The American Economic downturn
While Americans continue to battle high gas, energy and food prices, retail sales in March, excluding automobiles, gas stations, and restaurants, dipped 0.9% unadjusted over last year and 0.3% from the prior month, according to the National Retail Federation (NRF). March retail sales released by the U.S. Commerce Department show total retail sales, which include non-general merchandise categories such as autos, gasoline stations and restaurants, increased 0.2% seasonally adjusted from the previous month and increased 0.1% unadjusted year-over-year. Retail sales at stores open at least a year fell by 0.5 percent in March, compared with a year ago, based on results from the 37 national retailers that report monthly sales, according to International Council of Shopping Centers. That was the weakest showing for March in 13 years.
America is truly at war again, this time with itself. The Gem and Jewellery industry of the US is just managing to keep afloat, some succumbing to the economic pressure. Leading jewellery retailers like Alpha Omega, Friedmans etc are closing shop. What does this grim picture tell the suppliers to US and what are the immediate steps that they should take to overcome this situation. TNJ Bureau spoke to industry experts and few retail jewellers from the US Gem and Jewellery industry to get a first hand information of the US market and the current economic condition.
America is truly at war again, this time with itself. The Gem and Jewellery industry of the US is just managing to keep afloat, some succumbing to the economic pressure. Leading jewellery retailers like Alpha Omega, Friedmans etc are closing shop. What does this grim picture tell the suppliers to US and what are the immediate steps that they should take to overcome this situation. TNJ Bureau spoke to industry experts and few retail jewellers from the US Gem and Jewellery industry to get a first hand information of the US market and the current economic condition.
Our bureau spoke to Ralf Kircher, Executive Editor of I N S T O R E - The Magazine for the American Jewelery store owner, and got his insights on the US retail situation. Excerpts from an online interview.
TNJ: The US Markets have witnessed similar downward trends earlier. How do you think is the economic cycle going to move this time?
That's really most up to the American consumers and their perception of the market. The more they hear the word "recession," the more they are going to believe it and the more likely it is to occur. We're hearing from some of our readers who refuse to admit that anything is wrong or different in the economy, and we're hearing from others who have been clearly impacted by an economic downturn. All of the experts we have writing for the magazine agree on one thing: That retail stores have to adjust their strategies to a shift in the market to survive. On the surface, this is a general rule that could be applied at any time in retail. In this case, it involves taking a very clear look at price points, fast-sellers and those products they can't sell. Then it takes adjusting their buying for the second half of the year accordingly. Our experts agree that any business that adjusts to the reality of the situation and is otherwise in good financial health will pull through this, perhaps ever stronger than before.
TNJ: The US Jewellery Retailer has been the largest buyer for the Indian Manufacturer. Do you think the US Gem & Jewellery Trade can sustain this status in time to come?
There should be no reason - except for the rise of Chinese jewelry manufacturing, perhaps - that Indian manufacturers should not see their market share sustained as long as they maintain or continue to increase the level of service and quality in their products. Now, an economic downturn may affect the numbers of orders, but it shouldn't affect market share. If anything, lower price-point items that experts are predicting will be more popular with consumers in an uncertain economy, may serve to increase sales from some Indian manufacturers.
TNJ: According to you, can there be something more that the Indian companies can offer to increase sales from the US Jewellery Retailers?
From the perspective of the independent American jewelry retailer, the best things Indian companies can do are offer a level of service and produce pieces that are of a quality level and style comparable or exceeding those of suppliers they currently use. This will hold true no matter what the economic outlook.
TNJ: Lastly, given the current market recession are the Jewellery Exhibitions & Trade Shows doing expected businesses?
I can't speak for other shows, but we have recently announced our first tradeshow. The INSTORE Show will be held in April 2009 in Chicago, and the response has been overwhelming. People are genuinely excited about a tradeshow run by the same principles of our magazine - building your business, becoming better educated and having fun while doing it.
"The consumer is running out of arrows in the quiver here," said Joshua Shapiro, chief U.S. economist at MFR Inc., an economic research and market consulting firm in New York. Unlike past recessions, when consumers could tap into their mortgage equity to support their spending, "you don't have that now," Shapiro said.
