JEWELLERY Division
Adrienne Kleinman
The leading player in the mass middle market for jewellery and branded accessories.
POSITIONING
The Foschini group Jewellery division is the leading player in the mass middle market for jewellery and branded accessories. It has attained this position by offering attractive and inviting retail environments, extensive product ranges, desirable brands and outstanding service. Measured by number of stores, American Swiss Jewellers is the largest jewellery chain in southern Africa, followed by Sterns. American Swiss and Sterns have each traded successfully for more than 100 years and as a result have built up large and loyal followings in the market-place. The AMPS survey of 2009 and the Sunday Times Annual Top Retailer Awards for 2009 confirm American Swiss and Sterns as the No. 1 and No. 2 jewellery brands respectively in southern Africa. In-house credit accounts for 60% of total sales.
The division strives continually to differentiate the products it stocks in order to offer real choice to customers. Merchandise is obtained from all parts of the world, including products designed and manufactured locally for the southern African market, so ensuring that there is ongoing innovation and trend-setting.
The American Swiss brand is positioned to appeal to the fashion-forward and image-conscious customer, and offers consumers in the growing middle market appropriate products and brands to express their status. The American Swiss brand is highly visible in shopping centres and in the media, making its fashion statements with confidence and flair.
Sterns is a contemporary and classic jeweller well known to the market for its quality and welcoming service, offering beautiful and meaningful jewellery. The Sterns brand has now been repositioned as a quality contemporary jeweller in terms of merchandise, advertising and store design.
Matrix, the division’s sunglasses and cellphones chain, caters for the brand-savvy and image-conscious consumer who aspires to designer labels.
| 2010 | % change | 2009 | ||
| Turnover (R million) | American Swiss | 664,6 | (1,6) | 675,3 |
| Matrix | 37,1 | (8,2) | 40,4 | |
| Sterns | 393,6 | (4,1) | 410,3 | |
| Total | 1 095,3 | (2,7) | 1 126,0 | |
| Number of stores | American Swiss | 205 | 3,0 | 199 |
| Matrix | 22 | 15,8 | 19 | |
| Sterns | 138 | 4,5 | 132 | |
| Total | 365 | 4,3 | 350 | |
| Floor area (gross m2) | American Swiss | 14 586 | 2,4 | 14 244 |
| Matrix | 652 | 9,8 | 594 | |
| Sterns | 9 300 | 1,6 | 9 154 | |
| Total | 24 538 | 2,3 | 23 992 | |
| Number of employees | American Swiss | 868 | 7,6 | 807 |
| Matrix | 63 | 12,5 | 56 | |
| Sterns | 547 | 7,7 | 508 | |
| Total | 1 478 | 7,8 | 1 371 |
REVIEW OF THE YEAR
The division’s sales contracted by 2,7% for the year. In view of the global economic crisis and the fact that the products on offer are mainly in the luxury category, this result is neither surprising nor unsatisfactory.
The marketing budget was realigned to reflect the tightening of the economy and to ensure that advertising spend was focused on driving turnover while nevertheless protecting the brands’ essence. Divisional expenses were well controlled but additional promotional activity took place.
In recognition of the needs of consumers in the downturn, increased promotional activity was undertaken across all three brands in order to offer customers additional value for their money. This resulted in an increase in the mark-down to sales ratio to 11,6% from 10,1% in the previous year.
The Rand price of gold remained relatively stable last year after a 40% increase in the previous year. This made it possible for the prices of most gold products to be maintained at levels prevailing in the previous year, while the prices of certain lines were reduced in the promotional drive mentioned above, with notable benefits to customers.
Stock turn remained in line with prior years at 1,7 times. When trading started to slow down at the beginning of the year the division focused on managing the stock in order to ensure that closing stock levels were below those of last year. This created a strategically better starting position for the next year than that which prevailed in the past year.
The division opened 17 new stores in the year under review (seven American Swiss, seven Sterns, three Matrix). Two underperforming stores were closed (one American Swiss and one Sterns).
