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Are flatter Christmas sales the new normal?

Sales data for the festive season continues to show relatively flat trading. EMILY MOBBS investigates whether this could be a new normal for jewellery retail.

In the wake of the Christmas and New Year period, Jeweller contacted a cross-section of the industry to discuss results.

The general consensus was that sales figures for Christmas-related purchases were on par with or just below those for the same period in 2015.

The three buying groups often present a good reflection of the wider trade given that they represent some 870 stores between them across Australia and New Zealand.

Nationwide Jewellers is the largest of the three groups and managing director Colin Pocklington said several of his member stores reported good customer traffic but a decline in sales when compared to the previous year.

Pocklington explained that this was due to a lower average sale, adding that items under $200 sold strongly.

“Whilst sales were down on last year overall, there were stores that performed well above the trend,” he told Jeweller. “There is no doubt that the flat retail conditions in Australia over the past five years have resulted in poor growth for the industry.”

Leading Edge Group Jewellers general manager Joshua Zarb also said overall sales results for the group were slightly down on last year’s figures. Zarb stated that, after speaking to several members, it appeared that the majority of stores experienced a 5 per cent to 8 per cent decline compared with 2015.

“I do know of a handful of stores that finished up well above last year – more than 40 per cent – and these would have impacted the overall group result positively, which is why we ended up at just 2 per cent down overall,” Zarb explained.

Meanwhile, Showcase Jewellers general manager Carson Webb said his group was pleasantly surprised by December retail results.

“Although they were certainly all over the place with individual stores or areas, the overall result was fair,” Webb stated. “We also tend to remove some of the key brands out of the total-retail results, as they’re obviously strong enough to review independent of the more general jewellery mix these days, and when we run those results we found we were actually 1 per cent up on last year like-for-like.”

Independent, chain review

Catherine Pevy-Trewartha from My Jewellery Shop at the Gold Coast echoed Pocklington’s comments, stating that the number of customers didn’t vary from 2015 but sales were a “little down” because consumers had less to spend.

A similar point was raised by Australian Retailers Association executive director Russell Zimmerman, who commented, “I am told by some jewellery retailers that the basket size was less this year; however, there was a higher foot traffic that allowed retailers to achieve budget.”

Zimmerman said that this trend was not evident for the wider retail industry: “I note that in general retail, particularly clothing and footwear, the opposite seems to be the case. It would appear that foot traffic levels remain subdued with only 16 per cent of all retailers reporting higher foot traffic than last year and basket size improving marginally.”

When asked about major trends or changes during the Christmas period, Pevy-Trewartha acknowledged that there was a shift in the type of jewellery purchased.

“We did notice a big change in the quantity of branded product sold as more of the brands have new, updated websites offering free shipping directly to the customer,” she explained. “We had a good increase in non-branded silver and gold jewellery, particularly earrings and silver rings.”

The co-owner of Allen Jewellers in Adelaide, Graeme Eckert, said retail-trading figures were the same as the previous year. In addition, Eckert noted an increase in men’s jewellery sales but also commented that custom-made work had doubled.

Another jeweller who experienced a rise in made-to-order sales was Chris Hood, owner of Hobart-based Metal Urges Fine Jewellery.

“The Christmas just past was almost identical to the previous year for us financially but the big change was that there were virtually zero retail sales off the shelf,” Hood said. “We’ve just seen an absolute decline in people buying off the shelf, which is partially driven by what we are offering as we’re making purely made to-order for each client.”

Garry Holloway of Holloway Diamonds in Melbourne explained that the business had an “exceptional” November, which resulted in a 2 per cent increase for the two months combined but December sales across his two stores were 5 per cent below the previous year.

Also reporting positive results was Judy Cameron of Cameron’s Fine Jewellers in Swan Hill, Victoria, who said she had a better-than-expected Christmas, up 7 per cent.

Cameron largely attributed the success to changing marketing strategies just four weeks leading up to Christmas. This included altering staff responsibilities to maximise their skills – the store manager, for example, now has control of online marketing.

Cameron said changing staff roles had made Christmas “way more productive and profitable”.

“We also were going into Christmas off the back of an ordinary year, and the changes we made have had a very positive effect on the business,” she added. “Sometimes you have to change everything if you want to go forward.”

