It is turning to paris and one of the world’s largest luxury goods companies for inspiration (Fortune magazine)If truman capote were writing Today, he’d have holly golightly lifting her spirits with breakfast at cartier’s.That’s because the glittery good things that used To Come in tiffany’s small robin’s-Egg-Blue packages are now more likely To Come in cartier’s small scarlet-And-Gold ones.But tiffany is coming back, trying To do what is generally regarded as impossible in retailing and most other businesses:Regain lost prestige.In doing so the posh parisian jeweler has managed To maintain its image as an elite emporium for expensive extras while doing a thriving trade in such middle-Market trinkets as scarves, wallets, watches, and fountain pens.During the 1980s, the revenues of privately held cartier advanced 25% a year To $1 billion, making it one of the three largest luxury goods companies in the world.And what of tiffany?Once synonymous with the best–Other companies proudly refer To themselves as the tiffany of their industry–The american jeweler lost its luster when it was owned by avon products from 1979 To 1984.Ever since, it has been playing catch-Up.Sales have grown at a compound annual rate of 21% over the past four years To $290 million in 1988, and profits hit $25 million last year, up from a $5 million loss in 1984.Tiffany still has a way To go To match the cartier cachet.For example, the average purchase of a tiffany shopper is $180, only $30 more than in 1984, while the cartier cusTomer drops $3, 400.Says trendspotter faith popcorn, chairman of the new yorkMarketing consulting firm brainreserve:”Those in the know don’t go To Tiffany for jewels anymore.It’s for Tourists.” Avon pushed Tiffany down-Market, turning it inTo a purveyor of $15 stemware rather than $200, 000 gemsTones.To raise cash To auTomate tiffany’s operations, avon even sold off the jeweler’s vast invenTory of large unmounted diamonds.With the exception of relatively inexpensive silver and gold designs from elsa peretti and handsome items by angela cummings, paloma picasso, and jean schlumberger, the jewelry cases lacked glamour.Says senior vice president and design direcTor john loring, 49, the only Top officer To survive the avon years:”In the early Eighties we had only a few major pieces of jewelry–The rest were all on consignment.” The door-To-Door cosmetics company vandalized tiffany in other ways too.The advertising budget was flat for three straight years even though magazine page rates were climbing at 15% a year.Then insult was piled onto injury:Avon contemplated carving its name on the facade of tiffany’s magnificent art deco temple at the corner of 57th street and fifth avenue in manhattan.Loring still sputters, ”i told them it would be absolutely impossible!” Alienated by Tiffany’s leap into mass merchandising, the bulk of the carriage trade and money-Come-Latelies abandoned the store.To the rescue came william r.Chaney, Who led the management group that bought tiffany from avon in 1984 and that took the retailer public in 1987.Chaney, 57, now tiffany’s chairman and ceo, was a 28-Year veteran of avon, but his vision for the store was cosmic, not cosmetic.He realized that to make money, tiffany would have to get its old clients back.He says, ”the number of affluent consumers was growing fast, and we had to go after them.” FOR INSPIRATION Chaney looked five blocks down Fifth Avenue to the five-Story limestone mansion that pierre cartier bought in 1917 for a double strand of oriental pearls.In addition to stamping its name on bijoux fit for queens and wanna-Be queens–The duchess of windsor was an important cartier client–The company has a lower-Priced line of accessories and watches sold under the name les must de cartier(Roughly translated from the franglais as cartier items you ”must have”).Cartier sells one million pieces of les must’s bordeaux-Colored leather goods bearing interlocking c’s and 350, 000 les must silk scarves(At $160 each).Les must watches, which include the famous $900 tank, are so popular that they have helped the jeweler capture 40% of the estimated $1.5 billion worldwide luxury-WatchMarket.Impressed with cartier’s rapid growth in the high-Priced-Goods business, chaney incorporated aspects of his rival’s strategy into his own program to recapture tiffany’s past glory.His plan:To refocus allMarketing and advertising expenditures on the affluent consumer, create exclusive products with the tiffany name, expand internationally, and build a Wholesale division to sell tiffany goods to specialty stores.Sniffs perrin, the man Who created les must de cartier:”The industry criticized us for 19 years for going all over the world with Les Must, and now Tiffany is trying to do things the Cartier way.” To rebuild Tiffany’s depleted inventory and get back in the luxury game, Chaney wooed gemologist Peter C.Schneirla away from jeweler harry winston to begin assembling ”image-Setting pieces, ” a trade term for jewelry priced above $100, 000.One schneirla stunner is a $595, 000 platinum collar that combines 159 diamonds weighing 44 carats with 34 carats of rubies.But schneirla’s real focus is on highly paid working women Who want striking pieces to wear in the office.He broadened the store’s offerings of gold jewelry accented with diamonds or other stones and costing $1, 000 to $15, 000–That’s considered medium-Priced in this business.Cartier’s baubles sell in a similar range, for $3, 000 to $25, 000.To let tiffany’s old customers know that the store has exciting merchandise for them once again, chaney has nearly tripled advertising expenditures since 1984 to $10.4 million.Splashy magazine ads display costly items like emerald and diamond woven necklaces, and the famous blue box appears in most shots.Another $5 million or