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Jewelry Industry: Tiffany & Co.


Jewelry Industry: Tiffany & Co. Group 6 John Cayo Jessica Wilson Kirk Griffith Jessica Aragon Brandy Wolfe Raynee Bradley Cole Naylor The Jewelry Industry Jewelry ... – PowerPoint PPT presentation

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Title: Jewelry Industry: Tiffany & Co.

Jewelry Industry Tiffany Co.
  • Group 6
  • John Cayo
  • Jessica Wilson
  • Kirk Griffith
  • Jessica Aragon
  • Brandy Wolfe
  • Raynee Bradley
  • Cole Naylor

The Jewelry Industry
  • Jewelry dates back to 75,000 years ago
  • Uses of jewelry wealth, status, membership, etc.
  • The industry is timeless and very attractive to
    those who are in it

Main Players of the Industry
  • Tiffany Co. (top competitor)
  • Blue Nile Inc.
  • Signet Jewelers Limited
  • Zale Corporation
  • DGSE Companies Inc.
  • Birks and Mayors Inc.

Industry Life Cycle
  • Mature stage
  • Will not be taken down by economic crisis
  • Adaptation Short-run Medium-run
  • Research shows that this is a favorable industry

Overview of the Environmental Scan
  • There are six environmental factors that an
    investor needs consider when analyzing an
    industry economic, political, social,
    technological, competitive, and geographical.
    These factors are known as the environmental
    scan. Performing this secondary research provides
    an investor with much needed insight into an
    industry and helps build a foundation for further
    exploration and analysis.

The 6 Environmental Factors
  • Economic
  • Political
  • Social
  • Technological
  • Competitive
  • Geographical

Additional Implications
  • Dependence on Economic Well-Being
  • Reliance on Suppliers and Natural Resources
  • Market Niches

Dependence on Economic Well-Being
X-Axis 1,2,3,4,5 refer to Year 2004, 2005, 2006,
2007, 2008 respectively
Dependence on Economic Well-Being
-Axis 1,2,3,4,5 refer to Year 2004, 2005, 2006,
2007, 2008 respectively.
Driving Forces for Change
  • In the last couple of years politics and
    economics have played a big role in driving
    companies in the jewelry industry to change in
    order to stay competitive.

Conflict Diamonds
  • Conflict diamonds better known as Blood
  • Used to fund conflicts in war-torn areas.
  • Captured the worlds attention in 1990s, but
    more recently in the movie Blood Diamond
  • Conflict diamonds represent 4 of the worlds
    diamond supply

Changes Made
  • In January 2003, an intergovernmental agreement
    was created called the Kimberley Process
    Certification Scheme was created.
  • Companies also participate in a voluntary program
    of self-regulation in addition to KPCS.
  • Eliminates conflict diamonds from the worlds
    diamond supply.
  • Through these joint efforts 99 of the worlds
    diamond supply is free from conflict diamonds.

Dirty Gold Mining
  • Gold mining has been a dirty practice for over
    4500 years.
  • Conditions worsen as easily accessible deposits
    of gold have declined, and open-pit mining is
    becoming more wide spread.
  • These practices lead to destruction of the
    environment, damage to the ecosystem, and the
    opening of vast craters.

Social Responsibility
  • In 2003 Tiffany and Co. framework for
    responsible mining A guide to evolve standards.
  • Zale Corporation, along with other industry
    members, formed the not-for-profit Council for
    Responsible Jewelry Practices in May 2005
  • Since this move began, more and more companies
    seem to be making the change to this more
    socially responsible initiative.

  • Since repeat consumers play a key role in the
    success of the jewelry industry it is important
    for companies to adapt to the evolving mindset of
    their consumers which in this case is to take a
    strong position in social and ethical

The Current Economic Condition
  • Jewelry companies across the board take a second
    look at their strategies in attempt to weather
    this current economic storm.
  • The jewelry industry, which typically gets most
    of its profits from Valentines Day, Christmas,
    and Mothers Day, has also seen a downturn in the
    recent years due to the current economic
  • Companies are approaching this situation in a
    number of ways.

Marketing Techniques
  • Companies are using ads to adapt to the current
    mindset of its consumers.
  • Jewelry is considered a luxury and not a
  • Some companies are changing their approach to
    make diamonds seem like a thoughtful investment
    rather than a luxury.

De Beers
  • "Here Today. Here Tomorrow. In times like these,
    it's perhaps wise to reflect on the things that
    last rather than the things that come and go. A
    diamond has outlasted all that history can throw
    at it, from the formation of continents to the
    turmoil of markets. Across the generations, in a
    thousand years' time, a diamond will still be
    here. Just like love. Just not like your

Other Marketing Techniques
  • High-end retailers have chosen to focus on
    upper-class consumers.
  • These consumers are less likely to be as affected
    by the current economic state.
  • They continue to use quality as their competitive

Tiffany and Co.
  • "Dreams Can Still Come True, Give her the ring of
    her dreams. For less than you imagine, the best
    there is."
  • This ad still focuses on the high quality that
    Tiffany and Co. is known for, yet it changes its
    approach by saying dreams can still come true
    implying that even in this down-turned economy
    you can get great quality for the one you love.