From a chain store perspective, Bevilles Jewellers CEO Michelle Stanton told Jeweller that trading met the business’ expectations. There are 18 Bevilles stores across Victoria, NSW and South Australia and Stanton said there was a big rush towards the end of the Christmas period on engagement and diamond rings, as well as watches.

Retail chain Michael Hill also achieved a positive result with the company’s latest financial report showing a same-store sales increase of 1.3 per cent for the Australian market in December.

Offering another perspective on sales during the festive period was Michael Dyer, sales manager of software and consulting business Retail Edge Consultants. According to Dyer, whose analysis was based on data collated from approximately 300 jewellery stores in Australia and New Zealand, Christmas trading could be described as “disappointing”.

“Sales figures for December 2016 show a drop of 4 to 6 per cent on December 2015,” he said, adding that there were a couple of interesting trends. “Sales units were down in the 10–12 per cent range but this was offset a little by an increase in the average retail per item of 8–10 per cent. There was also an increase in sales dollars in fine jewellery – gold and/or precious stone-set jewellery – and there was a cost to generating the sales with a reduction in mark-up per cent achieved.”

Ring in the New Year

As might be expected, feedback regarding post-Christmas sales was varied. Hood said January sales for his store have probably been the strongest he has ever experienced. “But it’s the same scenario as Christmas – no stock (off-the-shelf) sales whatsoever and mountains of made-to-order,” he added.

Stanton reported strong Boxing Day sales, explaining that the additional public holiday on December 27 definitely assisted in boosting Bevilles’ results.

Cameron said her store’s Boxing Day sale and January sale were up on the previous year; however, she believed it was due to the good wheat and fruit crops in the region.

Pevy-Trewartha described the Boxing Day and January sales period as flatter than the previous year: “So many of the majors, department stores etc, went on sale by December 10; they were advertising ‘Better than a Boxing Day Sale.’”

The Michael Hill financial report also highlighted the discounting strategies of retailers during this period.

“Many competitors went on sale earlier than normal in December to try and bolster pre-Christmas sales; however, we resisted that trend and focused on maintaining good quality sales and gross margin in this critical period,” the statement read.

Webb believed that Boxing Day sales were a missed opportunity for some jewellers. He said that this specific sales strategy may not be successful for businesses located in particular regional areas but it was certainly important for stores situated in large shopping centres.

“There’s no doubt it’s still an area of potential growth but getting the formula right in store is not easy,” Webb added.

Pocklington said jewellers who promoted Boxing Day and January sales achieved positive results and Zarb stated that, anecdotally, retailers who had decided to run “aggressive” post-Christmas sales found this period very strong and better than expected.

“Whether it is a shame or just fact these days, it appears that many of our retail customers wait and hold out for the sales,” Zarb added. “It is a trend that is occurring globally and something that we all need to be ready for. I can’t see the major jewellery chains in Australia stopping post-Christmas sales in a hurry.”

The new normal

While it is difficult to predict how the next 12 months will unfold, industry feedback reveals that jewellers will more than likely need to re-evaluate business practices.

Webb suggested that the January sales period was staggered, having seemed to have started slow and then spiked nicely before falling away. He said trading would “hopefully go back to normal shortly – whatever normal is these days”, adding that there was definitely a “flat-lining” occurring in the industry.

“What I mean [by flat-lining] is that the sales spikes enjoyed over many years have flattened out more. December used to be about 24 per cent of the year’s sales; however, nowadays it’s not unusual to have it at 19 per cent and then an increased per cent of sales in some of the normal months. It poses some interesting challenges in buying habits,” Webb explained.

Dyer is another who touches on stock management and buying habits. “The patterns of 2016 may be the new normal,” he said. “Plan your buying carefully and cash-up your excess/old stock.”

Pocklington stated that there was no indication of improvement in retail conditions at this stage, with 2017 likely to be similar to 2016. However, he said despite a flat retail economy, there were still “significant” opportunities for jewellers to increase market share and capitalise on major trends.

Pocklington added his group would work with members to find ways to prosper in the ‘new normal’ economic climate this year.

Nationwide represents approximately 420 jewellery stores, while Showcase and Leading Edge represent about 245 and 208 respectively.


ABOUT THE AUTHOR
Emily Mobbs • Editor

Emily Mobbs is editor of Jeweller. She has more than 8 years' experience in trade publishing and reports on various aspects of the jewellery industry.

Independent Jewellers Collective (IJC)
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