America’s Changing Shopping Habits

Researching a Car Purchase Online


by John Sealander  

Why People Buy Watches Differently than they Buy Cars

New studies are showing that people around the world are changing the way they buy things. Increasingly, multiple visits to a series of retail stores to comparison shop are out. Consumers are doing their research on the Internet ahead of time these days and many have already made a purchase decision by the time they arrive at the store. This is especially true when people are buying automobiles.

Hans-Werner Kaas, a senior partner at the prestigious McKinsey & Company consulting firm says that average car buyer visits just 1.6 auto dealerships before making a purchase, down from 5 dealerships only 10 years ago. “This is the most dramatic change we’ve seen in the auto industry and how people buy cars in the last 50 years,” says Kaas.

Simon Soaf, General Manager at Mossy Volkswagen in Carlsbad, California, has witnessed this change himself. “Those days of going to six or seven dealerships to shop for a car are over. It is not going to happen again. Customers are more savvy,” he said.

There are many reasons for this change in buying habits. Cars are still a practical necessity. In a difficult economy, people want to arm themselves with as many facts as they can before they make a decision on an expensive but necessary item like a car, a major appliance, or even a healthcare provider. When money is tight, customers don’t trust sales people any more than they trust Congress. They want to make their own decisions.

Watch Retail Industry Continues to Expand

One product category seems to be bucking this trend. At a time when automotive and electronics dealers are consolidating, watch manufacturers are actually expanding, adding brick and mortar stores at a rapid pace. Just a few years ago, about the only place you could buy a fine watch was at a reputable jewelry store. Now, all the major watch manufacturers are opening their own stand-alone physical stores.

Go to any major shopping mall and you will see impressive brick and mortar stores for well-known brands like Omega, TAG Heuer, Swatch Tourbillon, Officine Panerai, Montblanc, Cartier, Audemars Piguet, and many more. Most of these brands sell through online retailers as well.

The Watch Buying Experience

Is there a reason why people are purchasing watches much differently that they purchase cars? Many experts think it is because watches are no longer a necessity. Nobody needs a watch to tell the time any more. They have their cell phones for that. Watches have become a fun discretionary item. Low to mid-priced watches are considered a fashion accessory now. They are often impulse purchases made to match a particular outfit.

High-end luxury watches are a little different, but buyers still seem to like to do their shopping in physical stores. A luxury watch is a status symbol and buyers often consider themselves to be timepiece connoisseurs. They are a lot like collectors of fine art in this regard. Going into a well appointed store and talking with a knowledgeable sales representative is all part of the process for these high-end buyers.

Watch Buyers vs. Car Buyers

A luxury watch and an economy car can cost just about the same these days. However, while frugal car buyers do research in an effort to find reliable transportation at the best possible price, watch aficionados are more like art collectors. And the fashionistas who are buying more affordable watches just want a stylish accessory that matches their new dress. These shoppers are more concerned with whether the watch is cool than they are with the price.

When watches were essential as timekeepers, shoppers bought them for essentially the same reasons as they bought their cars. They needed a watch to tell the time. The irony of the situation is that now that wearing a watch is no longer a necessity, watches have become more popular than ever.

About Gevril Group

Gevril GroupGevril Group, watchmaker and wholesale watch distributor, is the exclusive U.S. agent for exquisitely designed and crafted European luxury and fashion watch brands, distributing and servicing some of the best affordable luxury and Swiss watches and trendy fashion watches. Gevril Group also operates a full-service watch repair, staffed by master Swiss watchmakers. Contact Gevril Group by email or by calling 845-425-9882.

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What’s Behind Retail Store Closings?

Retail Store Closing


by Bonnie McEwan  

Out of the Malls and Onto the Internet

Most of us who follow the retail industry are aware of the wave of store closings that has taken place over the last few years. Since closings occur intermittently, however, you may not realize that roughly 5,759 stores in the US have shuttered since 2012. These include apparel companies like Jones Group and The Gap, restaurants (Wendy’s, Qdoba, Applebee’s), home furnishing stores (Kirkland, Pier One) groceries (Food Lion, Kroger, Stop ‘n Shop), toy and entertainment outfits (Build-A Bear, Game Stop) and tech companies (Cellular One, Apple). You can find an alphabetical list of all US retail store closings through September 25, 2013 here.

Certainly the Great Recession has something to do with this, but that doesn’t account for the fact that many of the same companies closing brick-and-mortar stores are expanding their online operations. These moves to the Internet have dramatic consequences that reach well beyond employees and consumers to affect communities and related industries, and not in good ways.

Shopping Malls

The obvious example is shopping malls. Most real estate professionals acknowledge that vacancy rates are high in many malls across the country and rents are depressed. Green Street Advisors, an analysis firm that tracks commercial real estate funds, predicts that 10% of the 1,000 largest malls in the U.S. will fail within the next 10 years. Some mall CEOs think that’s a conservative figure.

