New Frontiers in Jewelry Retailing – 2009-10-01 02:00:00 EDT | JCK Online.

Controlling inventory—what to stock and keeping track of it—is critical for jewelers. We examine two new concepts—’brass and glass’ and RFID—that could change the way jewelry is sold.

By Rob Bates, Senior Editor — JCK Online, October 1, 2009

Can Brass + Glass = Class?

There is a lot about the concept of “brass and glass”—which lets jewelers hold down inventory costs by only showing replicas—that is controversial, starting with the name.  Spence Diamonds, a Canadian jeweler that recently bought three stores in Houston, features nothing but replicas and proudly uses the term “brass and glass” on its Web site. (See “Jeweler Has Open Showcases,” JCK, May 2009, p. 51.) But others shy away from it, noting that their replicas are made of silver and other metals.

Nevertheless, more jewelers are using sample programs, showing customers prototypes of jewelry and then ordering the actual item. The major benefit, advocates say, is that it lets jewelers carry more product with less expense, at a time when prices of gold and platinum keep rising and jewelers have problems with cash flow.

“People are burdened with inventory that they can’t sell, and they are hesitant to invest in new product,” says Matthew Roth, vice president of Overnight Mountings, which offers a program called Authentix. “This allows retailers to display the latest and greatest and newest designs in their store, which they otherwise couldn’t afford.”

Roth says it’s also a good way to test new products and categories. “Some retailers are using it to get into markets that they are not in right now,” he explains. “If a bridal store is into modern styles, they can say let me try and get into antique reproduction styles.”

Arthur Klein, communications manager for Gabriel and Co., which also has a prototype line, says these programs are “a way for the smaller retailer to compete with the large stores. For a nominal amount of money, you are in the bridal business.”

Security risks also decrease. Since samples don’t cost much, retailers can take several pieces out at a time and let customers try them on. Some say this eases the pressure of jewelry shopping.

“Jewelry is the only industry where we have those few feet of showcases before the customer,” says Matthew Ego, director of operations for Unique Settings, which has a program called Unique Advantage. “When you’re shopping for a suit or a dress, you can try it on, but we don’t have that in the jewelry industry. With this, people are able to touch the pieces, and it allows them to be more comfortable.”

Stuller CEO Matthew Stuller, whose company also sells prototypes, agrees. “This industry needs to become more friendly and create better shopper experiences than in the past,” he says. “We need to have product that is available for people to touch and put on, and we need to be less guarded, with fewer salespeople tracking you. Being able to see the prototype and getting it on the customer’s hand and seeing how it looks gives the customer a lot of confidence.”

One jeweler, Mark Enix, president of Fountain City Jewelers in Knoxville, Tenn., even loaned a customer a sample engagement ring. “I tell them they can take it home, and they are blown away,” he says. “It’s a show of trust. They show it around and they feel kind of obligated to buy it. And if they take off with it, I’m only losing $20.”

Moshe Bezalel, vice president of sales and marketing for Variety Gems, notes that because security is less problematic, stores get a break on insurance. He tells the story of a customer who was robbed—of 77 Variety Gems samples. “The thieves probably thought they were getting $100,000 worth of merchandise,” he says. “They probably won’t get anything for them. Who is going to buy 77 rings of silver and CZ?”

Retailers using prototypes say consumer reaction has generally been good. “The consumers don’t seem to mind at all,” says Doug Baker, manager of the Diamond Vault, in Canton, Mass. “Some don’t even realize they are looking at samples until you tell them.”

Sometimes even fellow jewelers don’t know, Enix claims. “My father has a store, and he walked in and said, ‘Wow. You have a lot of inventory here,’” he laughs. “I didn’t tell him.”

There are drawbacks to using replicas. It eliminates impulse purchases, and consumers have to wait for their pieces. Even advocates say stores still need to stock “live” inventory, particularly for fashion and staple items. “It doesn’t make sense for a cash-and-carry business,” says Stuller.

But Baker is happy with it for bridal, noting most buyers make repeat trips anyway. “If it’s an engagement ring, buyers generally don’t plan to buy that day,” Baker says. “They plan to sit down and look at styles, and usually the gentlemen will come back to make the purchase anyway.”

Some also worry the replica will interest buyers more than the genuine piece, but most vendors discourage retailers from selling samples.

Justin May, store manager of Bremer’s, in Bloomington, Ill., says, “I’m sure most guys would like to spend $100, but we tell them, ‘This is a sample. The CZs are going to scratch, and the metal is going to wear.’”

His store is considering giving customers the sample along with the actual piece, perhaps touting it as something to take on vacation.

The final argument against samples may cut to the heart of jewelry retailing itself. Jeffrey Skaret, a blogger at JCKonline, argues it could make jewelers irrelevant.

“Instead of having to commit hundreds of thousands or millions of dollars to inventory, fixtures, and security,?anyone with a?table and cash register can show dummy samples and place orders,” he recently wrote, in a post that got more than 100 heated responses, for and against. “If this becomes the?standard for jewelry shopping, why would it matter where a consumer buys? Why would a consumer choose an independent over a chain store?”

But many argue that salesmanship is just as important when using replicas, although it’s a different kind of business than most jewelers are used to.