That's really most up to the American consumers and their perception of the market. The more they hear the word "recession," the more they are going to believe it and the more likely it is to occur. We're hearing from some of our readers who refuse to admit that anything is wrong or different in the economy, and we're hearing from others who have been clearly impacted by an economic downturn. All of the experts we have writing for the magazine agree on one thing: That retail stores have to adjust their strategies to a shift in the market to survive. On the surface, this is a general rule that could be applied at any time in retail. In this case, it involves taking a very clear look at price points, fast-sellers and those products they can't sell. Then it takes adjusting their buying for the second half of the year accordingly. Our experts agree that any business that adjusts to the reality of the situation and is otherwise in good financial health will pull through this, perhaps ever stronger than before.
TNJ: The US Jewellery Retailer has been the largest buyer for the Indian Manufacturer. Do you think the US Gem & Jewellery Trade can sustain this status in time to come?
There should be no reason - except for the rise of Chinese jewelry manufacturing, perhaps - that Indian manufacturers should not see their market share sustained as long as they maintain or continue to increase the level of service and quality in their products. Now, an economic downturn may affect the numbers of orders, but it shouldn't affect market share. If anything, lower price-point items that experts are predicting will be more popular with consumers in an uncertain economy, may serve to increase sales from some Indian manufacturers.
TNJ: According to you, can there be something more that the Indian companies can offer to increase sales from the US Jewellery Retailers?
From the perspective of the independent American jewelry retailer, the best things Indian companies can do are offer a level of service and produce pieces that are of a quality level and style comparable or exceeding those of suppliers they currently use. This will hold true no matter what the economic outlook.
TNJ: Lastly, given the current market recession are the Jewellery Exhibitions & Trade Shows doing expected businesses?
I can't speak for other shows, but we have recently announced our first tradeshow. The INSTORE Show will be held in April 2009 in Chicago, and the response has been overwhelming. People are genuinely excited about a tradeshow run by the same principles of our magazine - building your business, becoming better educated and having fun while doing it.
"The consumer is running out of arrows in the quiver here," said Joshua Shapiro, chief U.S. economist at MFR Inc., an economic research and market consulting firm in New York. Unlike past recessions, when consumers could tap into their mortgage equity to support their spending, "you don't have that now," Shapiro said.
World Jewelry Center Managing Director Bill Boyajian, shares his positive frame of mind with The New Jeweller Bureau on the economic cycle that US is going through. He sees an opportunity in this moment of adversity and also suggests improving the service levels to succeed in the prevailing market conditions.
TNJ: Your insights on the current economic slowdown.
BB: We all know that there are economic cycles in business and that such cycles are unavoidable. This said, while many companies are experiencing downturns in business, I have been impressed of late with those firms that are doing very well in the midst of a softer economy. What many view as a challenge, others view as an opportunity. I feel we will weather this cycle and emerge stronger than ever.
TNJ: Your take on the US Retailer in the current market conditions.
BB: Yes, I do. I hear a lot of talk about the US economy being so soft. What many people forget is that the US is still by far the world's largest economy and the world's largest retail jewelry market. Even with a slight downturn in the US economy, it still represents nearly half of global jewelry consumption. Some companies are re-directing there strategies to other countries. I feel that by the time manufacturers begin to market to other countries, the US economy will be on the surge again, and they may be left out.
TNJ: According to you, can there be something more that the Indian manufacturers can offer to increase sales from the US Jewellery Retailers?
BB: Service is the new mantra for all manufacturers, and as long as they can maintain, or even exceed, quality standards and provide excellent service, they will succeed. One of the values of participating in the World Jewelry Center in Las Vegas is the ease and convenience of access for retail customers. Our research shows that people don’t want to fly overseas as often any more, and they would like a "one-stop shop" in the US in which to do business. Our planned VIP Buyers Club for retailers further enhances our clients' opportunities. That's why I encourage all Indian manufacturers to consider purchasing office space in the WJC trade tower.
BB: We all know that there are economic cycles in business and that such cycles are unavoidable. This said, while many companies are experiencing downturns in business, I have been impressed of late with those firms that are doing very well in the midst of a softer economy. What many view as a challenge, others view as an opportunity. I feel we will weather this cycle and emerge stronger than ever.
