SHOP IN SHOPS: Battle of the brands

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As brands fight over space retailers struggle to keep their identity.

The fight for shop in shops is heating up and the power seems to be with the brands. Rachael Taylor investigates how retailers can cash in on the increased sales branded areas bring without losing identity or submitting to bullying tactics.

The jewellery industry is experiencing a radical power shift in the delicate retailer-supplier balance, and it’s not in retailers’ favour.

Throughout the recession the industry has been dominated by big brands and as these major players were on the up it was retailers that had the power as brands scrabbled to build huge retail networks quickly. Now, with many retailers relying on sales from big brands to keep businesses afloat, the brands seem to have woken up to the fact that the power is now theirs.

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As a result, brands are becoming more demanding. Each wants the best representation in stores and to achieve this nearly every brand has developed a shop-in-shop concept. Hot Diamonds has been running shop in shops for six years but the concept really took off when jewellery power brand Pandora created its shop in shop. And where Pandora has gone others tend to follow, feeling the pressure to not be left behind.

Welsh gold jewellery brand Clogau Gold is one of the latest brands to get on board with the shop-in-shop concept, launching its own shop in shop in October. The concept has been well received by retailers, according to the jewellery brand, but Clogau Gold managing director Ben Roberts admits that the creation of a shop in shop was a reactive move.

“If we don’t do it now then the big brands will continue to eat into our market,” explains Roberts. “If we’re not careful, some of our stockists are going to dedicate a part of their shop to another brand and to me that’s losing territory.”

Karl Irwin is the general manager and watch specialist at retailer David M. Robinson, which has several shops at locations including London, Liverpool, Manchester and Chester. Irwin says that David M. Robinson was slow to take on shop-in-shops as it was at first reluctant to do so for fear of losing its identity as a retailer but has recently installed Rolex and Patek Philippe branded areas.

“We felt that the David M. Robinson brand should be paramount but we put Patek Philippe and Rolex shop in shops in two locations and they have worked very well,” he says.

The reason that shop in shops work so well is that they give shoppers a full brand experience, believes Irwin. And a heightened experience tends to lead to heightened sales.

Pete Boyle, chief executive of jewellery retail chain Argento, admits he was also hesitant to install shop in shops but after experiencing the resulting inflated sales figures he has no doubts that branded areas are of a benefit to jewellery retailers. However, he stresses that it is important to pick brands carefully when considering taking on a shop in shop.

“We took on Pandora as a shop in shop and the reason we did that is Pandora trebles sales,” says Boyle. “We’ve had other brands that have diverted sales, so a £10,000-a-week shop will still be a £10,000-a-week shop but some of that money will be diverted to the brand. Pandora is different, there’s never been a jewellery brand like it.”

Thomas Sabo UK managing director Harald Winzer says that by introducing its branded furniture, stockists of the charm brand have experienced doubled or trebled sales. He says that more traditional jewellery retailers “have no idea about merchandising” and that by resisting concepts such as shop in shops they are holding their businesses back and providing UK shoppers with what he calls a “boring experience”.

“By putting product in the windows they think it will sell, but it clearly won’t” says Winzer. “We’re asking retailers to invest in our brand because when the shopper walks in they want an experience. The bigger units retailers take, the more they will sell. We’ve had retailers come back two or three months later [after buying in Thomas Sabo furniture] and taking more space because they’ve learned their lesson.”

Jewellery retailer Steffans in Northampton has turned its business around in the past few years by investing heavily in jewellery brands and along with the brands themselves, owner Steff Suter believes that shop in shops are the future for modern day jewellery retailers.

Steffans is a mélange of brands and has shop in shops and branded areas for Hot Diamonds, Thomas Sabo, Pandora, Georg Jensen, Swarovski, Monica Vinader, Links of London, Trollbeads and Gucci. Suter has even created his own shop-in-shop solution for Stephen Webster as the brand didn’t supply one.

“I don’t think shop in shops boost sales, I know they do,” exclaims Suter. “It’s what the public have been brainwashed into expecting. People don’t want you to pull it out from under the counter any more. If your shop sold an iPhone, it would be backed up with a display and all the brands are getting that way.”

Steffans has recently doubled its floorspace and has potential plans for further expansion on the horizon and Suter admits that if he had a smaller shop he would struggle to introduce so many branded areas.

“It’s tough if you’ve got a small shop, I don’t know how I would deal with it if I had a small shop,” muses Suter. “Even I’ve run out of space in 12 months. It started out as let’s have some brands and then it ended up as let’s have all the brands.”

While retailers are quick to acknowledge the financial benefit of shop in shops, it is this battle for floorspace that is the tricky element. Every watch and jewellery brand wants to be number one.

“If you put a large Pandora in your shop and then you want Thomas Sabo to come in then I’m not interested,” boldly states Winzer. “There are a few brands in the market at the moment and everybody wants the best space in the shop. I don’t want to be your second or third best friend as then I won’t sell.”

After making this statement Winzer somewhat backtracks and says that he would not turn a retailer away who already had a Pandora shop-in-shop concept and that “a good mix of brands is essential”, but he adds that he would expect retailers to “treat us all the same way”.