Many companies offer training to jewelers involved in their prototype programs. Unique advises them to treat the replicas “with the same value and care as the real item”—including keeping them in a case. (This differs from the policy at Spence, which keeps its cases open.)

Enix never calls the replicas fake. “I say it’s a living catalog,” he explains. “I tell customers we will custom make it for you and your bride. No one will ever wear it but you.”

Clark McEwen, a Spence veteran who is now an industry consultant, says Spence has been successful not only because of its model but also because of the system behind it. “It’s not just about installing brass and glass,” he says. “Spence has complete control of the whole concept, from production on down. They give customers a complete education in the ‘four Cs.’ They get professionally trained salespeople, from real estate and the pharmaceutical business, and they know how to sell and how to close. If you don’t know how to sell the concept, you are bound to fail.”

It remains to be seen if selling samples will become the independent jeweler’s salvation. But for now, the concept is a hot one. “I don’t know if it is going to last forever,” Klein says. “If gold drops down to $400, who knows what will happen. But for now, it makes sense.”

RFID: The Super-Scanner

Ever buy clothes and discover a mysterious lumpy tag that requires a special device to remove? Those tags contain an RFID (radio frequency identification) chip, and retailers in other industries have used them for years. Big companies like Wal-Mart even demand their suppliers use them.

But jewelers in the United States have generally not used them for a simple reason—their product is too small.

“It’s a challenge having a tag that can fit on all different pieces of jewelry,” admits Gabriel Nasser, whose company, TJS, has sold RFID products to jewelers in Dubai and recently opened an office in Boston.

John Kennedy, of Jewelers Security Alliance, calls RFID “the wave of the future,” but says, for now, many retailers find it too expensive and impractical.

“Chains and other retailers have experimented with RFID, but they are not ready to implement it,” Kennedy says. “The marketing and sales people say the tags detract from the appearance of the item, and they can’t make it small and inconspicuous enough.”

In addition, the tags required for jewelry are so small that it isn’t as easy to prevent someone from leaving with them, Nasser says.

Advocates note, however, that RFID has another use: It scans inventory lightning fast. By waving a wand over jewelry with RFID tags, retailers can do case counts by scanning each piece’s bar code.

Nasser maintains that better inventory control ultimately yields better security. “If you count your stock daily, and a piece went missing, you would be able to notice it within 12 hours, rather than when you do inventory 365 days later,” he says. “You can do an investigation, you can see if it’s misplaced, you can review the last few hours of tape instead of a year’s worth of tape. It allows you to ask questions within a framework.”

He claims that the Dubai stores that use RFID have almost no shrinkage.

At present only two stores in the United States use the technology: Sissy’s Log Cabin in Pine Bluff, Ark., and Peter Franklin Jewelers, in Fort Wayne, Ind.

“We just find it very handy for inventory,” says Peter Ball, of Peter Franklin Jewelers. “When you have such a huge amount of inventory, we always end up missing merchandise that just didn’t get scanned. So this is more accurate and quicker.”

At Sissy’s, RFID was useful in one recent incident. A customer was looking at rings, and the salesperson noticed one was missing. The RFID scanner tracked it down—to the customer’s purse.

“It slipped there by accident when she answered the phone,” says the store’s owner, Sissy Jones. “For the scanner to pick it up through the glass and through her purse was pretty remarkable.”

Jones notes that RFID has two disadvantages: it’s expensive (over $15,000) and requires considerable training. But she is pleased with it. “Every afternoon, we scan the Rolex watches in less than five minutes,” she says. “When something goes missing, you can track it immediately before it goes cold. When you know what you have every day, it makes your life easier and you can sleep better.”

Craig Carnevale, whose Jewelry Computer Systems supplied the technology for the two stores, says he “truly believes RFID is the future. As the economy picks up, it will explode.”

He thinks RFID will ultimately replace bar codes. “At some point down the road, the RFID chip will carry information for point of sale,” Carnevale says.

Carnevale also predicts that jewelers will use the kind of gate one sees in many stores that prevents people from exiting with pieces. Because the chips are small, he admits, “It’s probably not going to pick up everybody, but your run-of-the-mill shoplifter will get caught.”

Another entrant in the field, Infopoint Systems, initially targeted jewelry retailers but now thinks its technology is better suited to jewelry manufacturers and labs. InfoPoint’s chips are active, rather than passive, tags, so they let retailers know their whereabouts without being scanned, says executive vice president of marketing Michael Barelin.

In nonjewelry sectors, some have made grand predictions that RFID will change the way we shop. The Web site Howstuffworks paints this picture: “Imagine going to the grocery store, filling up your cart, and walking right out the door. … RFID tags will communicate with an electronic reader that will detect every item in the cart and ring each up almost instantly. … Your bank will then be notified and the amount of the bill will be deducted from your account.”

But even if RFID does progress this far in other industries, most think it’s unlikely that retailers will ever be so loose with a high-value item like fine jewelry.

“I can’t see where you would ever allow consumers to just put their jewelry in their bag,” says Matthew Stuller, CEO of Stuller, which is also looking into how RFID can apply to jewelry. “That’s a bit farfetched.”

He adds, “I don’t think there is anything that completely resolves the security issues. Would you ever let a $50,000 piece of jewelry or a loose diamond just sit on a counter? No. But for items that cost less than a thousand dollars, having it available for consumers to try on is a very workable solution.”

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