The 34-page detailed report published by IBISWorld includes information about companies that no longer trade in the Australian jewellery industry, has wrong store counts and even has errors in financial analysis.
The most glaring error pertains to Sunglass Hut, which was attributed with having 160 stores and 2 per cent market share of the Australian watch and jewellery retail market. The only problem is that the business no longer operates in the jewellery industry, and has not done so since 2009.
A spokesperson for Sunglass Hut explained that while the company was winding back its ‘Watch Station’ business in 2008, it was certainly out of the industry by January 2009.
The embarrassing error is made all the worse by the fact that IBISWorld was made aware of errors in its previous report.
However, there was either no attempt to rectify the quality of the report or the analyst team could not indentify that Sunglass Hut-Watch Station was no longer selling watches. A simple visit to the company’s website would have highlighted the fact there is no mention of watches.
The error was therefore repeated in the current edition though Mike Estes, IBISWorld’s production manager, quickly acknowledged the mistake and has updated the report accordingly.
However, Estes had a number of other issues to investigate after being contacted by Jeweller.
History repeating
A number of other errors have been repeated in the current report after being included in the previous year’s report:
Zamels was listed as having a 1.5 per cent market share noting that, “Zamels has grown to almost 70 stores nationwide”. Zamels store count was listed in Jeweller’s 2010 State of the Industry Report with 100 stores. It has reached 102 in recent times, though it has fallen to 99 since the business was sold late last year, not 70 stores. IBISWorld could have updated its information quite easily by visiting the Zamels website which lists all 99 stores.
Salera Jewellers is another retailer that has been wrongly reported. The 2011 IBISWorld report lists the company as having 0.4 per cent of the market with 18 stores. Unlike Zamels, which was not updated for the 2012 report, the Salera information was updated - incorrectly.
“Salera operates around 30 stores across Victoria and Queensland,” the new report states, however Frank Salera confirmed that he has only 23 stores.
While Estes also confirmed these errors, he had more to contend with when it came to the major ‘players’ in the Australian jewellery industry. IBISWorld will be feeling a great deal of embarrassment given the company’s website proclaims it prides itself on providing “independent, accurate, comprehensive, and up to date research on over 500 industries”.
Numbers not adding up
The 2012 IBISWorld report estimated the jewellery industry’s revenue at $3.8 billion. It also correctly lists Prouds Jewellers, or more correctly James Pascoe Ltd, as the largest retailer by market share. James Pascoe also owns Angus & Coote and Goldmark Jewellers, however the company is privately held and therefore its financial data is not on the public record.
IBISWorld therefore estimates James Pascoe’s revenue for the period at $600 million and allocates it 12 per cent share of the market. However using IBISWorld’s own data, the calculation of its market share is closer to 16 per cent!
Estes’ explanation was, “Prouds is diversified vertically and is involved in manufacturing, wholesaling and retailing (all of which pertain to different industries). Therefore, we cannot simply take Prouds’ total revenue and divide this by industry revenue, as not all of Prouds’ revenue is sourced from retailing, and this is the only aspect concerning the industry in question.”
Jeweller pointed out that while that may be so, the report doesn’t offer any explanation or insight into that point, leaving readers to conclude that the only data to appear in a retail report about the market share of a retailer is the company’s retail figures.
Therefore the estimated retail revenue figures ($600 million) were wrong or the estimated market share (12 per cent) was wrong, either way, the matter should have been explained.
A similar error occurred with the data published regarding Michael Hill Jewellers, which was attributed with 8 per cent of the Australian jewellery market. Unlike Prouds, which is not publically listed, Michael Hill’s financial records are on the public record, and easily accessible.
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.
Little knowledge
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.
Questionable data
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.”