TNJ: Your take on the US Retailer in the current market conditions.
BB: Yes, I do. I hear a lot of talk about the US economy being so soft. What many people forget is that the US is still by far the world's largest economy and the world's largest retail jewelry market. Even with a slight downturn in the US economy, it still represents nearly half of global jewelry consumption. Some companies are re-directing there strategies to other countries. I feel that by the time manufacturers begin to market to other countries, the US economy will be on the surge again, and they may be left out.
TNJ: According to you, can there be something more that the Indian manufacturers can offer to increase sales from the US Jewellery Retailers?
BB: Service is the new mantra for all manufacturers, and as long as they can maintain, or even exceed, quality standards and provide excellent service, they will succeed. One of the values of participating in the World Jewelry Center in Las Vegas is the ease and convenience of access for retail customers. Our research shows that people don’t want to fly overseas as often any more, and they would like a "one-stop shop" in the US in which to do business. Our planned VIP Buyers Club for retailers further enhances our clients' opportunities. That's why I encourage all Indian manufacturers to consider purchasing office space in the WJC trade tower.
Excerpts from the interview:
TNJ: March retail sales saw an overall 5% decrease and the trend shows further downfall in the coming months. What has been your retail experience for the last quarter?
Jimmy: We represent 30 family-owned independent retailers about 140 stores). Generally speaking our experience matches your data, although looking at individual member companies, a few are actually up, and several are down further than the 5%.
TNJ: What according to you should the US retail jewellery fraternity do to overcome or sustain during this moment of slow down?
Jimmy: Concentrate on marketing, take the time to implement all the great suggestions you've heard over the last few years that you haven't had time to work on. Concentrate on the customer base; be pro-active about birthdays and anniversaries. Hold special events at the store. Partner with charities and community service organizations. Touch the customer in any way possible. When they're ready to buy again they'll come back to the right store.
TNJ: The US Jewellery Retailer has been the largest buyer for the Indian Manufacturer. Do you think the US Gem & Jewellery Trade can sustain this status in time to come?
Jimmy: No. The market will become more global. As a middle class emerges in China, India and other developing countries they will develop appetites for luxury products, just like in the USA.
TNJ: What do you think should the suppliers especially from India adhere to maintain supplies to the US?
Jimmy: Vendors in India need to do to maintain their market share in USA, it's a very basic equation: QUALITY, SERVICE, VALUE. India's advantage has traditionally been low labor costs plus a favorable exchange rate. That advantage is dwindling--they will have to work harder to maintain the business. Areas of improvement could be improved customer service, more prolific styling, etc.
TNJ: Lastly how long do you think this situation of near recession will last in the US and what does the future hold for Jewellery Retail?
Jimmy: I don't put much stock in predictions and prophecies. The fact is that markets fluctuate. When business is great we would be foolish to think it will ALWAYS be great. Similarly, when business is soft it's foolish to think it's the end of the world. Personally I think the mood in the US will change around or after the election in November. Whether that will affect business positively is anyone's guess. My prescription, though, is for independent retailers to work hard on giving their customer a "luxury experience." Make that customer feel valued and "at home" in a way none of the majors can. Then they have a chance to be successful, whether the economy picks up or not (if not, they simply capture a larger share of the business that is being done--in other words, they take the business away from other jewelers).
Having seen their industry colleagues closing shop, TNJ Bureau spoke to Jimmy West, Executive Director of 'Leading Jewelers Guild' - the premier Jewellery Retailer's representative body established in the USA and to some key retailers of the US who have shared a mixed feeling towards the economy, but are still upbeat for the Indian suppliers and feel that patience will ultimately pay off.
Primarily, can you brief us a bit about PanAmerican Enterprises as a company?
Reply : Pan American Enterprises LLC is a gem & jewelry industry marketing company with 30 years experience in the gem & jewelry industry. Twelve years ago when G.L.D.A. Inc, the trade gem & jewelry industry promotion company which this year celebrated their 30th year of the "Tucson Show" began working on a Las Vegas Show, Pan American Enterprises was chosen to do all of their marketing for this new show. Pan American Enterprises has been associated with G.L.D.A. as their exclusive marketing company for their Las Vegas Show since the Las Vegas Show was just " a very good idea".
