Pandora’s president of Western Europe on sales growth and UK strategy.
Pandora’s latest financial results show a brand that keeps on winning new customers, increasing sales and driving up profits. How did it all go so right for Pandora? Professional Jeweller’s Rob Corder sat down with Peter Andersen, the company’s president of Western Europe, to find out.
Professional Jeweller: It feels like a great time to be speaking about the growth of Pandora. The company went public on the Danish stock exchange at a price per share of DK210. It then dropped to under DK40 in 2012, and is now almost double its initial public offer price at DK400. Tell us, what has gone so right for Pandora since 2012?
Peter Anderson: I always said, even back in 2012, that things were actually not that bad. I think the performance of the company in 2012 was actually very good. We were doing some fantastic sales figures. The performance since then has been absolutely fantastic, particularly since we adjusted our prices.
PJ: What do you mean when you say you adjusted your prices?
PA: We introduced some new categories. We had higher-priced items that we have now changed to ranges with prices that are better suited to our consumers. We introduced a new starting level so that any customer that comes into a Pandora shop can buy something for £20. Also, of course, we have added new things. Our design is getting so much better. If you compare our charms from three years ago to today, there is so much more detail and much more work with stones and enamel.
PJ: The UK has been one of the best performing countries in the world, according to Pandora’s Q1 2014 interim trading statement. What has worked so well here?
PA: If we talk about the UK, we have never really altered the strategy that we started with five years ago. We still want to be a brand and we still want to be a jewellery company, not just a bracelet company. We want to open more stores. We want to have a dedicated Pandora area when we are in independent shops. That means that when our consumers come shopping for Pandora, they find what they are looking for. We make sure that stores have the right furniture; that the rings and charms are presented in the right way.
PJ: How much work goes into ensuring the customer experience is the same whenever they go into a Pandora shop; whether it is a franchise store, a shop-in-shop or an owned and operated outlet?
PA: The first thing I would say is, out of the 129 UK stores that we have today, we only have four that are owned and operated by Pandora. It is important to remember that the other stores are franchises that are owned by independent jewellers. So, how do we make sure that the experience is the same at [London’s] Marble Arch store, which is owned and operated by Pandora, as it is to the store in Milton Keynes, which is a franchise store? This is one of the key areas that we have become better at. We have a really close relationship between Pandora and our partners. We have four different types of support groups that visit our franchise partners’ stores. We have the sales teams, who make sure there are no problems; there’s the retail team, that makes sure that the sell-out is going well; the [franchisees] are visited by the merchandising team to ensure that the retail experience is the same wherever the store is; and then there is the training team. We bring around 100 people to London to be trained every week and we have three trainers out in the field. In total, we trained 2,600 staff last year.
PJ: The USA is Pandora’s biggest market and the UK is second. Our market is almost twice as big as Germany. Why is that?
PA: One of the pillars of our success has been to carefully control the number of stores that we have in any particular location. We want branded outlets and fewer of them, as this allows the partners we work with to be more successful with Pandora. They need us, and we need them, so it becomes a great relationship. I think that if we had seven stores in a single town, we would never become important to any of them. If you have just one or two, then Pandora will be important to them.
PJ: Looking at Pandora’s Q1 interim financial report, it states that Q1 was boosted by the strength of sales over Christmas and restocking in January, but the predictions for the rest of 2014 are a little more cautious. Is this just a case of managing expectations, or do you expect growth to slow this year?
PA: I don’t think even our partners dared to believe that Christmas would be so good. But that of course led to a fantastic January. We had a fantastic Valentine’s, we had a fantastic Mothers’ Day, and our Spring drop has been fantastic as well. Everything we have tried in Q1 has worked really well. This is on the back of a very strong Q1 in 2013, so maintaining that growth is even more satisfying this year. For the rest of this year we expect to continue to see a growth. We have some very strong products coming out.
PJ: The language in your Q1 report was strikingly cautious about the rest of 2014. Is there anything relating to supply chains, to factories, or trends that makes Pandora think growth could slow this year?
PA: No. For the first time in my five years working with Pandora in the UK, I can actually say we are delivering. We are very much in control of our logistics now. There are always hikes when it is difficult. We saw hikes before Christmas when it was really difficult to follow demand, but we are getting much better because we ask our partners to tell us what their expectations are. I am quite sure that the remainder of 2014 will also be good. We grew approximately 30% in Q1. To maintain that is going to be difficult because it is such a high figure, which is why I think our CEO Allan Leighton said that he expects growth rate to be more likely in the teens.
PJ: Two years ago, I remember we spent half an interview speaking about supply chain issues, stocking and re-stocking issues and other challenges. Are those problems behind you now?
PA: We have managed the growth we have achieved this year without any significant logistical problems. That means that, even if a partner was not very accurate with their forecasts, we are still able to deliver sufficient product. The factories are doing really well. We have also done a lot of work from our merchandising department. We have narrowed the design variations (DVs) so that, where before we had 165 designs for our rings, today we have 90 but we are concentrating on 20 rings. It is the same with charms. Instead of having 800 designs of charms, it is much easier to keep supplies moving with 600 charms.
