In what has been a painful year for jewelers, there probably aren’t many observers with a finger closer to the pulse of the market than the firms that specialize in jewelry liquidations.
This story first appeared in the December 1, 2008 issue of WWD. Subscribe Today.
As consumers have found it harder to part with each discretionary dollar, recent economic woes have wreaked havoc on retailers of all stripes.
The slowdown in consumer spending, paired with increased competition in recent years from the Internet and home shopping, forced a number of jewelry companies to shutter this year. Through October, the Jewelers Board of Trade, a credit and collections bureau focused on the industry, counted 1,140 jewelry business discontinuances. Bankruptcies in the year were up 18.6 percent across the sector.
In August, the year’s largest retail jewelry liquidation sale began at Whitehall Jewellers Inc., which, four months earlier, had acquired bankrupt chain Friedman’s Inc. That acquisition also included certain assets of another retailer, Crescent Jewelers. Whitehall’s closing subsequently put about $1.2 billion worth of inventory on the market.
“The retail jewelry market has never faced this kind of competition and pressure before,” said Darren Fries, sales manager at liquidation firm Silverman Consultants.
The worst may still be to come. “I think we’re going to lose a lot of retail jewelry stores,” said Stevan Buxbaum, executive vice president at liquidation firm Buxbaum Jewelry Advisors. “This is the front end of a cycle of a reduction in the number of retail jewelers. It’s quite possible that Kay Jewelers may reduce their number of stores or their number of brands. Zales and Gordon’s Jewelers could be trimming doors.”
The downsizing likely will not be limited to national chains. Liquidation specialists suggested that smaller jewelers could be more prone to feel the pain.
“We’re going to lose a significant number of independents,” Buxbaum added.
By volume, independent jewelers account for close to 50 percent of the jewelry sold in the U.S., according to the Jewelers Board of Trade.
Existing jewelers will have even more competition in the upcoming holiday season as they are forced to contend with value inventory from liquidations.
“The consumer that does have some expendable income, they’re still looking for the best deal possible,” said Fries at Silverman.
With so much riding on the holiday season and more inventory on the market, many retailers have been left with little choice.
“If you’re a retail jeweler and things aren’t going well for you, often what you say is, ‘I’m going to get through this Christmas and see if I can make it work.’ It is the season that most of them point to and hope to come through with cash,” said Jim McGee, chief financial officer of liquidator Wilkerson and Associates. Dione Kenyon, president of the Jewelers Board of Trade, said that even in good years, the fourth quarter is a proving ground. In other words, when the calendar turns, liquidators could find themselves with even more business. “The industry’s bankruptcies start to emerge in January,” Kenyon said.