Rapaport Magazine

Retail Scope

September 2007

By Rapaport
RAPAPORT... The last stop for diamonds is the retail store. Here is a behind-the-scenes look at what is happening at retail in the U.S.

Zale Changes Structure

The centralization of support functions for its moderate brands will be one step in the Zale Corporation’s streamlining of its corporate organization.

Many organizational changes are on the horizon or have already taken place, including the promotion of Steve Lang to group senior vice president and chief merchandising officer, as head of a new centralized merchandising organization. Buying for all of the moderate brands (Zale’s, Gordon’s, Zale’s Outlet and Peoples/Mappins) will be consolidated under Lang, who will report directly to Zale CEO Betsy Burton. (In 2006, Zale moved to a centralized sourcing organization, which will continue to be led by Gil Hollander, group senior vice president and chief sourcing officer, also reporting to Burton.)

Burton said of the announcement, “We believe there are significant synergies and efficiencies to be gained by the elimination of redundancies and more teaming across brands. We are starting with the consolidation of support functions across the moderate brands as an important step in achieving this goal.”

Zale has also engaged an executive search firm to commence a search for the new position of chief operating officer (COO). Starting with the moderate brands, there will no longer be separate brand presidents. Store managers will report to Burton until a COO is identified.

The retailer also announced that John Zimmermann, who was president of Zale North America, has left the company.

Tiffany Wins Suit Against Counterfeiters

Tiffany & Co. has won a final judgment in court in a case brought against Starglam, Inc., and its principal John Shamir, who was engaged in selling counterfeit Tiffany goods both in Asia and on New York City’s Canal Street. The judgment enjoins Starglam, Inc., and Shamir from any further counterfeiting or infringement of the Tiffany name and trademark. The defendants had previously pled guilty to trademark counterfeiting, served a prison sentence and paid a judgment of $956,793.15.

Michael Kowalski, Tiffany’s chairman and chief executive officer (CEO), commented, “Trademark counterfeiting severely damages brand owners and consumers alike. The way to stop it is to take aggressive action against the counterfeiters and make them pay, criminally as well as civilly.”

The case’s ramifications continue. Because of the huge amount of counterfeit Tiffany silver merchandise sold on ebay.com auction sites, Tiffany has brought a civil action against the website, which awaits trial in federal court in New York.

In other news affecting Tiffany & Co., the company has agreed to sell its Little Switzerland chain to the NXP Corporation, which operates retail stores under the brands “Jewels” and “Azura by Jewels” in the Caribbean. The transaction, which is expected to be complete by August 31, is likely to lower Tiffany’s after-tax earnings in the second quarter ended July 31, 2007, by about 15 cents to 18 cents per share.

Tiffany & Co. has also announced plans to open a new boutique in its Matsuzakaya Nagoya flagship store in Japan. Scheduled to open on September 26, the boutique will be Tiffany’s third location in Nagoya and its 54th in Japan. Besides the work of exclusive Tiffany designers, the boutique will offer diamonds in platinum and 18-karat gold settings.

Robb Report Launches Luxury Index

From the luxury-oriented publication the Robb Report comes a new tool for tracking the market performance of public luxury goods and services companies. It’s called the Robb Report Global Luxury Index.

Among the functions of the new index are tracking the stock price performance of luxury goods and services companies, namely retailers, luxury goods manufacturers, travel and recreation firms, and investment and other professional services firms.

To qualify for the index, equities must trade on a major United States or global developed-market exchange with a market capitalization of more than $500 million. Of the 42 firms now on the index, the Robb Report noted, 18 are traded in the United States, while others are on the London Stock Exchange, Euronext Paris and the SWX Swiss Exchange.

Brand names that made the index include jewelers Tiffany & Co. and Harry Winston; luxury houses LVMH, Richemont and PPR; and retailers Saks and Nordstrom.

“Interest in the global luxury marketplace continues to grow as affluent households around the globe continue to increase in number and in financial power,” the Robb Report explained. It quoted the 2007 Spectrem Group Affluent Market Insights report, which states that more than 1.1 million households in the United States have a net worth of over $5 million.

Martin Flyer Launches Authentication Program

Jewelry designer and manufacturer Martin Flyer, Inc., has joined with accurate Grading Quality assurance, Inc. (aGQa), an online certificate software company, to launch a certificate of authenticity and product warranty program. The program applies to FlyerFit products, which are a line of wedding sets designed to fit together without sacrificing the rings’ individual styles.

Under the ambitious new program, a purchaser of a FlyerFit product will be able to have his or her product registered on aGQa’s web site. He or she can then utilize a certificate of authenticity, or registration card, generated by aGQa for the product. This certificate enumerates the ring’s grading characteristics, such as color, carat weight, clarity of center and side stones, and size of the ring. For purposes of tracking, a certificate number is also provided.

“While grading appraisals are common in the industry, the aGQa program is the only one in the industry to guarantee the product for up to $10,000, a guarantee underwritten by Jeweler’s Mutual,” a spokesperson for Martin Flyer said.

Fortunoff to Open New Location

In time for the Christmas buying spree, retailer Fortunoff will open a new Manhattan location at 3 West 57th Street, just off Fifth Avenue. Scheduled to open its doors in November, the new store will span 12,600 square feet on three levels, offering shoppers a glimpse of the retailer’s “new and updated” store concept. The company plans to keep its 681 Fifth Avenue location open during the holidays as well.

On the first floor, under the expanse of 17-foot high ceilings, you will find Fortunoff’s fine jewelry and a collection of fine watch brands. The lower level will highlight a diamond boutique, featuring diamond engagement rings, wedding bands and other jewelry. If privacy is a priority, you can receive Fortunoff’s personalized service in modern viewing rooms.

On the upper level, you will find a Baby Fortunoff boutique filled with special gifts and baby jewelry, and an interactive Wedding and Gift Registry environment where you can view Fortunoff’s full assortment of tabletop and home furnishings, or access and purchase from a registrant’s wish list.

To coincide with the opening, Fortunoff will add new jewelry designers to the 57th Street store to enhance their assortment of proprietary jewelry.
Barteluce Architects & Associates, whose previous clients include Gucci, Cartier and Fendi, designed the new 57th Street location. Fortunoff is using this space and design to serve as a prototype for jewelry outlets scheduled to open in the next few years.

Robbins Bros. Adds Chicago Locations

The Robbins Bros. chain, based in Illinois, is attempting to bring more passion to the wedding proposal across the Chicago area by opening three new stores in strategic locations. A new jewelry outlet opened in the suburb of Schaumberg in July, and Robbins Bros. outlets will open in Oak Brook on August 23 and in Lincoln Park in the middle of October.

Typically stretching over 6,500 to 9,400 square feet, Robbins Bros. stores are free-standing “destinations” offering a wealth of merchandise, including many engagement rings. The stores often include lounge areas featuring big screen TVs. The retailer also offers “Perfect Proposals” engagement assistance, a free and confidential service that can map out a vision, be it a firework show dedication or a live proposal at a baseball or football game.

Over the past 85 years, Robbins Bros. has expanded to 12 locations. Of these, seven are located throughout southern California, three in Houston, one in Dallas, and now one in Chicago with two more on the way.

Article from the Rapaport Magazine - September 2007. To subscribe click here.

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