Tiffany & Co. Overview Tiffany & Co. is a retailer, designer, manufacturer, and distributor of luxury fine jewelry. As of January 31st, 2003, they had 44 company-operated stores within US borders and 82 company-operated stores internationally. Fine jewelry makes up 79% of their net sales followed by other products such as timepieces, stationery, and sterling silverware.
Michael J. Kowalski, Tiffany & Co. ’s current CEO, has the same mission the company had when it first started in 1837: to be the world’s premier luxury brand of fine jewelry as well as America’s house of design.S. W. O.
T. Tiffany & Co. has done an outstanding job in developing a strong brand name, which represents nothing but the best, most durable, and most luxurious jewelry. Part of their strong reputation can be accredited to their company-operated stores, which quickly differentiate Tiffany & Co. from competitors who sell their products through other distributors. The company-operated stores strengthen the brand name even more by physically isolating Tiffany’s name and its products, giving them a prestigious image.
Tiffany & Co. ’s advertising campaigns have done a good job in targeting their ideal upper to middle class customer. Their ads have been strategically placed in newspapers such as The New York Times and The Chicago Tribune, and in magazines such as New Yorker, which tend to be read by a well educated, upper class group. Tiffany’s collections which range in both style and price, combined with their impressively efficient inventory, have kept customers happy for decades. Tiffany & Co.
s well trained employees have been able to form relationships with their customers are another reason why the company has many returning customers. Tiffany exhibits several weaknesses that are hurting net sales. Most importantly, their international stores have not been bringing in nearly as much revenue as company executives had once predicted. The number of international stores is almost double that of stores within US borders, yet only bring in about 41% of net sales.
As for domestic problems, Tiffany & Co. eems to have placed all its stores in large cities, not tapping into suburban wealth that could increase the company’s net sales. Also, sales of men’s products have been low. Although international sales have been rather low, foreign countries provide Tiffany & Co.
with great opportunities in relatively new and expanding markets. Markets with strong potential exist in countries such as China, Brazil, and Canada. Since China’s membership in the WTO in 2001, global trade has risen, increasing economies of scale.Tiffany must continue to utilize China for its custom designing and cheap labor, and continue to utilize the low design and operational costs in Brazil, in order to increase net profit. Tiffany & Co.
also purchased a diamond mine in Canada to cater to Canada’s growing trend in diamonds. Tiffany & Co. ’s main threats are posed by other luxury jewelers like Bulgari, Cartier, and Harry Winston. Zales and David Yurman also pose significant threats, although they are not considered to be in the same price bracket as Tiffany.Internationally, small, local boutiques pose significant threats in small towns outside of large cities, as they have an already established customer base.
External Analysis The luxury goods industry took a hit after the attacks on the World Trade Center in 2001. However, the jewelry sales increased almost one percent from 2002 in just the first quarter of 2003 alone, and is on its way to a full recovery. Also in 2001, the SARS outbreak in China decreased sales of jewelry overseas, but those sales also began to rise shortly after the epidemic was controlled.The luxury industry will always be able to bounce back because luxury goods are always in demand by the wealthy. Economists estimate that by 2050, over 25 million households will have assets of over one million dollars, as opposed to the 5 million households with assets over one million dollars in 2002; a 400% increase in just 48 years. With this increase in wealth, combined with the continual increase in population size, there should always be a strong market for luxury goods.
Technological advancements have played a major role in the industry since the late 1990s.Jewelry in particular has a very high weight-to-value ratio, which makes shipping easy and keeps shipping costs relatively low. Internet sales have passed catalogue sales in over 10 of the top 15 luxury jewelry companies. Tiffany & Co. ’s internet sales passed its catalogue sales shortly after the company opened its website in 1999. The complaint that the company-operated stores closed before a majority of the workforce went home for the day, is now somewhat outdated now that Tiffany has a very effective and functional website that can be accessed 24 hours a day.
This year, Tiffany & Co. announced that over 60% of its direct sales were generated through their website. Demographic trends play a much smaller role in the luxury jewelry business than it does in many other industries. Tiffany & Co. ’s various jewelry collections cater to virtually all ages, ranging from young teens to matures, well beyond there sixties. However, the baby boomer generation, which is made up of persons in their forties and fifties, does have a large amount of buyer power.
Several recent trends have affected the luxury jewelry market.Men’s jewelry sales increased by over 150% from 2006 to the present (specifically money clips and cuff links). Recent Japanese trends are showing that brides are moving away from classic engagement rings and moving towards colored stones, while the popularity of diamonds in Canada has drastically increased. Tiffany took its first step towards backward integration when it purchased a diamond mine in Canada. This was an effective step in preparing for the future, especially with Canada’s recent trend in diamonds.
Tiffany has a decent amount of seller power now that it has ownership in a diamond source, however, other precious metals and stones must be purchased from mines throughout the world, and the prices of these precious metals and stones are constantly changing. Recommendations I think Tiffany & Co. should take the second approach with regards to its global expansion, which was to collaborate with international local competitors in existing and potential markets. By doing this, they can decrease and potentially eliminate any competition in already existing markets.The second option will be most effective for several reasons. Firstly, luxury jewelry has been around for many years and can be a very personal business.
Many of these local shops and boutiques that Tiffany & Co. would collaborate with already have established relationships with customers and have concrete customer bases. Secondly, because of different trends in different regions, it would be more cost effective for Tiffany & Co. to team up with local retailers. By selling through local vendors, Tiffany would be able to place certain products in certain regions that directly cater to the trends and fads in each region.By specifically targeting different regions through small vendors, Tiffany & Co.
can increase their revenue per square, and eliminate expenses that go along with owning property such as rent, insurance, and electric. Tiffany & Co. might want to consider placing bridal and engagement jewelry in local Japanese vendors to go along with the trend of Japanese brides moving away from classical engagement rings towards rings with precious stones. By catering to a specific trend in Japan only, which accounts for 28% of Tiffany & Co. ’s total net sales, Tiffany & Co. should be able to increase revenue by a good amount.
Lastly, it does not pay for Tiffany to spend the time, effort, and money to build new stores when approximately 60% of their sales come from the Internet. There website which is extremely efficient, ships products all over the globe and has a more complete collection than any store. Recommendation Critique The obvious drawback of this recommendation is that it will take a lot of time and energy for an industry leader like Tiffany & Co. to come to terms and agreements with small, local, international vendors. While I think this strategy will be the most cost effective way for Tiffany & Co. o successfully sell their products internationally, selling through non-company-operated stores might compromise Tiffany & Co.
’s reputation and image. Depending on the terms and conditions agreed upon by Tiffany & Co. and the local vendors, Tiffany products might not all be wrapped in their unique “Tiffany Blue” packaging. Also, Tiffany jewelry could be sold through vendors who don’t have particularly nice stores, depriving shoppers of the positive shopping experience, which Tiffany & Co.
offers to all of their customers who shop in company-operated stores.