Good to Great
  • The strategy that De Beers and Tiffany and Co.
    have chosen to follow is similar to the mindset
    of the Stockdale Paradox.
  • It talks about facing the brutal facts of your
    current reality.
  • The companies are embracing this crisis and
    adapting their strategy to sustain their market
    positions in the changing environment.

Facing even more Brutal Facts
  • As the economy has continued to decline these
    marketing techniques have become less successful.
  • Aspirational buyers have been knocked out of
    the high-end jewelry market.
  • Even companies such as Tiffany and Co. have even
    seen a decline in recent sales.
  • The few companies that do continue to market to
    just upper class successfully are usually the
    retailers that have higher brand recognition and
    greater differentiation of products- Providing
    greater customer loyalty.

Innovative Designers
  • Innovative designers are very important.
  • Companies do not typically brand their products.
  • Innovative designers provide companies with a
    recognizable product design and packing.
  • They also give companies a wider range of
  • This helps them differentiate from their
    competitors while battling in the red ocean of
    the jewelry industry.

Market Niches
  • The Right-Hand-Ring-De Beers, Helzberg, Zale
    Corp. and others.
  • Mens Jewelry
  • Estate Jewelry
  • Gay Americans - a segment that has been steadily
    growing as civil marriages are becoming more

  • Raw materials such as platinum and silver are at
    an all time high at an estimated 60 percent and
    40 percent, respectively, from a year ago.
  • Companies have started to increase their prices
    to compensate for their costs due to inflation.
  • This causes an additional adverse impact on the
    demand for jewelry, especially for companies that
    compete on price, such as Wal-Mart.
  • High-end companies dont seem to be as affected.

  • As of right now, it remains to be unseen what
    will exactly become of the jewelry industry as a
    whole as the economy continues to change.
  • Whether it is for the better or worse, these
    companies will persist in finding ways to remain
    competitive as there are always driving forces in
    this ever-changing economy.

Porters Five Forces
Competitive Rivalry amongst existing firms HIGH
  • In the jewelry industry companies that are
    considered mass merchandisers or limited line
    jewelers generally compete on the basis of price.
  • Specialty jewelry companies, have found great
    success competing on quality rather than
    competing on price. Brand recognition is the
    greatest asset.
  • There is a high growth rate in the industry. As
    the jewelry industry expands globally, the
    industries top competitors are opening many
    stores in order to increase market share and
    capitalize on competition.
  • This has created a stagnant industry that now
    competes by taking market share away from the
    other players and creates price wars among many
    of the firms in the industry.
  • The switching costs and degrees of
    differentiation lower as the industry grows.
    These low degrees of differentiation lead to
    consumers purchasing items based on price rather
    than quality.

Threat of New Entrants Moderate to Low
  • Several of the existing firms have contracts with
    well-known diamond distributing companies.
  • New entrants may find it difficult to contract
    with these companies, because they lack the
    financial status. Also new entrants do not have
    a reputable name, which may cause doubt from a
    diamond distributing company and thus no contract
    will be created.
  • The entry into this market is getting
    increasingly difficult due to the growth of
    companies already established in the industry and
    due to high initial investment costs.
  • Existing firms experience economies of scale from
    large investments in research and development,
    brand advertising, or in physical location of
  • The barriers to entry and to exit are very high
    in this industry.


Threat of New Entrants (continued)
  • Large economies of scale make it very difficult
    for new entrants to compete in an industry.
  • The more assets a firm has the greater the firms
    ability to take advantage of economies of scale.
  • The following chart shows each of the competitors
    total assets from 2006 to 2008

Total Assets (in thousands)
Threat of Substitute Products High
  • The threat of substitutes depends on the relative
    price and performance of the competing products
    and on customers willingness to consider
  • In this Industry there are millions of consumers
    who will not purchase a diamond unless they are
    absolutely certain it is conflict free due to
    ethical and social concerns. Since conflict free
    diamonds are harder and more expensive to obtain,
    this creates a high level of competition for the
    jewelry industry.
  • Products price elasticity is also affected by
    substitute products. For example, as more
    substitutes become available the demand becomes
    more elastic because customers have more
    alternative choices. Therefore a close
    substitute product constrains the ability of
    firms in the industry to raise prices.

