Wednesday, January 17, 2007
From the Reveries Magazine January 17, 2007 issue of “Cool News of the Day” daily on-line newsletter:
“It looked like Tiffany had the whole "affordable luxury" thing nailed -- what with their stores packed with people snapping up silver bracelets, tripling sales, doubling earnings and increasing stock prices six-fold, as reported by Ellen Byron in The Wall Street Journal (1/10/07). But instead of celebrating, Tiffany's management team was worrying. On the one hand, selling inexpensive baubles might endear younger consumers to the brand, making them more likely to buy more expensive stuff as they got older. On the other hand, maybe those consumers would simply look back fondly at Tiffany as the place where they used to buy their jewelry when they couldn't afford finer things.
Focus group research tended to confirm that, unfortunately, the latter attitude prevailed. "I felt like I was in Macy's," comments Carolyn Cipoletti, who recalls buying a silver necklace at Tiffany's for her 12-year-old daughter back in 2000. Not only was everyone at the silver counter (instead of the diamond section) but the store was so crowded that Tiffany's had to hand out beepers "to alert shoppers when a sales associate became available." Internal research confirmed that the crowds were wearing thin on Tiffany's customers, and company executives additionally feared that the brand was being defined by just one thing -- and that thing was "inexpensive silver jewelry." So, Tiffany decided it was time to jettison its "affordable luxury" strategy and get back to being that exclusive place where mostly rich people rattled their really expensive jewelry.
The plan involved dramatically raising prices on silver jewelry to discourage "aspirational" customers, while also renovating stores to separate "transactional" from "relationship" customers. The former would be channeled to the silver counter while the latter would be diverted to a "special room" off to the side, where the champagne was on ice. The effect of this new approach has been felt rather slowly, but today Tiffany says its greatest sales growth is coming from its highest-rolling customers. The retailer's earnings and stock prices are also up -- although gross profits are still slightly down. Meanwhile, the retailer continues to open more stores in smaller markets -- and may have a ways to go before its luxurious image is fully restored. As one former fan puts it: "You used to aspire to be able to buy something at Tiffany, but now it's not that special anymore." Source: http://www.reveries.com
We agree with the focus group folks. This Christmas we hopped the train to downtown Chicago and headed straight to Tiffany to pick up a few gifts.
Once inside the store we climbed the stairs to the second floor where we hit a solid wall of shoppers. We were politely told that we had two choices: we could wait in line for our turn with a sales person, or we could peruse the counters and then get in line and wait for our turn with a sales person. There were at least 30 people in line ahead of us, and we figured that it would take at least 20 minutes per person to choose a gift, ring it up and wrap it, so we decided not to wait. Instead, we went to Bloomingdale’s where we purchased equally nice sterling silver bracelets and didn’t have to wait very long at all. And we were able to continue leisurely shopping while our gifts were being wrapped.
We know that you have to wait at Christmas because everyone else is doing their shopping, too. And we know that we can always plan ahead and shop on-line, but we like to see and touch the merchandise before we buy it -- we like the retail store experience. It just felt strange to have to stand in a crowd of people in a fine store like Tiffany. And we not so sure that their plan to separate “transactional” customers from “relationship” customers the way it’s described in the article holds water. We’ve each purchased plenty of jewelry from Tiffany over the years, and some of it was big ticket "downstairs" stuff. In our book that makes us loyal customers, loyal customers who are now labeled "transactional", second class customers when we return to buy their expensive "inexpensive silver jewelry". No customer deserves that moniker.