It doesn’t make sense. Anyone can sell a piece of sterling silver jewellery; however, there’s nothing to offer customers in the next range up. Where are the opportunities to up-sell items with a higher price-point?
Everyone is looking for an easy sale and, in my opinion, going about it the wrong way. It comes down to the logic that a jeweller has to sell 50 per cent more product to cover expenses if more people are buying lower-range items. Rent isn’t going down and salaries aren’t going down!
So much energy is spent selling multiple units of branded product at $39 each instead of one unit at $8,900. Retailers need to change their business strategy by focusing on higher-ticketed items and better-quality product. They need to return to basics and start promoting and selling diamond jewellery, engagement rings, wedding bands, eternity rings, diamond earrings and other staples.
For some reason, this line of thinking still doesn’t make sense to many people; they’ve never figured it out.
It’s hard because it’s not just a problem in the jewellery industry. This has become the case across all retail sectors in the past few years and the Australian market is now renowned for being cheap and nasty.
I had a meeting with a friend last year and he couldn’t understand how the likes of Big W were in so much trouble.
I told him it is because they sell a kettle for somewhere between $6.99 and $9.99. Any person with half a brain would realise that kettle was imported from overseas. It has to be shipped to Australia, unpacked from a container in Sydney and put on a shelf in a warehouse where it awaits a packing order from the store. The kettle is then shipped to the store, unpacked by staff members and offered for sale.
This whole process involves significant labour, time and money, and all for a product that retails for $6.99.
The reality is that there are consumers who walk into David Jones, find a beautiful kettle and are happy to pay $69.99. If David Jones or Big W sold that same $6.99 kettle for $14.99, do you honestly think they’d sell any fewer units? They’d probably sell the same amount.
In fact, if someone saw a kettle for $8.99 and then another one for $16, I can guarantee that person would lean towards the more expensive option as the mindset is that the $8.99 kettle is lower quality – it’ll probably make five cups of coffee and then break.
My whole point is that everybody is trying to sell cheaper and cheaper goods but they’re not making money and consumers aren’t necessarily asking for cheap.
We need a whole culture shift. Yes, that’s easier said than done because everybody would rather sell silver jewellery at $39 and make a gross margin of 100 per cent than sell an 18-carat product for $699 and make a gross margin of 40 per cent.
Please don’t go playing the ‘consumers aren’t spending’ card because that is absolute nonsense. The truth is that people can afford the real deal and are prepared to pay for it.
One only has to look at just how many international jewellery brands have opened flagship stores in Australia – diamond retailer Graff recently opened its first store in Melbourne; Cartier opened a new flagship in Sydney; and Tiffany & Co continues to increase its footprint.
Sales for top luxury conglomerates like Richemont and LVMH are also skyrocketing. I went to order a Rolex watch the other day and was told there was a two-year waiting list! Yes, that’s a two-year waiting list for a $13,000 watch with no discount.
Mark my word, people are spending money.
I believe consumers will always pay a little bit extra for a better-quality product.
“The quality is remembered long after the price is forgotten” is a quote attributed to both Sir Henry Royce, co-founder of Rolls-Royce, and the Gucci family; it shouldn’t be taken lightly.
After all, the heritage and quality of these two brands continue to stand the test of time.
Name: Robin Sobel
Business: Protea Diamonds
Position: Managing director
Location: Sydney
Years in the industry: 30