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Articles from STERLING SILVER JEWELLERY (866 Articles), BEAD JEWELLERY (132 Articles), BUYING GROUPS (88 Articles)

Although the news came as a surprise, the buying group heads met Pandora's exit with pragmatism
Although the news came as a surprise, the buying group heads met Pandora's exit with pragmatism

Buying groups hit back over Pandora

Pandora’s surprise decision to end its working relationship with Australia’s jewellery buying groups has been met by the heads of each group with a combination of shock, disappointment and pragmatism.

In the wake of Pandora Australia president David Allen meeting with Nationwide Jewellers, Showcase Jewellers and Leading Edge Jewellers last week to explain the reasons behind the decision for Pandora to “discontinue its partnership with buying groups”, all three groups have expressed concern about implications going forward.

Nationwide Jewellers managing director Colin Pocklington said, “I have written to Pandora advising of our disappointment that they have undervalued the contribution that we made towards our mutual Pandora business.”

Colin Pocklington, Nationwide Jewellers managing director
Colin Pocklington, Nationwide Jewellers managing director

Pocklington, who was unable to meet with Allen due to his attendance at a JAA board meeting scheduled for the same time, said he was surprised at the announcement.

“I assumed it was one of our regular meetings with Pandora staff,” he explained.

Joshua Zarb, general manager for Leading Edge Jewellers, was also caught by surprise. “The news came as a bit of a shock. We had been talking to Pandora up until the time they notified us and there was no advance warning given by Pandora for what was about to occur,” he said.

“As a buying group we lose some revenue as a result of Pandora dealing direct with our members, however, as a group we are quite fortunate that we didn’t rely on Pandora as a major income stream.

“It is one of our major suppliers but at the end of the day, less than one third of our members have accounts with Pandora. And because of the growth in membership last year, it will be a short-term impact,” Zarb explained.

Carson Webb, general manager of JIMACO Ltd, the operating company of Showcase Jewellers, was also caught unaware.

Joshua Zarb, Leading Edge Jewellers general manager
Joshua Zarb, Leading Edge Jewellers general manager

“The recent decision by Pandora to withdraw from the existing supplier agreement with JIMACO and others [Nationwide and Leading Edge] is a business and positioning move,” Webb told Jeweller.

“Clearly, and for some time, Pandora has refined, or has been refining its business model and will fully control its relationship with retail partners. It’s all business; we need to retain our very robust relationship with Pandora Australia and accept that while, as a group, we may not like the decision, we also cannot change this decision,” he added.

Pocklington was just as pragmatic about Pandora’s decision.

“It has made us realise that suppliers are not aware of how much finance we provide to members buying their [supplier] products. Our Range Development Finance, which allows members to spread purchases over six months, interest free, is a seamless process with almost no paperwork needed.

“However, suppliers are totally unaware that their invoices have been financed by Nationwide over six months, as they are paid in full and on time every month,” Pocklington said.

He explained that Pandora’s decision made him realise that Nationwide should “look at producing a report for suppliers showing how much of their business with us has been financed over six months”.

Carson Webb, general manager of Showcase Jewellers
Carson Webb, general manager of Showcase Jewellers

Zarb also commented on how buying groups supported members and suppliers.

“I hope Pandora comes to realise how much effort the buying group and the members have put in over the last seven to eight years to assist them with large orders, extended terms, cash flow and we do all of that and more. That will be the biggest loss to our members and I hope Pandora still works with retailers in the same way the buying group does.”

Moving forward

News of Pandora’s decision emerged last week after an email was sent to Pandora franchisees and independent stockists.

In the email, Allen stated, “As our business and the structure of the business changes, it is necessary for us to consider the partnerships within the network.”

Along with Pandora’s revised strategy, effective 1 July 2015, the company will also introduce a new discount structure. “All partners [stockists] will receive a settlement discount of 4 per cent for accounts that adhere to our current trading terms,” the email read.

The new terms will apply across-the-board; meaning retail stockists who are not buying group members will also receive the discount.

“At the end of the day, Pandora has had a fantastic year with our group and throughout the industry. Even though Pandora has made their decision I still want Pandora to be a major part of our [members] business and get the best result,” Zarb told Jeweller one day after a Leading Edge member conference where the topic was widely discussed.

He said he advised members that it should be business as usual and to continue to use Pandora as they currently do because it still represents a major part of their turnover.

Commenting on how Showcase would move forward, Webb said, “The business of selling diamonds and fine jewellery is what we have direct control over. We embrace it and to a large degree, as retailers, control it. We believe and feel confident that our members have the experience, skills, the vision, technology and the team to do so, and do it brilliantly.”

Who will be affected?

Pandora currently operates 15 company-owned stores in Australia and New Zealand and has 85 franchisee stores; the company has been refining its retail operation for some years.

In February 2011, Pandora created industry-wide controversy when it announced it would close the accounts of 100 independent jewellery stores – or what Pandora calls its “multi-branded partners”.

Then, 12 months on, in January 2012, the company announced another rationalisation when the accounts of a further 100 stockists were closed.

While Pandora declined to provide details on the total number of its Australian and New Zealand multi-branded partners (comprising those that are buying group members as well as those that are not), Jeweller estimates it to be between 300 and 400. 

Traditionally, the business agreement between a buying group and supplier is one where members order their own product from a supplier, and the buying group acts as a centralised billing or payment service for that supplier. The group in return receives a discount of around 8 per cent – about half of which is passed on to the individual members.

Of the three groups, it’s believed that Showcase will be the most affected by Pandora’s decision.

Although Showcase is Australia and New Zealand’s second largest buying group by store count (288), Jeweller estimates that around half of its member’s stores (140) stock Pandora.

On the other hand, Nationwide accounts for 500 stores across Australia and New Zealand, however, its Pandora stockists number is around 110 stores – or 22 per cent.

The numbers for Leading Edge are lower again given it’s the smallest of the groups. While its membership base grew last year by more than 20 stores to 182, Jeweller estimates that around 50 Leading Edge stores are Pandora stockists.

Jeweller also estimates that in addition to the 300 buying groups’ stores, Pandora product is sold in approximately 100 stores that are not associated with buying groups. This indicates that the buying groups represent the major portion of Pandora’s retail locations (75 per cent) outside of the company-owned stores and franchisees.

What’s more, anecdotal evidence would suggest that the average annual turnover of Pandora jewellery by Showcase stores would be greater than the average of the other groups because Showcase had had the longest and closest relationship with the Danish brand. 

A key to the continuing evolution of the Pandora phenomenon might be explained in Allen’s email to all stockists regarding the company’s concept stores (franchisees). It described the volume of business for concept stores as “increasing significantly over the past three years” while the volume of business from independent stores, which are not associated with a buying group, “had been significant”.

Pandora Australia’s most recent financial results, released in November 2014, recorded a 15.6 per cent rise in revenue to DKK153 million (AU$29.4 m) and a same-store sales increase of 22.9 per cent in the third quarter of 2014 compared to the corresponding period of the previous year.

Allen’s email stated, “We continue to maintain a balanced approach to our [distribution] network, and we continue to be committed to all of our distribution channels and partners. We are actively working with our multi-branded partners to that end and they will continue to be an integral part of our business.”

More reading
Pandora jewellery drops buying groups

Background reading
Birth of brand Pandora
The Pandora phenonmenon

Coleby Nicholson

Former Publisher • Jeweller Magazine

Coleby Nicholson launched Jeweller in 1996 and was also publisher and managing editor from 2006 to 2019. He has covered the jewellery industry for more than 20 years and specialises in business-to-business aspects of the industry.

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