The division has opened 43 new stores over the past two years, remaining confident about the future and its prospects for continued expansion. In the current tough economic climate the additional space has naturally placed pressure on trading densities, resulting in a reduction in trading density from R47 000 per square metre in the previous year to R45 000 in the 2010 year.
| Mark-down statistics | |||||
| 2006 | 2007 | 2008 | 2009 | 2010 | |
| Mark-down value (Rm) | 89,0 | 96,5 | 119,4 | 113,6 | 127,3 |
| % of sales* | 10,0 | 9,4 | 9,9 | 10,1 | 11,6 |
| * Based on latest selling price as opposed to original selling price used previously | |||||
STRATEGY
The division expects a slow recovery in respect of durables especially luxury goods and therefore expects that trading conditions in the new financial year will continue to be tough. Reduced interest rates will no doubt have a positive impact on consumers, but this will partially be off-set by increased electricity costs. It is anticipated that the 2010 FIFA World Cup™ events will generate positive sentiment that will assist in lifting sales. Inflation in jewellery costs is expected to be low and this should help to drive unit sales growth when it is borne in mind that the rising gold price of the previous few years, coinciding with a general economic downturn, was the chief factor in bringing about contraction in unit sales.
The division will also continue to rely on the strength of each of the American Swiss, Sterns and Matrix brands in its drive to continue growing their market shares.
The brand alignment process undertaken over the past years has strategically positioned the division’s brands for market leadership in the future and the next year will see a continuation and refinement of this process. To this end, the division is focusing on innovations in products and marketing strategies.
Three American Swiss concept stores have now been opened and are trading well. The American Swiss concept store at the Canal Walk shopping centre won the Spectrum Award 2009 for Best Retailer in the Western Cape. This distinctive shop design will be rolled out to major shopping centres over time.
Sterns launched a new concept store at the beginning of the 2009 year. While it improves greatly on the previous generation of stores and has been well accepted by customers, there is opportunity for further refinement of the concept. When finalised it will serve as the basis for all new stores in the Sterns chain.
The Jewellery division considers that customer service is a key differentiator. Accordingly, the division is continuing to improve the training programmes used in stores and at the group’s head office in order to ensure that all staff members are aligned with the division’s customer focus and its core values. Further details on the group’s human resource activities – including employment equity, skills development, and occupational health and safety – are provided in the Human Resources review.
| Store statistics | |||||||
| Projection | |||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| American Swiss | 179 | 181 | 187 | 199 | 205 | 212 | 215 |
| Sterns | 115 | 121 | 122 | 132 | 138 | 143 | 150 |
| Matrix | 14 | 14 | 19 | 19 | 22 | 24 | 26 |
| Total No. of stores | 308 | 316 | 328 | 350 | 365 | 379 | 391 |
| Closures | 3 | 4 | 7 | 4 | 2 | 2 | 2 |
| Floor area (m2) | 21 580 | 22 029 | 22 519 | 23 992 | 24 538 | 25 308 | 26 018 |
Supply chain management continues to be a key focus within the group and the division has launched several initiatives that will, over the next few years, build a supplier pipeline that has greater flexibility and shorter lead times than have prevailed in the past, while also ensuring adherence to ethical, labour and environmental performance standards. This should result in improved decision-making and operational efficiency. The division complies with the requirements of the Kimberley Process, aimed at ensuring that all diamonds have been purchased from legitimate sources not involved in funding of conflict, in compliance with the United Nations Resolutions. Further details on the nature of the division’s supply chain management and auditing activities are provided in the Supply Chain and Group Merchandise Procurement reviews.
The division’s store location strategy includes the continuous monitoring of performance trends and where economic factors so dictate, closures or consolidation will proceed. Locations in new and existing shopping centres where the division’s stores are under-represented have been identified, and new stores will be opened in prime positions. Great care is taken in ensuring that new stores are appropriately sized. A measured view of expansion is taken, in line with the core strategy of seeking long-term growth in sales and profit.
PROSPECTS
As has been indicated above, the division expects that trading in the next year will be subdued, in line with conditions in the broader economy, but it is confident that the strength of its brands, the positive cash flow of the group and the expertise of staff members will enable the division to grow its turnover and market share, with benefits to overall profitability.
