New category competencies evolve from marginal to mainstream - Wal-Mart Stores Inc., jewelry sales - Brief Article - Company Profile - Statistical Data Included

DSN Retailing Today, June 4, 2001 by Mike Duff

Any retailer would consider it an accomplishment to be the leader in a given product category-and by this measure Wal-Mart has much to be proud of. But the true sign of retail dominance is the ability to consistently generate new merchandising growth opportunities-the yardstick that puts WalMart in a class by itself.

The areas that have been most productive for Wal-Mart in the last couple of years are jewelry and appliances, plus gasoline to a lesser extent.

In jewelry, the story is one of consolidation, and the department has grown bigger than one might suspect. In 2000, jewelry represented about 2% of sales for WalMart Stores division, or about $2.44 billion. In comparison, the world's largest specialty jeweler, Signet, which owns Kay Jewelry in the United States, produced about $1.84 billion in sales in 2000. Zale, the top U.S. specialty jeweler, did sales of about $1.79 billion.

Wal-Mart has been repositioning its jewelry operation in discount stores and supercenters, both literally and strategically. Once buried in the middle of the store, the jewelry department has been moved to the front near the checkouts, so customers have to cruise by during most store visits. Wal-Mart also is featuring more and more upscale items. Recently, in a move bound to bolster jewelry sales, Wal-Mart Stores rolled out gift registries in its 2,600 U.S. stores. The gift registry is located in the jewelry department.

The gift registry is designed to be shopper-friendly. Customers follow simple steps on a touch screen to use the registry. Essentially, they establish an electronic wish list for the occasion they are planning. Thus far, bridal and baby shower lists have proved the most popular, according to Wal-Mart, but the registry is recommended for housewarming parties, bar mitzvahs, graduations, Mother's Day, Father's Day, anniversaries, birthdays and Christmas. Critically, weddings and anniversaries are bound to generate jewelry sales and more big-ticket purchases.

While the $2.44 billion generated in Wal-Mart stores sales is, to say the least, significant, it's only part of the treasure revenue the overall company commands. Wal-Mart's Internet subsidiary has a substantial jewelry offering, and jewelry is one of 11 main merchandising categories on its site.

Incidentally, jewelry isn't just available under the jewelry heading but under gifts as well, and various necklaces, pendants, etc., are regularly offered on the title page of its Web site. In the days leading up to Mother's Day this year, Walmart.com offered a 10-karat gold and diamond mom-and-child pendant for $29.99 and quarter carat diamond studs for $69.98 rolled back from $89. While the bulk of jewelry available on Walmart.com is under $100, engagement rings top out at about $3,000, indicating Wal-Mart isn't giving up on the more affluent customer in its on-line efforts.

The greatest changes in jewelry operations, and clearest indication of Wal-Mart's desire to consolidate its efforts, comes at Sam's Club. Last year, it ended a franchise agreement with Jan Bell and took over direct control of jewelry operations at its warehouse clubs. Previously, jewelry operations were limited. The company began expanding its scope with a rollout to all clubs that was slated for completion early this year.

Who is running the store isn't all that has changed at Sam's. The company added black fixtures to give Sam's jewelry presentation a more sophisticated look, and it dedicated labor, to make the operation more service-oriented than is typical among its competition.

Sam's Club also is making a play for the upscale jewelry buyer. For instance, at a club in Springdale, Ark., visited late last year, watches by Cartier, Breitling, Tag Heuer and Omega were priced at $3,444, $2,698, $2,249 and $1,749, respectively. Previously, Movado brand watches in the $500 to $800 range were the priciest timepieces found at a Sam'sClub.

An assortment of gold jewelry included a dozen gold diamond rings priced above $2,000. A white gold necklace mounting nine carats of diamonds was $5,617.

While not quite the business jewelry is, embroidery has become a key initiative at Sam's Club. The company has been rolling embroidery operations out to selected clubs and, as of March, to its Web site. The Web element gives the initiative particular reach. Once a service offered by neighborhood and downtown sporting goods stores, embroidery has become a more difficult service to find as mom-and-pop operators have given way to chains who are more interested in driving sales through volume promotions than by providing services.

The service should give Sam's an edge with those businesses that provide embroidered apparel as uniform garments for workers, but are too small to profit from the use of a dedicated service. Additionally, embroidery appeals to amateur sports teams who also may be expected to shop Sam's ain plreparation for the social events that fall in and around games.

"A lot of it is our business customers," said Melissa Berry-hill, a Sam's Club spokeswoman. For business customers who are too small for a catalogue service "this works perfectly." With our family members, many are into their children's Little League, for example. They want the embroidered hat or shirt, and we can offer enormous savings."