Terry Burman will tell you that the Four Cs — cut, color, clarity and carat weight — are the standards by which all diamonds are measured, and that all four combined determine the value of a particular diamond.
There are also four factors that define the success of the company Burman heads: location, employment, merchandising and technology. Strict adherence to these details has made his company anything but a diamond in the rough.
Burman is chairman and CEO of Akron-based Sterling Jewelers Inc., the second largest specialty jewelry retailer in America. Sterling is also the U.S. subsidiary of the London-based Signet Group plc, making it part of the largest specialty retail jewelry organization in the world.
Operating from its 250,000-square-foot corporate headquarters in Fairlawn, Sterling boasts more than 825 retail stores in 44 states; about 550 of them are Kay Jewelers, the national chain that dates back to 1916. The rest are regionally recognized chains operating throughout the country, such as J.B. Robinson, Beldon, Weisfield, Shaw’s, Goodman, Osterman, LeRoy’s, Friedlander and Rogers.
A year ago, Sterling reached a milestone in its more than 80-year history: It met a $1 billion sales goal. Today, sales are substantially in excess of $1 billion. In addition, the company leads the industry in comparative store sales increases, average sales per store and operating income as a percentage of sales.
As a company, Burman says, Sterling’s distinction, size, positioning and power in the industry are due in large part to prerequisites it sets for its stores.
Gold chain of command
Maintaining high visibility of its national and regional retail operations in malls and shopping centers in every top market in the country has put Sterling at the helm of the competitive specialty jewelry business, says Sterling CFO Richard Miller.
The company’s nationally recognized Kay Jewelers chain has increased visibility over the past two years by way of new store openings and the conversion of some regional stores to the Kay brand. Last year, Sterling opened 41 mall stores.
Sterling’s greatest potential expansion vehicle and “category killer” concept is Jared the Galleria of Jewelry. Last year, the Jared division nearly doubled in size: In the company’s fiscal year, ending Jan. 30, 1999, 13 Jared stores were opened, raising the chain size to 28. The first Jared store was launched in Akron’s Chapel Hill Mall in 1993. Since then, stores have sprung up in major metropolitan centers across the U.S.
The distinctive, free-standing Jared stores are more than five times the size of traditional mall jewelry stores and offer more than 7,000 jewelry items displayed in separate departments, creating the impression of several stores within a store.
“Like the category-killer type of shop, Best Buy, for example, the intent of the Jared strategy is to bring jewelry into a destination-type shopping environment,” says Miller.
“That out-of-mall strategy is a natural growth and expansion of our operating base that follows what is going on in retail development today. We have to look no further than Market Street out here in Montrose, where you see all the shopping development taking place outside of traditional malls.”
The clincher, says Mark Light, Sterling’s executive vice president of operations, is that the destination-bound shopper has substantial buying power, and many developers are swayed by the possibilities of leveraging the traffic that such a store can bring. For Sterling, the “destination jewelry shopping experience” concept that has revolutionized the industry has enabled Sterling to attract new customers from a significantly different demographic perspective.
And the Jared customer, Light assures, is definitely different than the typical mall customer.
“They have a higher average selling point. Their purchases run the gamut from anything as low as a $35 charm to a $40,000 diamond bracelet.”
With that in mind, Sterling plans to open more than 200 Jared stores across the country during the next decade.
“There’s a big map out there and great opportunity for the Jared concept,” says Light.
Miller says Sterling plans to expand the Jared division in conjunction with the enhancement of the Kay name nationwide, because there’s still a large customer base that prefers to comparison shop in malls. In addition, Sterling’s growth strategy includes development of its national regional mall chains, and group acquisitions of other jewelry stores.
The company has pinpointed strategic areas for future growth, including more than 100 malls across the country.
Pearls of wisdom
“In every aspect of our business, it’s part of our mission statement to keep focused on continuous improvement,” says Light.
Here, then, are Sterling’s keys to success.
Location, location, location
Sterling’s real estate strategy is likely the most important facet of the company’s growth, says Light.
“We understand and we know what it takes to make a mall store successful and profitable, and one key element of that is the selection of the real estate,” he says.
For example, Kay mall stores were once located near stores such as Kaufmann’s. Now the quest is to corner center-court locations in malls.
“Our Kay Jewelers store in Summit Mall is the prototypical type of location that we demand,” Light says. “We stay focused on that real estate strategy and we won’t veer off and say, ‘OK, we’ll take an inline location,’ because we know that we can only expand profitably by expanding at the appropriate real estate location.”
Miller says the expansion of the Jared division is the greatest challenge Sterling faces.
“When you put your store in a mall, the developer has already done all the demographic tracking, such as identifying the ideal location and the customers that will shop there,” says Miller. “But when you’re opening Jareds, it’s very important that you have the proper visibility and traffic count, and you don’t have the benefit of a mall developer doing it for you.”
Using the example of Market Street in Montrose, Miller explains that a mile up or down the street in either direction has a very different traffic pattern, and it’s crucial to be located on the right street, on the right corner, and to have the proper visibility.
“All of these factors go into the Jared decision, which is more complicated for us than simply going into a mall,” he says.