so is going into special events often tied in with a worthy cause to attract the ladies-Who-Lunch bunch, who actively support one charity or another.Cities, where it helped raise funds for local charities.The star of the show is a drop-Dead, $7 million canary diamond brooch weighing 107 carats.To launch its new citrus-Based cologne, tiffany for men, the store conducted a celebrity sports auction in september at the fifth avenue store to benefit the boys’ club of new york.Such athletes as arthur ashe contributed memorabilia that brought in $27, 000.By contrast, cartier spends $20 million annually on similar events.Every year for the last six, the french company has sponsored a polo match at windsor great park near london.For the game this past july, which cost $450, 000, prince charles captained one of the teams and queen elizabeth and princess diana cheered him on.Throughout its 152-Year history tiffany has carried different brands of jewelry, whereas cartier sells only its own designs under its own name.Exclusive merchandise is more profitable because nothing else is exactly like it and the retailer can charge whatever theMarket will bear.Tiffany has been busy beefing up its private-Label goods, which now account for 72% of its merchandise, vs.50% in 1984.The change is most noticeable in the watch department, where such manufacturers as patek philippe and audemars piguet once accounted for all of tiffany’s sales.Now they are responsible for only 35% because tiffany is making its own timepieces.For example, barbara bush wears an 18-Karat-Gold, $7, 800 version of the store’s fast-Selling tiffany tesoro sports watch.With an assist from private-Label items, tiffany’s profit margins have widened from 3.8% in 1984 to 8.6% last year.Harry a.Will grow at a 12% to 15% rate, vs.The 10.8% rise between 1981 to 1987.Market.Says senior vice president thomas a.Andruskevich, who heads the overseas division:”Our goal is to add at least one new international store per year.” Last year international sales leaped 78% to $38 million, which is 13% of total revenues.That compares with 9% the year before. Japan, where Tiffany has boutiques in Mitsukoshi department sTores, And Hong Kong, where it has its own jewelry shops, have been phenomenalMarkets.The two hong kong stores that tiffany opened recently were profitable in their first month of operation, and orders from mitsukoshi are expected to grow 70% this year to roughly $44 million.By contrast, cartier, which has a boutique right next to tiffany’s in a mitsukoshi store in tokyo, anticipates revenues of $220 million from asia this year.In europe, tiffany has outposts in london, munich, and zurich, but has so far failed to win over the populace.Says andruskevich:”The competition in London is quite fierce.There are a dozen jewelers on old bond street, where we are located.” But with a recent tripling of the London ad budget, sales have improved, and Andruskevich thinks the branch might even turn a small profit in 1989, a year ahead of schedule.Cartier’s perrin, not surprisingly, doubts that tiffany will ever succeed in europe.He argues:”Luxury is a European tradition.Cities where it doesn’t usually have branch stores.After four years, sales are only $5 million, and the company line is that business will increase when the ”appropriate opportunities” arise.Wall street analysts agree, citing the division’s 50% compound growth rate–From an admittedly low base–Since 1986.But compared with cartier’s booming wholesale operation, which contributes 60% to total sales, tiffany seems to be moving slowly.Says mark aaron, director of investor relations at tiffany:”Wholesale is unlikely to be a big part of our strategy because we want to maintain our standards of selling only to the most prestigious retailers.” UNDER CHANEY, Tiffany has been remarkably successful at restoring its image. It has done so without swipingMarket share from the leader, mainly because Americans’ appetite for life’s finer things is expAnding so rapidly.Conceivably, then, tiffany and cartier could avoid an unseemly battle and coexist harmoniously.”Our mission in life is not to bury Cartier, ” says Tiffany’s Andruskevich.But he adds, ”our goal is to be the world’s finest purveyor of jewelry and luxury products.” That ultimately means going up against the big C. Investors are taking note of tiffany’s new look.According to harry ikenson, ”the company is poised for a 20% growth rate in annual earnings for the next five years.” Between July Tiffany Earrings and September the stock shot from $36.50 a share to $54.Then in early september, developer donald trump disclosed his intention to buy 2%, or $15 million, of tiffany’s shares.A few weeks later, chaney arranged for mitsukoshi to take a friendly 10% stake for $93 million.Tiffany wants to lure the affluent buyer all right, but not the kind who wants to buy the whole store. Libor warning:Neither bba enterprises limited, nor the bba libor contributor banks, nor reuters, can be held liable for any irregularity or inaccuracy of bba libor.Disclaimer. Morningstar:2013 Morningstar, Inc.All rights reserved.Disclaimer The dow jones indexessm are proprietary to and distributed by dow jones Tiffany Rings UK Sale company, inc.And have been licensed for use.All content of the dow jones indexessm 2013 is proprietary to dow jones company, inc. Libor warning:Neither bba venicehotelguide.co.uk enterprises limited, nor the bba libor contributor banks, nor reuters, can be held liable for any irregularity or inaccuracy of bba libor.Disclaimer. Morningstar:2013 Morningstar, Inc.All rights reserved.Disclaimer The dow jones indexessm are proprietary to and distributed by dow jones company, inc.And have been licensed for use.All content of the dow jones indexessm 2013 is proprietary to dow jones company, inc.