Do you think current downward trend in the US markets will enable the jewellery trade shows to accumulate the kind of business that they normally do?
Reply: I think that gem & jewelry shows are a necessary platform for companies to best show their merchandise, their ideas and to network with thousands of potential clients in a brief time period in a secure circumstance. The most successful buyers are busy in their stores and they know that they can "interview" hundreds of different companies with different lines in a matter of a few days, review hundreds of lines and the buyers can then have the "best possible" vendors for the merchandise that the need.
March retail sales saw an overall 5% decrease and the trend shows further downfall in the coming months. What has been the retail experience in the jewellery sector for the last quarter?
Reply: Yes, retail sales are down at this moment and probably will be down for the next 3 to 6 months. I think the important question is not " What has been the retail experience in the jewellery sector for the last quarter?"
But " what cana company do about this situation each and every day to get the best results from whatever business is in the pipeline. My wife and I just returned from Basel Show and we heard this question hundreds of times from exhibitors that we personally know. My reply to this question is to take control of the situation and take positive steps to work through this difficult situation. Better jewelry designs- more differentiated designs, better pricing, being prepared when clients ask prices and delivery on items, following through on clients requests, following up with customers each month building a friendly and trusting business relationship from the clients met at shows. The business continues to go to the best run, efficient companies that have good products at fair prices. .These companies outwork and out thing their competitors every day and these companies are not standing in the aisles at trade shows complaining about their fate. These companies are making their own positive circumstances. I continue to see every week and month that Gitanjali Gems Ltd / Gitanjali Group continue to purchase jewelry stores/jewelry stores in the U.S.A. I see that Tata Motors purchased Jaguar and Land Rover from Ford at the end of March 2008. I think that the quote from Marcel Proust of " The real voyage of discovery consists not in seeking new landscapes but in having new eyes" sums up my position on how to deal with the current circumstances.
What according to you should the US retail jewellery fraternity do to overcome or sustain during this moment of slow down?
Reply:
They need to be creative and unique in style and purpose.
They need variety and depth of merchandise.
They need good, exciting designs and fair pricing.
They need capable , knowledgeable sales associates.
They need to create a friendly and comfortable buying atmosphere where the buyers can buy and where the buyers want to buy.
They need strong product lines followed by strong marketing plans.
They need adequate capital reserves.
They need optimism, patience and they need to have a long term outlook.
What is your focus for increasing business at the GLDA Las Vegas keeping in mind the current economic environment?
Reply: We have many, many instruments in place to add value to the G.L.D.A. exhibitors that come to Las Vegas. The exhibitors are provided many marketing tools and many extra values in their situation with this G.L.D.A. Las Vegas Show that they do not receive at any other shows.
Lastly how long do you think this situation of near recession will last in the US and what does the future hold for Jewellery Retail?
Reply: Again, yes, retail sales are down at this moment and probably will be down for the next 3 to 6 months. However many companies are prospering even at this point in time. For the U.S this is an election year and election years generally bring prosperous times. We are expecting a weak summer followed by a very strong winter selling season. We are very optimistic that the near future will be very good for the jewelry industry industry.
Reply : Pan American Enterprises LLC is a gem & jewelry industry marketing company with 30 years experience in the gem & jewelry industry. Twelve years ago when G.L.D.A. Inc, the trade gem & jewelry industry promotion company which this year celebrated their 30th year of the "Tucson Show" began working on a Las Vegas Show, Pan American Enterprises was chosen to do all of their marketing for this new show. Pan American Enterprises has been associated with G.L.D.A. as their exclusive marketing company for their Las Vegas Show since the Las Vegas Show was just " a very good idea".
Do you think current downward trend in the US markets will enable the jewellery trade shows to accumulate the kind of business that they normally do?
Reply: I think that gem & jewelry shows are a necessary platform for companies to best show their merchandise, their ideas and to network with thousands of potential clients in a brief time period in a secure circumstance. The most successful buyers are busy in their stores and they know that they can "interview" hundreds of different companies with different lines in a matter of a few days, review hundreds of lines and the buyers can then have the "best possible" vendors for the merchandise that the need.
March retail sales saw an overall 5% decrease and the trend shows further downfall in the coming months. What has been the retail experience in the jewellery sector for the last quarter?