Employment
Another element in Sterling’s growth is the personnel required to run Sterling’s stores and execute its strategies, says Light. Personnel selection is critical, because there are specific characteristics that make for a successful Sterling jewelry store manager — such as knowledge of the company’s inner workings. That’s why, in most cases, promotions are made from within.
“Having the benefit of 800 existing stores has allowed our growth to come from within the ranks,” Light says. “It’s rare that anyone becomes a district manager or regional vice president unless they have worked their way up through the ranks.”
The company does hire from the outside for positions such as merchandising, marketing and information systems management.
The Sterling organization also has a different culture than most other retail organizations, Light says.
“We motivate our people differently and we have very intense training, in which we invest a lot more money compared to some of our competitors. Not only do we have specific in-store training, but we also have career development classes where we bring our people to our home office year round, from all over the country.”
Training ranges from district manager training programs to new store manager and high-volume store manager training, specialized customer service and sales training, and diamontology/gemology courses.
“We put a lot of effort into career development, and one of the benefits of being an expanding organization is that you can offer a career path to people,” says Miller.
Merchandising
Like many retail operations, Sterling’s merchandising department perpetually shops its competitors, not just for pricing information, but for new styles and trends.
“We’re always refining merchandising strategies so we have the appropriate product selection, and one that’s priced appropriately,” Light says.
In a retail operation such as Sterling’s, says Light, it’s crucial to have a merchandising program that can keep selection and pricing competitive by way of expeditious inventory replenishment.
“If our buyer goes out and picks the best bracelet, and the marketing people determine how to best advertise it, all the effort is wasted if it’s just sitting in our vault and we fail to distribute it to our stores,” says Miller. “In jewelry, where you have a slow turnover and people aren’t in the store each week, it’s extremely important to have on-hand the product that the customer wants.”
Technology systems
Whenever a purchase is made in any of Sterling’s branches, the cash register transaction instantaneously transmits the purchase information to Sterling headquarters. Without any buyer intervention, the store’s inventory is replenished within 24 hours.
“Every one of our stores is connected to its own satellite, so we can track sales minute by minute, day by day, communicate with our stores via advanced technology and replenish our inventory with real-time tracking,” Light says.
Sterling’s satellite communications network also facilitates instantaneous credit approval. When a store downloads a customer’s credit application information, it is immediately transmitted to the corporate office.
“Within minutes, we can get a credit line back to the store,” says Light.
The strength of its paperless technology systems enables Sterling to monitor and track every aspect of its business, says Miller, whether it be on an SKU-by-SKU inventory basis, how product is producing, how well each employee is selling and how each store is performing.
“We know what’s going on throughout the country in any store,” says Miller. “I can tell you that at 10:12 a.m. this morning we have $237,000 in sales across the country.
“That’s the kind of information you like to have.”
How to reach: Sterling Jewelers Inc., (330) 668-5000
Cindy’s out, romance is in
Sterling’s strategic national television and radio advertising campaigns have built a solid identity for Kay Jewelers as a business that offers quality merchandise.
Cindy Crawford had a hand in that. But Cindy’s no longer in the picture, says Light.
“We parted ways in May of 1998,” he says, referring to Sterling’s former contract with Crawford as Kay’s celebrity spokesperson. “She was with us for five years and it was a good relationship. But we felt it was time to make a change in our advertising campaign.”
Light confides that market research indicated it was time to go a different route.
“Now our whole advertising approach is basically that whenever somebody buys jewelry, it’s always an expression of love,” he says.
Cindy’s out. Romance is in. And the push is on to draw into the stores men who are looking for the perfect expression of affection, says Harriet Schreiner, Jared’s executive vice president for merchandise.
Schreiner says one marketing tool that’s luring male customers is the “Jewelry Quotient” (JQ), a “foolproof” guide designed to take the panic out of purchasing fine jewelry for that special female. Using the guide, the male merely chooses the JQ category that best describes the female: classic, active, romantic or trendsetter.
“It’s simply a matter of considering the tastes and lifestyle characteristics of the significant other,” she says.
In terms of radio and television advertising, Sterling spends hundreds of thousands of dollars to draw customers.
“It’s more and more television for Kay, more and more radio for our stores like Jared and our off-brands like J.B. Robinson and Rogers,” Miller says.
As far as the spots themselves, one Akron disc jockey says there must be something subliminal about the Jared jingle, in which a female singer trumpets, “Aaah, that’s Jared!”
“Every time we run that commercial, I can’t stop humming it for an hour afterward,” he says.
Light says the ditty definitely separates itself from the clutter.
“It has a very high name awareness and strong identify attached to it.”
Miller says Sterling’s advertising efforts are intensified during the busiest buying periods, such as Christmas, Valentine’s Day and Mother’s Day. In addition to electronic media, direct mail packs customers’ mailboxes when they’re most likely to consider buying jewelry. Full-color catalogs are produced throughout the year and distributed via direct mail and in the stores. The Internet has also become a marketing vehicle.
As for Kay Jewelers’ prior pitch to the public by way of a celebrity spokesperson, Schreiner submits that one reason for the new marketing approach is that real customers figured they couldn’t afford something Crawford would wear.
“It’s mostly that the consumer relates to real people,” she clarifies.