PJ: What is the current situation in the UK with points of sale?
PA: We have a plan to open more stores. We have franchisees that want to open stores with us and this is planned for this year.
PJ: Are those existing franchisees looking to open additional stores, or completely new franchisees?
PA: There are a few new franchisees coming on board. But we are quite happy with the franchisees that we are already working with, and some of these are opening additional stores. I think there are three to five new franchisees sneaking in – late arrivals. We think that is very healthy.
PJ: Do you typically shut down Pandora gold partners and shop-in-shops in a town when a franchisee opens a Pandora concept store there?
PA: Not necessarily. That really depends on the size of the store that is opening. For example, in Northampton there is an existing concept store and there is also a shop-in-shop. Plus, we have a concession in House of Fraser. That means we have three accounts working in the same town successfully.
PJ: You mention House of Fraser, which is an interesting development for Pandora. How do your partners react in an area where you open in their local House of Fraser?
PA: We have had no issues. I actually think that department stores attract a different type of shopper compared to a jewellers. We have also been very clear in our strategy with House of Fraser. At the moment, we are only selling Pandora in six House of Fraser stores. We also work with our franchisees for House of Fraser shop-in-shops. They are not owned and operated by Pandora.
PJ: How many department stores might Pandora operate over time? Could it be 12 this year, 50 by next year?
PA: It could, but it is not going to happen. I want to be very selective with our distribution. One of our successes is that we do not want to have too many conflicts in any areas. That is one of those things that we promised to begin with and we have stuck to that. There will probably not be 15 Pandora shops in House of Fraser because we have 129 concept stores. We don’t have any plans to develop further with House of Fraser.
PJ: Do you have any concerns that selling in House of Fraser is taking the Pandora brand a little bit downmarket?
PA: There are plenty of amazing brands in House of Fraser. We are sitting next to Mulberry, Prada and Armani. I will take that any time. I would never call House of Fraser downmarket.
PJ: But retailers can be sensitive – it was tough to get them on board with the boom in silver brands. Are you now making Pandora more of a department store brand?
PA: What jewellers have to understand is that whether you are Pandora, House of Fraser, or a jeweller, it is all about the consumer. I think that the consumer is quite happy to shop for Pandora in House of Fraser.
PJ: What can retailers and consumers expect to see from Pandora later this year? Do you now have a design formula that can never falter?
PA: I will never say that things can never go wrong. Allan Leighton said earlier this year that when you are on top, you have to be paranoid. This drives us to make sure that every little detail is the right detail. We work hard at everything we do. It is only when we stop working hard that we run into danger. This goes across everything; from product design and manufacturing, to marketing, the way we sell, the training of our partners and the service to our consumers. I am not saying that we are perfect; we are far from perfect and there are things we can get better at. But, are we better than we were five years ago? Absolutely. I think that the consumer can tell that we have got better and this is why they keep shopping with us.
PJ: How are you promoting your other jewellery collections?
PA: We have a great marketing campaign which kicked off in May called #MyRingsMyStyle. This is a fantastic online campaign where, for the first time, we are really getting our consumers involved. At the moment, they are tweeting pictures of their rings, and it is fantastic to see the engagement of the consumers with the Pandora brand. We have five million Pandora Club members, over two million Facebook likes and over 90,000 UK Twitter followers. Our e-store is also going from strength to strength.
PJ: Can you reveal anything about the collections consumers will be seeing this Christmas?
PA: Great product. And we will keep developing great new products. There is a change in the type of jewellery we sell. We were always asked about what Pandora would sell other than bracelets. Today, bracelets [and charms] make up only 77% of our sales. The ring percentage is increasing. The new Essence collection is going well. Earrings are starting to pick up, and so are necklaces, even though they are not yet high percentages. We are seeing a big development in becoming a jewellery brand. We said from the start that we don’t just want to be a bracelet brand, and that is becoming true. It is just very difficult to grow the percentages of our other jewellery ranges when sales of the bracelets continue to grow so fast. In Q4 last year, we sold 62,000 of our new style bracelets. That is an amazing figure. And consumers can get 17 charms on average on each bracelet.
PJ: Would you ever partner with multiple retail chains like Goldsmiths, Fraser Hart or Ernest Jones? They are really starting to raise their games…
PA: Our strategy it to partner with independent jewellers. We do not work with any of the high street chains.
PJ: Do you think Pandora could work with them in the future?
PA: I would never say never, but we can’t see that it would benefit us at the moment. It is definitely not in our plans.
PJ: Finally, what are the key messages from Pandora to its retail partners in the UK?
PA: The key message is that we must all strive to get better every single day. Our partners have to help us and work with us to deliver a fantastic experience to every shopper who comes to buy Pandora jewellery, because without the shopper nothing else matters. We never talk about what we can do for our partners; we always talk about what we can do for the consumer. That of course means we first have to satisfy our partners by making sure they get the right Pandora product and the right brand support.