Retail Realists vs Charlatans<\/h3>\n
In the retail jewellery industry, the two largest drivers of inefficiency are firstly, the cost of running a store \u2013 that is labour, rent and all the other expenses involved with keeping a store open and secondly, the cost of keeping stock which causes hundreds of thousands or even millions of dollars to be tied up potentially for years or even decades.<\/p>\n
In their excellent State of the Industry Report<\/a>, Jeweller Magazine<\/em>, documents the rise of jewellery retailers \u201cwithout a storefront\u201d. Whilst still a very small percentage of the industry \u2013 about five percent \u2013 these jewellers tend to operate from home, online and\/or an \u201cupstairs\u201d premises and keep little to no stock. Therefore, without the two main inefficiencies of traditional retailers, one may conclude that these retailers are the most \u201cefficient, and thus able to offer the most competitive prices to the end consumer.<\/p>\n However, the report from Jeweller Magazine<\/em> paints retailers in a very black and white fashion – that is those with and without a storefront. The reality is that there are many shades of grey when it comes to jewellery retailing, and many in the industry are looking to adopt more efficient and thus more profitable ways of doing business. For example, despite the chagrin of many retailers, a lot of diamond wholesalers are now selling directly to the public, either by opening their doors to the public or establishing an entirely different brand. Likewise, many retailers, responding to the demands of their customers are offering more bespoke and online options, which require holding a lot less stock and a lot less overhead. Just recently, Michael Hill<\/a>, Australia\u2019s largest jewellery retailer launched a new purely online and bespoke brand called TenSevenSeven<\/em>, mimicking what most online engagement ring retailers already do.<\/p>\n Above: Michael Hill’s New Bespoke Engagement Ring Design Website<\/p>\n That said, within the industry, there continues to exist a small amount of what I describe, perhaps unfairly, as industry charlatans. These are people who spend large amounts of money trying to appear bigger than they are, or attempt to create the illusion that their brand is more valuable than it really is. For example, in Perth, where Jogia Diamonds are located, one jeweller now employs nearly 50 bench jewellers, despite only having two stores! Similarly, another jeweller opened a new store next door to Tiffany in 2008, closed it a few years later only to reopen a bigger store a few doors down a few years after closing the old store! These attempts to create a certain brand image, whilst usually the realm of larger international brands such as Tiffany<\/em> or Cartier<\/em>, are completely unjustified when it comes to small local shops with one or two locations, and most certainly add a not so insignificant cost to the retailer\u2019s goods and services.<\/p>\n Traditionally, there are two ways that a retailer may source their diamond stock. Firstly, the retailer may buy directly from either a diamond manufacturer or diamond wholesaler and either pay with cash upfront or on terms, say 30 days. The diamond is then kept in the retailer\u2019s stock, and the longer it sits in the retailer\u2019s safe or showcase, the higher the holding cost. The other way is to take goods on consignment, or \u201cmemo\u201d from a wholesaler for display in their store. This method, whilst avoids the holding costs, ultimately means that the purchase price of the goods will be a lot higher than if the goods were purchased outright from the wholesaler or through a manufacturer. For retailers, this can lead to a difficult balancing act, as retailers don\u2019t want to hold too much stock leading to higher holding costs, or worse yet, keeping the wrong stock, leading to \u201cdead stock\u201d that cannot be sold. On the flipside, buying everything on consignment, whilst less risky, usually leads smaller margins due to the higher purchase price of goods sold on consignment.<\/p>\n![\"Ring](\"https:\/\/www.jogiadiamonds.com.au\/images\/tensevenseven.png\")
<\/p>\nSolving The Supply Side Issue<\/h3>\n
![\"Diamond](\"https:\/\/www.jogiadiamonds.com.au\/images\/diamond-dealer.jpg\")
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