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Changing Channels

More manufacturers are selling directly to consumers

For a long time in the industry, a retail jeweler’s primary competition was the jeweler across town. Then came the internet, which eventually expanded the competition to not only jewelers from around the world, but also online giants such as Amazon. Now jewelers are facing a new challenge—competing for sales against the very companies that make some of the jewelry featured in the jewelers’ cases. The internet has opened the door for jewelry manufacturers and designers of all sizes to easily sell their brands direct to consumers.

“There’s a blurring of distribution channels,” says Hanna. “It helps build a brand with consumers, and [the brand’s] getting additional profit and revenue from it. It’s something to pay attention to.”

“We’re starting to see more models where a wholesaler will create its own retail site that’s not identified as the wholesaler,” adds Jacobs, who points out that this is being done alongside retailers, not in lieu of them.

“It’s not to wipe out the retailers,” he says, “it’s more like they’re doing it because they can. They can present an online store and generate revenue. They’re not out there announcing that you can buy stuff here instead of at their retailers.”

In addition to the possibility of it generating revenue for the brand, this move has come about partly due to issues some manufacturers have had in working with retailers, whether it’s from retailers wanting inventory on consignment, being slow to pay, or simply being an unreliable seller.

“For years, manufacturers needed stores to sell their brands, but an unreliable retail distribution chain is changing that,” says Hurwitz. He cites stores’ inability to adequately serve a new, younger consumer demographic as the key reason why “brands are seeing a downward trend with their sales from the traditional jewelry retail channel.

“Manufacturers would love the retail channel to be healthier, but it’s problematic for those brands because they don’t see growth in that channel,” he continues. “They do see growth in direct-to-consumer.”

“Brands are going to stop doing business with [retailers] if they’re not willing to buy the inventory instead of consign,” adds Marissa Harvey, owner of Marissa Harvey Consulting in Forest Hills, New York. “Brands can’t afford to bankroll the jewelry. It’s in the retailer’s best interest to make it attractive for a brand to make money. It has to be more of a partnership.

“I know of many brands that spend more money on trade shows and bankrolling inventory than they get back in sales from retailers,” she continues. “In my opinion, the smart thing to do is to start building a B2C e-commerce business with the money you would have spent on trade shows and independent co-op advertising. I think you will find you get a bigger return on your spend and your inventory turn will be much more efficient.”

“If you’re a manufacturer that has a brand with a consumer following, you must already be looking in the direction of controlling your own consumer destiny,” says Hurwitz. “If you are not yet considering it, you should be. It will take a few years to develop a coordinated marketing strategy for a direct-to-consumer initiative, but in the end it will secure the medium and long-term future of your business.”

A key part of taking this step is working with retailer partners so that everyone can benefit. Manufacturers can market to consumers and generate revenue from selling direct to them online. But since only 10 percent of total retail sales are conducted online, manufacturers can also direct consumers to their retail partners for those more comfortable with making in-store jewelry purchases. And as part of this partnership, manufacturers and retailers need to work together on pricing so neither undercuts the other.

“[A retailer] might give a good customer a discount, but the published retail price should be the same,” says Harvey. “You have to police it, and you have to look for good partners on the wholesale and retail side. A good partner shares costs and tries to be as transparent as possible. But the more consumers you reach, the better off everyone is. The whole industry is better off if we all stay in business and win over this new generation, who has very different reasons for buying jewelry [than previous generations].”

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