Byline: Georgia Lee

The new Service Merchandise is a far cry from the old take-a-number-and-wait routine. The Nashville-based chain has undergone significant changes after filing Chapter 11 bankruptcy in early 1999. Shortly thereafter, the company closed around 150 of its unprofitable stores, then embarked on revamping many of the remaining 220 units in a new prototype.
The new look features a specialty store ambience, contrasting sharply with the original catalog-warehouse presentation. Square footage of each store now averages 23,500 square feet, half of what it used to measure. Selling space in the new layout is roughly 17,500 square feet. Six remodeled Atlanta units were unveiled in September 2000.
During the restructuring, the company studied consumer buying habits from its proprietary database. Studies revealed that 48 percent of customers bought jewelry first.
“We can dominate in categories like jewelry, with our big assortments, value, and the ability to test product, work with suppliers and get feedback, said Charlie Septer, coo of the Nashville-based retailer.
The new stores feature wider aisles, brighter lighting, enhanced displays and more upscale fixtures. One of the most striking new areas, the Gallery, an in-store shop, showcases fine jewelry, priced from $500 to $20,000, and including dramatic pieces such as a 13.5 carat diamond bracelet, a four-carat diamond ring and bold designer pieces. The Gallery will be in 43 Service Merchandise stores by the end of 2001, although the concept won’t spread to all markets.
Per store, fine jewelry sales average more than $3.2 million dollars annually. Bridal, which is one-third of jewelry business, will expand, along with diamond and fashion jewelry, gemstones, gold and silver. Fashion watches, from brands such as Harley-Davidson, Bulova, Disney and Relic, are also growth areas. Crosses and hearts are constant bestsellers. Rather than any one designer, Service Merchandise will build its own brand image as the source for jewelry.
“In fine jewelry, the brand is the store,” said Septer. “We know that upscale jewelry is appealing more to the mainstream, as everybody wants to trade up. We always had the designer business, but we didn’t have enough. We’re keeping the same value in lower price, but stretching into unique, high-priced items.”
The new strategy is a three-pronged approach that integrates store, Web site and phone sales. With Service Merchandise in the mail order business for 25 years, e-commerce was an easy transition early on.
Kiosks have been placed in 220 stores where customers can go online to buy product for store pickup, or use the store’s Web site for more extensive product information, including a real-time stock check via a satellite system.
As jewelry levels vary from store to store, the kiosk allows customers to see a more complete selection on the Internet. Content, including an info site, is intended to make the site “sticky,” with tips on hot trends and gemstone care. Questions on jewelry are answered by salespeople in a live chat room.
Gold has been a bestseller on the Internet, along with precious, semiprecious jewelry and fashion watches. Higher-end purchases, particularly diamond solitares, are less in demand, as customers prefer to buy them in stores.

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