Gold rush - gold jewelry merchandising - Apparel Merchandising supplement

Discount Store News, Sept 18, 1995

For discounters troubled by the cloud that is hanging above American retailing, the silver lining may be gold.

As consumers increasingly view full-line discounters as acceptable outlets for fine jewelry, sales of gold in the tier are outpacing the vast majority of classifications available at these stores.

First half sales of gold jewelry (excluding 10K gold) at the discount store level increased 36 percent to $474.8 million in 1995 from the same period two years ago, according to research conducted by the World Gold Council. Unit sales for the first half of this year amounted to 13.7 million pieces, up 34 percent,, from the 10.3 million units sold during the first half of 1993. What's more, this volume is very profitable, with gross margins in the fine jewelry category typically in excess of 40 percent.

"It has grown significantly for us since we reset our floor two years ago. We upscaled the area, added gem stones and expanded the area as we changed our strategy," says Liz Levin, sr. vp, gmm for O'Fallon, Mo.-based Venture Stores.

At Green Bay, Wis.-based ShopKo, year-to-date fine jewelry sales are up 20 percent. On a comparative store basis, sales moved ahead 14 percent.

Most observers believe that the success of gold jewelry in this less-than-stellar retail climate is due to a fundamental change in consumer buying behavior.

"America has shifted its loyalties. First it was from the traditional jeweler to the department stores, and today it is to the mass merchant," explains Morris Dweck, vice president at Jacmel, a New York City-based jewelry manufacturer.

John Calnon, director of merchandise planning for the World Gold Council, agrees that the discounter lure is becoming more palpable to the gold-buying public.

"First of all, they may be reaching a customer who isn't a jewelry store shopper. But they are also reaching the crossover consumer who shops in various places. Discounters have been able to do that because they have established themselves as standing for quality and value," he says.

Discounters have been growing fine jewelry by incrementally layering on different items within the category.

The gold chain business is starting to level out as it matures in the discount channel, but other accessories are coming on strong. "Bracelets and earrings are hot," Levin says.

Information culled from the World Gold Council indicates that sales at Venture reflect the discount tier as a whole.

Sales, in dollars, of earrings were up 24 percent during the first half of 1995 compared to the first half of 1994. Bracelets surged 38 percent, gold wedding rings leaped 32 percent and gold rings stirred a 24 percent increase, according to the World Gold Council. Chains, which account for 38 percent of the dollar share of gold jewelry in discount stores, moved ahead nearly 11 percent.

Another category that appears to be a growth opportunity for mass merchants is 10K goods. Generally crafted into "big looks" that discounters say connote perceived value, 10K merchandise is the basis of expansion for many retailers and manufacturers.

"It's becoming a bigger piece of the business. It was just rings, but now it's in everything. Our growing gemstone business is a 10K business," says Levin.

Comments Andy Concool vice president sales for OroAmerica: "Our assortment of 10K has grown enormously because of the appeal of bigger looks at lower price points. As far as I can tell it will continue to grow at stores like Wal-Mart and Kmart."

But not everyone is as enthralled with 10K gold as Levin and Concool.

"I see 10K as an area of ambivalence," says Mark Hanna, president of Leach & Garner's international division. That's because he believes the bottom line potential is bigger in 14K items. "You have to look at return on investment, not just on gross sales," he says.

Ed Anderson, vice president at Princess Pride Collection, points out that "it's a Catch-22. You can bring in more transactions [with 10K jewelry], but the price points are lower."

Some retailers, like those at ShopKo, are still on the fence. "14K has been our strength. 10K is a small part of the business, but we are talking about moving more aggressively," says Skip Chustz, senior vice president and general merchandise manager.

The gold jewelry business may be shining on discount store floors, but maintaining the luster is at times complicated.

Traditionally an "on sale" business, retailers in the East received a jolt when, they were cited by authorities for staging what was deemed phony promotions. They were told that gold couldn't be marked at "70 percent off," for example, everyday.

Retailers got the message. Now they typically promote fine jewelry by subcategory.

"Jewelry remains a high/low business, but we have a very specific rotation for sales by category," explains Chustz, who was not involved in the government crackdown.

As mass market retailers find their way in the fine jewelry business, they'll undoubtedly hit some storms along the way. But the category has the potential to bring bright sunny skies to at least a portion of their overcast businesses.