Bargaining Power of Customers Moderate
  • When there is a large market of buyers the
    industry has the ability to set its price points
    as high or as low as they choose.
  • Customers have little bargaining power regarding
    price when they shop at luxury stores and refuse
    to search for alternatives, because of such a
    limited selection.
  • However, when buyer power is strong, the
    relationship to the producing industry is near to
    what an economist terms a monopsony- a market in
    which there are many suppliers and one buyer.
    (Quickmba) In this particular market condition,
    the buyer sets the price.

Bargaining Power of Suppliers High
  • Since diamonds are scarce, mining companies have
    absolute control over the selling price.
  • Diamond-mining companies such as DeBeers and Aber
    control the price of the diamonds that are
    supplied to several firms in the jewelry
    industry, such as Tiffany and Co. Since these
    precious gems are of great value to the firms,
    the power of the supplier is even larger.
  • The power of suppliers within the jewelry
    industry has skyrocketed within the last few
    years due to natural gemstone scarcity.

Major Players
  • Tiffany and Co.
  • Blue Nile Inc.
  • Signet Jewelers Limited
  • Zale Corporation
  • DGSE Companies Inc.
  • Birks and Mayors Inc.

Tiffany and Co.
  • TIF
  • Founded 1837
  • Headquartered in New York, New York
  • Stores
  • Compete

Blue Nile Inc.
  • NILE
  • Founded 1999
  • Online selling
  • Compete

Signet Jewelers Limited
  • SIG
  • Founded 1950
  • Headquartered in London, United Kingdom
  • Store names and locations
  • Compete

Zale Corporation
  • ZLC
  • Founded 1989
  • Headquartered in Irving, Texas
  • Store names and locations
  • Compete

DGSE Companies Inc.
  • DGC
  • Founded 1965
  • Headquartered in Dallas, Texas
  • Online auctions
  • Compete

Birks and Mayors Inc.
  • BMJ
  • Founded 1879 and headquartered in Montreal,
  • Store names and locations
  • Compete

Financial Data
  • Current Ratio
  • Debt/Equity Ratio
  • Stock Price
  • Market Cap
  • Total Revenue
  • Return on Equity
  • Mean Recommendation
  • Long Term Growth Rate Over 5 Years

  • How well assets cover short term obligations.
  • Companies ability to borrow and repay loans.

Stock Price
  • BMJ taken from November 05 because that is as
    far back as stock history could be found.
  • Mid cap TIF
  • Micro cap NILE SIG
  • Nano cap ZLC DCG

  • Sales must be brought in to turn a profit.

Return on Equity
  • The higher the percentage, the more likely the
    company is able to generate cash internally.

  • Suggests if a stock should be bought or sold

Long Term Growth Rate Over Five Years
  • This illustrates Who will grow the most and a
    profitable investment.

Predicting the Moves That Competitors Will Make
  • Developing socially responsible lines of jewelry
  • How competitors deal with economic crisis
  • Use of e-commerce in the industry

Social Responsibility
  • Becoming a fashion trend
  • Conflict Free
  • Free of violence, war and exploitation
  • Jewelry for a cause
  • Bulgari Pandora
  • Segmented target marketing
  • Movie Bling on

Dealing with Economic Crisis
  • Focusing on lower-priced pieces
  • Luxury goods tax
  • New York
  • Buyouts
  • Berkshire Hathaway
  • Bankruptcy
  • Fortunoff Fine Jewelry

E-commerce Innovations
  • Different approach to online purchasing
  • New niches
  • Harry Winston lower priced pieces
  • Blue Nile fashion jewelry
  • Uncertainty in these times, but potential for
    huge success in the future

  • Must lower prices to keep up in crisis
  • Target specific customers through direct
    marketing and new market niches via internet
  • Move toward Conflict Free lines
  • Partner with charity organizations
  • Enhance online shopping options

Key Success Factors in the Jewelry Industry
  • Introduction and execution of e-commerce
  • Understanding and reacting to economic conditions
  • Aspects of consumer spending

  • History of e-commerce
  • Consumers new power of choice
  • Blue Nile Inc. reported a 30 percent growth from
    2003 to 2004, showing a need for items to be
    offered not only in stores, but also online.

Economic Conditions
  • Key players may face volatile prices, mergers, or
    even bankruptcy in the near future
  • A strong leadership team from the bottom up
  • Issue of divergence of demand
  • Apply resources where the opportunities for
    profits are the highest

Understanding Consumer Spending
  • Disposable personal income variances
  • Prices of goods and services unstable
  • Issues in a struggling economy and overcoming
  • Two types of jewelry consumers and the effect on
    high end vs. lower end jewelers
  • Being socially responsible
  • Continuously monitor the changing environment and
    adapt accordingly

  • This is a favorable industry
  • Can take advantage of market trends
  • History proves that jewelry is long-lasting
  • Highly volatile market, highly attractive
  • Will overcome the economic crisis

Always Remember
  • Diamonds are a girls best friend!