If the revenue for the period is estimated to be $3.8 billion and IBISWorld’s report estimates Michael Hill as having 8 per cent of the market then that equates to sales of over $300 million. However, Michael Hill’s revenue in Australia is around $250 million, which makes its market share less than 6.5 per cent so we asked Estes to explain the error especially given IBISWorld sells other reports on Michael Hill specifically.
To be fair to Estes, he conducted a thorough investigation on this error and provided a detailed explanation, but at the end of the day it fell down to, “The analyst has misread the report and used NZD figures [New Zealand dollars], but is now aware and will amend.”
That will come as no surprise to Philip Taylor, chief financial officer Michael Hill, who was aware of the errors in the report before Jeweller contacted him.
“Yes, I purchased the report only to find that the data about our company was wrong. I also recognised quite a few other errors which is very disappointing given that we paid $800 to use the report for market analysis,” Taylor said.
Colin Pocklington, managing director Nationwide Jewellers, Australia and New Zealand’s largest buying group representing 513 stores, says he’s been disappointed in the IBISWorld reports for many years, so much so that he disregards them completely.
According to Pocklington, you only need look at the report’s opening definition to conclude IBISWorld has little knowledge of the current industry.
“They give the industry definition as retailing a ‘broad range of watch and jewellery products along with tableware, glassware, cutlery, cooking utensils, clocks and other goods’, which may have been true in the 1960s and 70s, but almost no [jewellery]stores sell tableware, glassware, cutlery and cooking utensils these days except for a few country stores,” he said.
The observation is correct, but Pocklington points to more substantive errors.
Michael Hill Jewellers has around 140 stores in Australia and IBISWorld records the company as having 8.0 per cent of the retail market. On the other hand, James Pascoe (Prouds, Angus & Coote and Goldmark) has over 460 stores and is listed by IBISWorld has having 12 per cent of the market.
“So that means that although Prouds has more than three times as many stores as Michael Hill, the size difference only translates to an increase in just half the market share of Michael Hill – 12 per cent compared to 8 per cent,” Pocklington said.
It implies that Prouds stores have only half the annual revenue of Michael Hill stores, which Pocklington says would not be accurate.
Pocklington suggests that some of the errors probably stem from the headline data being wrong. IBISWorld estimates the industry’s annual revenue at $3.8 billion, but Pocklington believes it to be far greater.
According to Pocklington, although the Australian Bureau of Statistics (ABS) stopped recording jewellery industry data in 2008, its final report had the annual revenue at $3.3 billion.
“The ABS data was also for fine jewellery stores only and did not include fashion jewellery or accessory stores. If, in June 2008 the ABS estimated $3.3 billion, and you add the enormous Pandora sales for the last few years which would add around $300 million into the market, and you add a modest growth especially if you keep in mind the year ending June 2010 was a very good year for the jewellery industry, I believe the revenue figure is more like $4.1 billion,” he explained.
Pocklington emphasises that the $4.1 billion excluded fashion jewellery outlets, “so I think the industry revenue is greatly understated,” he concluded.
After Jeweller raised the various concerns with IBISWorld’s Mike Estes, he began an investigation and quickly acknowledged that the report contained errors and was now making the necessary corrections and updates.
Estes responded to Jeweller’s criticisms by saying, “We are always looking for additional information and resources to improve the quality of our reports. I look forward to a constructive dialogue in the future and welcome any additional industry data that you might have which will inevitably make our reports better.”
He added that it might be prudent for IBISWorld in future to have a regular dialogue about the jewellery industry. Pocklington, who is also a Board member of the Jewellers Association of Australia, agreed saying, “They should use a panel of industry experts to advise, and lead their analysts in the right direction.”