It is this competitive attitude that has brands putting retailers under considerable amounts of pressure. Once David M. Robinson introduced Rolex and Patek Philippe shop in shops to its stores it set out a clear policy that these were the only two brands it would give prime retail space to because they delivered the highest percentage of its turnover. These firm guidelines were an attempt to keep other brands at bay, but despite this clear line the brands keep knocking at its door.

“The pressure from other brands is staggering,” says Irwin. “We’ve been approached by every other watch brand to do it.”

As the power shifts from retailer to brand, some brands are using shop in shops as bargaining tool. Many watch and jewellery brands are now opening own stores and franchised concept stores and as they do, their reliance on independent retail stockists is diminishing.

Many in the industry feel that big brands that are embarking on store-opening programmes of their own are using shop-in-shops as a test of loyalty to determine which retailers to keep on stockist lists as they slowly pull out of the independent retail market.

One retailer who wished to remain anonymous told Professional Jeweller that one main watch brand it works with has directly threatened it. The retailer said: “They have suggested to us that it will be part of their sales process going forward – if you don’t take a shop in shop then you won’t be allowed to continue as a stockist. They are opening their own boutiques and don’t see the retail network as a vital cog in the future – they can drive more business through fewer points of sale with more control and more margins.”

Lumbers managing director Dominic Gommersall has experienced similar bullying-style tactics. The Leicester retailer has shop in shops for Breitling, Breguet, Chopard, Bulgari, Mont Blanc, TAG Heuer, Gucci and Pandora, and while Gommersall says that they “add a huge quality feel and Bond Street ambience” to the store, he feels that some brands are overly “arrogant” in their pursuit of shop-in-shop areas.

“All the Swiss watch houses that we have allocated space to have been grateful and have contributed greatly to the cost of the fit, if not contributing the complete cost, but certain new brands, one in particular, that we stock have an incredible arrogance to their requirement and not only limit access to stock if they don’t get their required floor area but also make the retailer pay for it,” reveals Gommersall with more than a slight hint of irritation.

Gomersall adds that the forceful attitude of such brands is leading others to act in a similar ways to compete. “Other important new brands that we would like to introduce to our business are now insisting on branded areas as a requisite to open the account as they don’t wish to have less space than a competitor,” he says. “For unproven brands it is a big ask to make this commitment before building a track record of sales.”

But not all brands are pursuing shop in shops in an aggressive manner. Roberts insists that Clogau Gold’s shop-in-shop solution “isn’t a hard sell and it shouldn’t be” and Julie Large, creative director of Hot Diamonds, which has 35 shop-in-shop concepts in the market, says that the brand doesn’t “go round with a big stick”, but both are sold on the idea that shop in shops boost sales and improve brand image.

“I think it’s the way forward,” says Large. “It’s a balancing act. The good retailers can take these brands in and still keep their personality.”

From a branding perspective, Large says that shop in shops are so important to brands because they are permanent. “A point of display can be moved or taken out of the window,” she explains.

With potential sales uplifts and fragile brand relationships to nurture, it can be hard for retailers to resist the pressure of shop in shops. While for brand-led retailers such as Steffans integration of shop in shops is a natural progression, for more traditional retailers that are new to jewellery brands, and may have only taken on such stock to supplement core fine jewellery sales during the recession, it can be difficult to introduce such bold marketing.

Even Steffans endured a difficult transition period as it first introduced brands to what had been a traditional jewellery shop selling unbranded stock. “Once you try and mix them [brands and unbranded jewellery], which is the transitional period we had to go through, the conversion is not simple,” says Suters. “I dealt with it by expanding the business, dedicating an area to brands and splitting it up.”

Essex jewellery retailer Emson Haig has also invested in brands and has dedicated areas in its main shop dedicated to TAG Heuer, Gucci, Chopard, Omega and Toywatch. When some brands started taking over the store, owner Dave Shone took the dedicated branded area beyond the shop-in-shop concept and opened up Pandora, Swarovski and Links of London concept stores in the stores surrounding the main Emson Haig shop in Lakeside shopping centre.

Emson Haig has knocked through the walls connecting the shops so that shoppers can flow through from one shop to another. Rather than cannibalise sales, Shone says that the stores complement each other.

“You can have as many shop in shops as you want but you have to manage the space,” says Shone. “You can’t let them take over the shop but you can’t be short-sighted either. You’ve got to create the right environment for the brands and so many retailers don’t do that. You’ve got to have the right brand in the right space in the right shop, otherwise you’ll drive sales down not up.”

As the power of branded jewellery continues to hold sway in the UK market it is important for retailers not to cut off their nose to spite their face. Brands are big and shop in shops are the best way to push branded sales, but choosing which jewellery and watch brands to work with on such a large project requires careful consideration.

There is much speculation that jewellery and watch brands are now using shop in shops to test the loyalty of stockists as they build their own standalone store empires, so it is not just short-term sales benefits that retailers have to consider when thinking about turning down a shop in shop request. If a brand contributes heavily to a store’s turnover or is key to future plans then giving up that corner of a store might be worth the long-term benefits.

While some retailers such as Emson Haig and Steffans trade on being an emporium of brands, others such as David M. Robinson want to limit the number of brands given dedicated space. The debate is a prickly one and the balance between bolstering sales and losing your identity as an independent retailer is precarious, so think carefully as you decide whether a jewellery or watch brand is a bully or an opportunity

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