoing “recessionary environment” for jewelry consumption would span nearly 8 years. But fortunately, there is now overwhelming evidence that we are about to experience a breakthrough December. Indeed, two key data points were announced in late October that clearly show a massive shift in consumer sentiment.
The first comes from the annual Gallop poll of likely consumer Christmas spending levels, in which a statistically significant consumer group is asked questions about their gift purchasing intentions. In years past, Gallop’s data has been spot on in predicting Christmas consumption. This years’ forecast is the best since 2007, and misses the ‘07 mark by just one dollar.
Along similar lines, the recently reported Conference Board Consumer Confidence Index was off the charts - a whopping 125.9, registering the highest level in 17 years!
Something very special and very important is going on here. Barring a major terrorist attack, armed hostilities on the Korean peninsula, a major stock market correction, or some other unforeseen catastrophe, we are about to experience a Christmas “like the good old days”. And recognize that, just as when the economy gets a cold, the jewelry industry gets pneumonia, similarly when consumers go on a spending spree, we experience euphoria. But in order to cash in on the coming feeding frenzy, you had better readjust your strategy.
1) For most of you, bridal has become your central focus, caused in large part by the fact that affluent male shoppers have stopped spending money on big ticket jewelry. Many of you have recaptured and even exceeded past levels of sales and profitability by becoming the primary retailer of engagement rings in your local area. But the coming increase in jewelry purchases will not come from engagement rings, because nothing has changed there. Millennials will still fall in love, and get engaged, at the same rate. The increase will come, instead, from every other category.
2) If you’re still in the bead business, you need to realize that it’s tanking. What kept you in cash and customer traffic during the depths of the recession will not help you now.
3) In recent years, I’ve seen a shift in the relationship between advertising spend and revenues in December, in that this is the one month where advertising ROI has become almost completely elastic. Normally, there’s a limit to how much an advertising increase can drive a corresponding sales increase, but in recent years I see stores benefitting disproportionately from higher December expenditures. If you are spending less than 8 percent of revenues on advertising this December, you’re likely missing massive profits. But you’d better make sure you’re advertising the right stuff (and at the right prices!).
If you’re confused about what to advertise, focus on what’s being advertised on TV. When the majors are promoting an item, their advertising is like an aerial bombardment softening up an area that you intend to invade. So instead of having to fight your way into the consumer’s consciousness from scratch, all you have to do is show up after they’ve done 90 percent of the work with ads touting the same item, with the added benefit that it comes from your store, with your reputation for quality, value, and service.
And remember, many affluent consumers have seen their investment portfolios gain 25-30 percent during the past year. Even better, if the Republicans can get it together on tax reform (read Tax Cuts!), there will be even more consumption enthusiasm. The rising tide of this new economy has not lifted all boats, but it has definitely lifted the spending inclination of your target jewelry consumption audience.
Indeed, I urge you to take a look at your current inventory and ask yourself: “Do I have the better end inventory to handle a Christmas like 2007?”
God willin’ and the Creek don’t rise, this promises to be the best Christmas our industry has experienced in many years. I encourage you to prime the advertising pump. The word-of-mouth that you create this December will drive revenues and market share for many months to come. Be sure to send your tax accountant a nice Holiday Greeting card - you’re going to need him more than ever in April!