Reply: Yes, retail sales are down at this moment and probably will be down for the next 3 to 6 months. I think the important question is not " What has been the retail experience in the jewellery sector for the last quarter?"
But " what cana company do about this situation each and every day to get the best results from whatever business is in the pipeline. My wife and I just returned from Basel Show and we heard this question hundreds of times from exhibitors that we personally know. My reply to this question is to take control of the situation and take positive steps to work through this difficult situation. Better jewelry designs- more differentiated designs, better pricing, being prepared when clients ask prices and delivery on items, following through on clients requests, following up with customers each month building a friendly and trusting business relationship from the clients met at shows. The business continues to go to the best run, efficient companies that have good products at fair prices. .These companies outwork and out thing their competitors every day and these companies are not standing in the aisles at trade shows complaining about their fate. These companies are making their own positive circumstances. I continue to see every week and month that Gitanjali Gems Ltd / Gitanjali Group continue to purchase jewelry stores/jewelry stores in the U.S.A. I see that Tata Motors purchased Jaguar and Land Rover from Ford at the end of March 2008. I think that the quote from Marcel Proust of " The real voyage of discovery consists not in seeking new landscapes but in having new eyes" sums up my position on how to deal with the current circumstances.
What according to you should the US retail jewellery fraternity do to overcome or sustain during this moment of slow down?
Reply:
They need to be creative and unique in style and purpose.
They need variety and depth of merchandise.
They need good, exciting designs and fair pricing.
They need capable , knowledgeable sales associates.
They need to create a friendly and comfortable buying atmosphere where the buyers can buy and where the buyers want to buy.
They need strong product lines followed by strong marketing plans.
They need adequate capital reserves.
They need optimism, patience and they need to have a long term outlook.
What is your focus for increasing business at the GLDA Las Vegas keeping in mind the current economic environment?
Reply: We have many, many instruments in place to add value to the G.L.D.A. exhibitors that come to Las Vegas. The exhibitors are provided many marketing tools and many extra values in their situation with this G.L.D.A. Las Vegas Show that they do not receive at any other shows.
Lastly how long do you think this situation of near recession will last in the US and what does the future hold for Jewellery Retail?
Reply: Again, yes, retail sales are down at this moment and probably will be down for the next 3 to 6 months. However many companies are prospering even at this point in time. For the U.S this is an election year and election years generally bring prosperous times. We are expecting a weak summer followed by a very strong winter selling season. We are very optimistic that the near future will be very good for the jewelry industry industry.
The New Jeweller, also spoke to the organisers of the GLDA Shows - Pan American Enterprises and this is what Paul Page, Owner and Director of Pan American Enterprises had to share with us:
What if They Gave a Recession and Nobody Came?
Older baby-boomers will recognize that the title (above) is a takeoff from a popular bumper sticker in the late sixties: “What if they gave a war and nobody came?” The bumper sticker falls in there with other feel- good ‘60’s icons like John Lennon’s “Imagine” lyrics, and robed Hare Krishna types handing out flowers at airports. The point of the bumper sticker is to suggest that wars wouldn’t happen if the people fighting them (I guess that would be, soldiers), simply stayed home and didn’t play along with having a war. As a Poli Sci major, I’m not sure it works that way when it comes to warfare. But it might very well work that way when it comes to recessions.
Recessions can have many causes, but I think all economists would agree that if everyone is absolutely certain a recession is coming and makes economic decisions based on that belief, a recession probably will happen just from everyone preparing for it. It’s entirely possible that we’re about to have a recession— or may already be in one—that is entirely artificial. Or perhaps I should say “synthetic.” Given our industry, let’s call it: lab-grown. Classic business theory is to prepare for a recession by anticipating a drop in sales. If you know sales will be dropping soon, you’ll want to stock less inventory. Any expansion of your business should obviously now be postponed for a better time. New staff? Certainly not now. After the recession, maybe. Roll out a new marketing campaign? Well, it would be wasted if we’re about to have a recession. New product lines? Aggressive trade show schedule? Brand extension? No, no, and no. Not with a recession coming!
