Late last year I started to think that 2016 would be the year for the battle of the jewellery brands. As an increasing number of international jewellery companies look to expand into Australia, the market is sure to become more crowded.
Endless Jewelry launched in Australia this time last year and did so with much song and dance. The new Danish brand made sure everyone knew it was here with serious intentions. It was, perhaps, a lesson in how to successfully launch a new business in a new country.
I talk to and receive many emails each month from overseas companies that want to expand their businesses to Australia and New Zealand. Unfortunately, too many of them want to do so on the smell of an oily rag – without the appropriate investment – and my advice is to either do it properly or don’t do it at all.
Our local market doesn’t need any more fly-by-nighters – here today with lots of promises but gone tomorrow when the going gets tough. We have seen it before – international companies that believe expanding here will be easy simply because they are a well-known brand in their home market. They think, “Just tell the Aussies and Kiwis we’re here and the orders will roll in.”
No matter the product, branding is all about marketing, and marketing costs dollars. If your pockets aren’t deep enough to heavily advertise and promote your brand then you won’t be successful, so don’t bother.
Anyone can launch a product with no commitment and no follow-through.
Pandora issues ultimatium
After the Endless launch there were rumours that US-based Alex and Ani was eyeing off the Australian market and, being aware of one or two other upcoming launches, I started to realise we might be set for a brand battle.
Little did I realise how accurate my thoughts were.
No sooner had Alex and Ani launched in December than Pandora took the unusual step of telling jewellery retailers how to run their businesses!
As far as Pandora and its staff were concerned, they had a right to tell jewellery retailers what they could and couldn’t stock by issuing an ultimatum: you can continue to stock Pandora provided you do not stock Alex and Ani.
Aside from the fact that threatening customers was not an ideal, long-term business strategy, one must wonder: why was Pandora worried? The threat only served to bring more attention to the Alex and Ani launch than it otherwise would have attracted.
So much so that it may have potentially started a real life legal battle; the Australian Competition and Consumer Commission (ACCC) is currently investigating whether Pandora’s actions breach the Australian Consumer Law, specifically exclusive dealing and misuse of market power.
Interestingly, I’ve had first-hand experience in a case very similar to this where I appeared as an ACCC witness for two days in the Federal Court of Australia. With this in mind, I’m not sure that Pandora knows what it’s in for should the ACCC decide to proceed with legal action.
From personal experience, I would suggest that the last thing Pandora president Brien Winther and vice president of sales Brett Spinks want is to be cross-examined for days by QCs in Federal Court.
It is, to say the least, a most unpleasant experience, and only time will tell whether this stoush becomes a legal fight. If it does Pandora staff will most likely find themselves being grilled by senior barristers. I hope, for them, that's not the case!
But back to 2016 being the battle of the brands. These things are fought on many fronts and the ultimate ambition is to attract and capture consumers; however, reaching them requires shelf space, shelf space requires distribution, and distribution requires retail stockists.
It’s all very logical really, but jewellery stores are not large areas. There are only so many products that can be crammed into small stores and only so many jewellery brands retailers can carry before those stores start to look anything but their own.
Conflicting messages
In recent years, jewellers have to come to realise that when they fill their stores with brand-supplied signage, furniture and visual merchandising material, their in-store presentations can become confusing to consumers.
This doesn’t benefit the retailer and it doesn’t benefit the brands either. Stores were becoming such a hotchpotch of mixed and conflicting messages that many jewellers felt obligated to wrest back control of their in-store presentation.
On top of all of that, retailers need to consider the issue of sales cannibalisation, which occurs when the introduction of a new product causes a reduction in the sales volume and revenue of an existing product.
Assuming you have the shelf space, the introduction of any new brand needs to attract new customers who are willing to give you their hard-earned dollar. If a new brand will not expand your market and increase sales then there is no reason to stock it.
Background reading: Pandora 2015 biggest surprise
Apart from the charms and beads category, the new brands entering the Australian market in recent years have all had their own niches. They all might be competing for the same consumer dollar but each of their products has enough differentiation to offer something additional to both retailers and consumers.
Therefore, with limited space, limited resources and limited time, any new entrants to the market will not find it easy to successfully capture the hearts and minds of jewellers. Without that success, the brand must take a different and more expensive route.
Adding to that is the fact that Australian and Kiwi jewellers have become more selective (and sceptical) of new international brands in the past five years. They have good reason given a number have failed locally in the recent past (think Chamilia, Blossom Copenhagen and X by Trollbeads).
It seems obvious to me that the fight for jewellery brands to garner support from local retailers will inevitably become more difficult. I also think the next stage will see retailers drop some of the existing European brands that have waned in popularity in favour of trying something different.
Retailers may well begin to ask why they should continue with these stale brands if they can devote space to new brands that have momentum. Doing so will indicate how battles between bigger brands can also affect sideline players – collateral damage, if you will.
This all means that retailers are in an enviable position to be able to choose from a wealth of jewellery product and brands. The trick is to choose the winning side, the one that has momentum.
More reading
ACCC begins Pandora jewellery investigation
Brand battle: Pandora: Alex and Ani to fight it out
Pandora jewellery in hot water over Alex and Ani
Charm offensive – Pandora warns retailers off former boss’ new brand
Adcock launches Alex and Ani in Australia