There’s a website called Dead Malls that tracks those shopping centers that are already abandoned or well on their way. Of the 33 JC Penney stores slated for closing, three are on the Dead Malls site: Muscatine Mall in Muscatine, Iowa, Military Circle Mall in Norfolk, Virginia, and Singing River Mall in Gautier, Mississippi. Macy’s plans to close stores in two more: Fiesta Mall in Mesa, Arizona, and Medley Center in Irondequoit, New York. Abercrombie & Fitch is closing a store in yet another mall on the endangered list, Oaks Mall in Gainesville, Florida.

It appears that these particular malls, along with most of the others listed, while not going gentle into that good night, they are slouching toward oblivion, dragging community spirits down with them. Part of their woes are caused by the oversupply of mall real estate. The US has so many malls that when one closes shoppers can easily drive 10 or 20 miles to another. Add to this the ‘smart growth’ and walkable cities emphases in current urban planning theory and you easily see that the curtain is descending on the malls’ last act.

Malls Repurposed

So what happens to these dinosaurs littering the suburban landscape, becoming eyesores in the communities they once served? Sometimes mall owners just call in the demolition equipment. Occasionally, though, more creative solutions are devised. Although not located in a mall, an abandoned Wal-Mart in McAllen, Texas was turned into the largest, single-story library in the country by Minneapolis-based architects Meyer, Scherer & Rockcastle, Ltd. The conversion plan included space to establish a community gathering place, which serves as an updated version of the town square.

Wal-Mart, once roundly criticized for letting its abandoned stores lie empty to prevent competitors from moving in, now has a subsidiary called Wal-Mart Realty. According to its website, “Walmart Realty’s mission is to find businesses to open in our former stores and clubs and to locate in available property around our stores. At Walmart Realty, we believe we have a responsibility to work with communities to find a use that generates economic growth and opportunity.”

Online Rising

While this is a positive development, it assumes that there are companies interested in opening brick-and-mortar stores, a debatable idea. “If I were thinking of starting a new retail brand right now, I would unquestionably start it online,” writes Jeff Jordan, a partner at Andreessen Horowitz and board member for several online retailers. He points out that online retail will continue to steal business from brick-and-mortar stores and that will place even greater pressure on shopping malls.

Even online retailers that do move offline to open physical stores are doing them as Internet showrooms, where customers view samples and then place orders. This is a stark departure from the traditional retailer that stocks inventory in its stores. Jordan cites two, Bonobos and Warby Parker, that began online and are now employing this showroom model.

There’s a joke going around that says Best Buy, which recently closed 10 stores, has become a showroom for amazon.com. Consumers visit Best Buy, check out the product they’re considering, then go home and order* their preferred model online. I’ll admit that I’m guilty of doing this exact thing when shopping for a high-definition television, not because Amazon had a cheaper price, but because the delivery is so much less hassle than dragging a TV home myself. It’s small conveniences like this — and probably others that are less apparent — that are driving consumers online.

All this does not mean that the retail industry is in trouble. Only that the mechanics of selling are changing. As Bette Davis said, “Fasten your seat belts. It’s going to be a bumpy night.”

*Or order then and there from their Smart phone.

About Gevril Group

Gevril GroupWatchmaker and wholesale watch distributor Gevril Group is the exclusive U.S. agent for exquisitely designed and crafted European luxury and fashion watch brands, distributing and servicing some of the best affordable luxury, Swiss and fashion watches. Gevril Group also operates a full-service watch repair, staffed by master Swiss watchmakers. Contact Gevril Group by email or by calling 845-425-9882.

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Is Gucci Losing Its Luster?

Gucci, New York City


by John Sealander  

When luxury logos lose their luster, can the kings of bling survive?

GucciWhen the economy imploded in 2008, luxury goods seemed relatively immune to the carnage that the ensuing economic downturn created. Analysts speculated that even though the economy was weak, companies like Ralph Lauren, Tiffany, Coach, and Gucci would thrive because even after the downturn, the rich still had plenty of money left to buy all their favorite luxury items.

All that may be changing however. There are growing signs that luxury logos are losing their luster. While the ultra-rich can still afford their yachts and Ferrari automobiles, a growing group of “affordable luxury” companies are beginning to suffer.

The latest luxury brand to falter is Gucci, the flagship label of Paris based Kering SA. Gucci profits fell dramatically during the fourth quarter of 2013 to 50 million Euros, down from 1.05 billion Euros a year earlier. Kering CEO François-Henri Pinault in a recent CNBC interview said he was unconcerned about the slowdown, but many financial analysts think that Gucci’s stagnating sales growth signals a change in the way consumers view luxury goods.

Luxury Industry Slowdown

The slowdown in luxury sales has been well documented. Around the world, and particularly in China, well-known luxury brands are suffering from what many call “logo fatigue.” As recently as a few years ago, the Chinese couldn’t get enough bling. If it was gaudy and gold, they had to have it. Now, discriminating Chinese shoppers seem to prefer understated luxury and are buying less flashy labels.