Maybe I missed the memo, but my sense is that the mainstream media began screaming about the impending recession six months ago when the economy was doing fine. Now, I keep talking to people in the trade and out, who are very worried about the coming recession (how can they not be, they see people warning about it on TV every night!), and are taking steps to prepare.
But what if they gave a recession and nobody came?
In the business world, a “recession where nobody came” means a business climate in which people simply refused to follow the common wisdom. A recession, to a businessperson, shouldn’t mean it’s time to hunker down, circle the wagons, and tell your kids they can’t go to college. It’s time to do the opposite.
In a recession, business as usual isn’t good enough. In a recession, you have to find new ways of generating profit. In a recession, you can’t coast on your prior successes. In a recession, you need to be doing more, not doing less. Most importantly, you need to be doing everything smarter.
The problem is that most people think of a recession the way they think of the weather. “It’s raining outside.” If it’s raining, everyone’s going to get wet. But a recession—strictly defined as two consecutive quarters with negative GDP—doesn’t need to affect you at all. If the economy is growing, say, at four percent a year, does that mean your business can only grow four percent? Of course not. It’s equally absurd to think that just because the economy may shrink slightly, your business is headed for the doldrums.
With the media heralding the coming recession from every roof-top and plasma TV, it’s almost certain to happen. But it doesn’t have to happen to you. Let them go ahead and have their recession. This time, let’s boycott it.
Older baby-boomers will recognize that the title (above) is a takeoff from a popular bumper sticker in the late sixties: “What if they gave a war and nobody came?” The bumper sticker falls in there with other feel- good ‘60’s icons like John Lennon’s “Imagine” lyrics, and robed Hare Krishna types handing out flowers at airports. The point of the bumper sticker is to suggest that wars wouldn’t happen if the people fighting them (I guess that would be, soldiers), simply stayed home and didn’t play along with having a war. As a Poli Sci major, I’m not sure it works that way when it comes to warfare. But it might very well work that way when it comes to recessions.
Recessions can have many causes, but I think all economists would agree that if everyone is absolutely certain a recession is coming and makes economic decisions based on that belief, a recession probably will happen just from everyone preparing for it. It’s entirely possible that we’re about to have a recession— or may already be in one—that is entirely artificial. Or perhaps I should say “synthetic.” Given our industry, let’s call it: lab-grown. Classic business theory is to prepare for a recession by anticipating a drop in sales. If you know sales will be dropping soon, you’ll want to stock less inventory. Any expansion of your business should obviously now be postponed for a better time. New staff? Certainly not now. After the recession, maybe. Roll out a new marketing campaign? Well, it would be wasted if we’re about to have a recession. New product lines? Aggressive trade show schedule? Brand extension? No, no, and no. Not with a recession coming!
Maybe I missed the memo, but my sense is that the mainstream media began screaming about the impending recession six months ago when the economy was doing fine. Now, I keep talking to people in the trade and out, who are very worried about the coming recession (how can they not be, they see people warning about it on TV every night!), and are taking steps to prepare.
But what if they gave a recession and nobody came?
In the business world, a “recession where nobody came” means a business climate in which people simply refused to follow the common wisdom. A recession, to a businessperson, shouldn’t mean it’s time to hunker down, circle the wagons, and tell your kids they can’t go to college. It’s time to do the opposite.
In a recession, business as usual isn’t good enough. In a recession, you have to find new ways of generating profit. In a recession, you can’t coast on your prior successes. In a recession, you need to be doing more, not doing less. Most importantly, you need to be doing everything smarter.
The problem is that most people think of a recession the way they think of the weather. “It’s raining outside.” If it’s raining, everyone’s going to get wet. But a recession—strictly defined as two consecutive quarters with negative GDP—doesn’t need to affect you at all. If the economy is growing, say, at four percent a year, does that mean your business can only grow four percent? Of course not. It’s equally absurd to think that just because the economy may shrink slightly, your business is headed for the doldrums.
With the media heralding the coming recession from every roof-top and plasma TV, it’s almost certain to happen. But it doesn’t have to happen to you. Let them go ahead and have their recession. This time, let’s boycott it.
While the entire country is crying recession, Jacques Voorhees, Founder & CEO - Polygon.net explains how to find new ways of sustaining profit during trying times.
Taking The Trade To New Dimensions
