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How Should A Retailer React When A Respected Brand Offers A Sweet Deal?

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JENNY FRANK LOVED her store. She loved everything about the high fashion, designer business she’d built over the past 20 years. She remembered her early days as a bench jeweler fondly and remained grateful to the loyal customers and suppliers who helped her parlay that 300-square-foot shop into the award-winning showroom, Jenny F Gallery.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual jewelry businesses and people.

ABOUT THE AUTHOR

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at [email protected]

No one in her Southeastern college town could deny that Jenny’s passion, energy and enthusiasm were the driving forces behind her success. In the past five years, the Jenny F Gallery had overtaken the three stores previously recognized as the top volume stores in the market, and Jenny had comfortably and proudly assumed her role as a leader in the town and in the industry.

In addition to a large number of new customers, success had generated an interesting cadre of suitors as well. Jenny often found herself smiling as manufacturers and designers who once dismissed her as “too small” now courted her, desperately seeking a place in her showcases, and as competitors who once considered her irrelevant were now working feverishly to copy her every action.

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Most interesting of late was the behavior of one of the larger designer bridal and fashion jewelry brands in the industry. For several years, this particular brand had been the mainstay of Village Jewelers, one of Jenny’s biggest competitors, anchoring their sales effort and even subsidizing the cost of building their new store with one of its own “boutiques” inside. Village Jewelers had taken on the line early in its existence, long before the brand had any recognition in the consumer arena. Ryan Connor, Village’s owner, had invested millions of dollars over the years in promoting the brand name and making it significant in the market. Even with the Jenny F Gallery gaining strength, Village managed to maintain a spot as one of this growing brand’s top retailers nationwide. Ryan was secure in his store’s performance with the line, and in fact had found himself heavily dependent on it. Supported by an excellent training program and strong incentives paid directly to his staff, the brand’s bridal and fashion jewelry sales had delivered nearly 30 percent of his total volume in the previous year. He had every reason to trust the brand’s continued promise of market exclusivity.

For her part, Jenny had no problem competing for diamond business in town. She stocked her showcases with non-branded collections of like quality at lower prices, and parlayed her local popularity into amazing success with a private label “Jenny F Signature” line, with diamonds sourced to be consistently better in light performance and value than the branded product. With a more diverse inventory and better salespeople, Jenny was able to hold her own.

Much to her surprise, Jenny received a visit about a year ago from the branded line’s vice-president of sales and his local rep. They suggested to her that Jenny F Gallery was the right place in town for their brand, and that they would be willing to pull it from Village if she was willing to become their local dealer. Initially, Jenny refused. She felt that the inventory investment was not sensible, as she was doing just fine without the line — and she was strongly averse to a marketing campaign that couldn’t help but leave her sounding like an “also ran.” Over the next few months, however, the local rep for the brand came back to her several times, making the offer sweeter each time. Last month, the rep visited again, with the VP in tow. They made what they presented as a final offer: purchase-matching memo, three-year terms and a one-year full buy-back guarantee. They said that while pulling the line from Village was the ultimate goal, they were confident that the market could support two local dealers until she could get on her feet with the line and Village could be phased out.

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Jenny was confused, and for the first time in many years, not certain that her own instincts were pointing her in the right direction. She discussed the situation with a friend who was a sales rep for another line carried by Village. Her friend was genuinely surprised, telling Jenny that Ryan Connor had been given complete assurance that the diamond line would not be pulled from his store. He was told that it was his great success that had made the market large enough to support a second dealer.

Jenny thought about how much she hated the lack of independent thinking and creativity she perceived when a competitor jumped on her bandwagon. She also weighed carefully the advice of other retailer friends throughout the country who raved constantly about the branded line and its ability to increase sales and profits. She wondered if the matching memo was really a “gift,” or if it would become a drain on her owned inventory turn and cash flow in the long run. She was also having a hard time getting past the apparent sliminess of the whole chase.

The Big Questions

  • What should Jenny do? Should she take the branded line or should she follow her instinct and pass?
  • What about Ryan Connor at Village? Should he go on marketing the line, trying to maintain his level of sales, or should he drop them completely?
Sheron L.
Tylertown, MS

We had this happen, except we were the ones losing the line. We had worked with this brand for years building up their business. We carried two other brands of school-related items and had a great business with all of them. We had customers from Louisiana, Mississippi and Alabama. We sold a lot of championship rings and related items. I was placing a custom order ring for a local track team that was state and division champions. Imagine how I felt when the salesperson told me I could not place the order because the other store was now their account and I should transfer the order to them! Well, that went over like a lead balloon. We immediately called our other suppliers and got approval on a new design. We pulled everything. A year later, the line wanted to be back in our store since the other store did not sell as much. The answer was NO, thank you. We are happy with our other brands, would never trust the company again.