A slowing global economy is causing many to change their priorities. Paul Lejuez, a New York-based analyst at Wells Fargo & Co. calls this phenomenon “wallet-share shift.” Instead of buying Hermes scarves and diamond bracelets, they are spending their money on practical items like cars, electronics and home furnishings.

Survival of the Grandest?

It remains to be seen whether this trend will continue. If the economy improves, luxury retailers like Gucci could quickly return to their former glory. If conditions continue to deteriorate, all bets are off. In a declining economy, there will still be rich people, just not as many of them. Luxury companies will be forced to focus their efforts on a much more targeted audience, which will create winners and losers. “The whole ship isn’t sinking,” says Aurora Investment Counsel president David Yucius, “It’s a matter of which brand is winning the fashion trend of the moment.”

Will Gucci and the luxury industry recover in 2014? With the top 2% of Chinese earners accounting for fully one third of all global luxury sales, the fortunes of a very few people could make a big difference. Whatever happens, one thing is certain: customers will continue to evolve, and successful companies will need to reflect their changing needs in the products they sell.

About Gevril Group

Gevril GroupWatchmaker and wholesale watch distributor Gevril Group is the exclusive U.S. agent for exquisitely designed and crafted European luxury and fashion watch brands, distributing and servicing some of the best affordable luxury, Swiss and fashion watches. Gevril Group also operates a full-service watch repair, staffed by master Swiss watchmakers. Contact Gevril Group by email or by calling 845-425-9882.

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Signet Jewelers to Buy Zales

Zales Store


by John Sealander  

Who benefits most when two jewelry juggernauts join forces?

When Signet Jewelers, the parent company of familiar names like Kay Jewelers and Jared the Galleria of Jewelry, acquired the giant Zales Corporation with its well-known Zales and Gordons brands, a jewelry juggernaut was created. Signet and Zales were already the two largest jewelers in the United States before this historic merger. Together, they have the opportunity to become an unstoppable powerhouse that virtually controls the US retail jewelry market.

Jared Galleria of Jewelry Store Kay Jewelers Store
Jared Galleria of Jewelry Store Kay Jewelers Store
Click to Enlarge Image Click to Enlarge Image

Investors have already benefited from this sale, with shares of Zales surging 40% on the merger news. Signet shares also rose 12% to a record 52-week high. The jury is still out on whether this monumental merger will offer the same sort of benefits for customers. Consolidation in other industries has shown mixed benefits. The economies of scale that a larger organization brings often result in lower prices for consumers. These savings come at a price however. A large organization must streamline their supply chain to maintain profitability targets, and smaller vendors are often eliminated. This means that although prices are typically good, consumers often have fewer choices.

Michael BarnesAccording to Signet CEO Michael Barnes, “the addition of Zale to the Signet family is consistent with our long-term growth strategy and leverages our combined operating expertise to create better choices for our customers, new opportunities for our employees and makes us a more attractive partner to our vendors.”

Based on what Michael Barnes has already accomplished with his Signet brands, this means big changes for the Zales Corporation in the years ahead. Signet has already completed a multi-year turnaround program that has returned the corporation to profitability. They will almost certainly use the same strategies to return their newly acquired Zales and Gordons brands to profitability as well.

A Retail Jewelry Powerhouse

The combined companies from this monumental $1.4 billion dollar transaction will operate more than 3,600 stores in the United States, in addition to each brands’ online retail operations. It is estimated that this new jewelry powerhouse will generate annual sales in excess of $6 billion. The company will employ nearly 30,000 people.

The merger, which will be financed by bank debt, other debt financing and the securitization of a significant portion of Signet’s accounts receivable portfolio, is still subject to the approval of Zale’s stockholders and must meet regulatory requirements. Industry insiders expect that the sale will go through however, and the transaction is expected to close later this year.

Since all of the brands involved sell watches, the merger will have definite implications for the watch industry. Consolidation is already a fact of life within the luxury industry, so there will probably be no surprises. Some brands will grow stronger through improved access to a larger customer base. Other fringe brands may be hurt, especially if they are eliminated as a Signet vendor.

One thing is certain. With $6 billion in projected sales, there will still be a lot of people buying fine jewelry and luxury watches.

About Gevril Group

Gevril GroupWatchmaker and wholesale watch distributor Gevril Group is the exclusive U.S. agent for exquisitely designed and crafted European luxury and fashion watch brands, distributing and servicing some of the best affordable luxury, Swiss and fashion watches. Gevril Group also operates a full-service watch repair, staffed by master Swiss watchmakers. Contact Gevril Group by email or by calling 845-425-9882.

Join the conversation! Follow Gevril Group on Facebook, Twitter and LinkedIn.

Please subscribe to the Gevril Group newsletter and blog digest.