Lornie M.
Kirkwood, MO

Wow. I would pass as obviously that line is greedy and not to be trusted.

Louie D.
Vacaville, CA

Jenny should go with her gut. She has done well without that brand. She should stay true to herself and her customers to separate her store’s identity from her competitor. Something about the vendor doesn’t sit well with me; I don’t believe they are truly being honest to one of the parties.

Tracy W.
San Gabriel, CA

RUN from “sliminess”. It might be good for you short term, but you’re dealing behind Ryan’s back. They won’t hesitate to do the same to you. They’re telling you what they’re all about. If nothing else, trust that.

Peggy W.
Chesapeake, VA

This actually happened to us. She should call Ryan Connor and let him know the situation and PASS. This vendor is a total slimeball. These are the kinds of people who give our industry a bad name.

Richard F.
Mobile, AL

Knowledge is power. Jenny knows she’s doing great without the line. She also knows the line is important to her competitor. The only thing “final” about the offer is, if Jenny doesn’t accept it, she could do better later if she so desired. Jenny also knows the company is probably in trouble, and they have no loyalty to their retail partners. Jenny should forget this company and their “final” offer.

Stuart S.
Egg Harbor City, NJ

Jenny successfully turned her store into a local brand. She does not need to jump into that investment. The brand demonstrates zero loyalty to the existing account. They will likely do it again if the opportunity presents itself. They have also lied to one of these stores. She needs to keep her focus on what has made her store what it is today. As for Ryan, now is the time he uses that brand for whatever market recognition he can, while investing minimal dollars. He also needs to figure out what it takes to survive without them, so they lose their leverage. Brands that play the market this way deserve to face their karma.

Richard S.
Seattle, WA

She should pass. Sounds like the vendor is playing both parties and not being honest with their promises. Not a company you want to do business with. The rule is to follow your instincts, and it sounds like she has some doubts about the situation. There will always be another designer or brand you can add to your inventory.

Marcus M.
Midland, TX

I think this situation happens more often than not. Jenny should steer clear of this brand. They clearly have no loyalty, and if they’re not happy with the success of Village Jewelers, then are they going to be happy with her? They’re just greedy and want to spread out their product with no sense of loyalty. Jenny should stay in her lane and keep doing what she has been doing successfully. Ryan should also have a very serious and stern conversation with this brand. He should also think about ditching them as well. If he can’t because it brings too much business for him, then he needs to make sure they bend over backwards for him while keeping them at an arm’s length away. I can’t stand brands that play this game; it will eventually bite them in the tuchus.

Robert H.
Lakeway, TX

If Jenny wants to be indebted to a line that does not uphold their agreement, and when her sales are not as good as they thought they should be, then what happens? I had a large designer line close my account after I bought in to them because my orders were not high enough. Ryan should keep what’s working for him.

Joe C.
Bristol, RI

Jenny should send them packing. The most important thing in our business is integrity. I don’t think the “branded” vendor has any integrity if they are willing to pull the line from a proven and invested client (without their knowledge) and offer it to a competitor in the same market area. Trust is paramount, and this type of behavior doesn’t promote that quality. Jenny doesn’t need them or the possible fallout.

Steve J.
Carefree, AZ

Jenny should not only refuse the slimy deal, she should take the deal offer to her competitor and have a discussion with them about what the brand wholesaler is attempting to do to his business. Ryan should take the whole mess to the brand wholesaler and demand a rewrite to his contract with better terms.

Andrew P.
Valley Stream, NY

The first thing I would do is to call my competition and let him know what his vendor is up to. If the situation were reversed, that’s what I hope my competition would do for me. While I enjoy an exclusive account with several vendors, I can understand their position.
I probably would choose not to take on the new line only due to their opaque dealings with their current account. What would stop them from doing the same thing to me down the road?

Alex W.
Torrance, CA

Since Jenny has done well without the branded line, she should not even consider adding it regardless of so-called sweet deals. The brand has just demonstrated to her that they are willing to dump another account that was in good standing and not looking to get rid of the brand. Jenny should consider that the brand will eventually do the same to her in a snap. A real possibility.

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Denise O.
La Grange, IL

Jenny should rely on her integrity, original thought, and her personal creative genius, which has landed her in their headlights. Adopting a branded company into her metrics will undoubtedly find her stores being challenged by how they perceive their brand should be advertised, allotted case space and minimums/buy back ratios. When incorporating a brand, all of these minutiae of their business acumen have to be adopted. Jenny has flourished without having any of her prime directives diverted or negotiating any of her original thought perspectives. With that in mind, why jeopardize designing, developing your legacy, your business truths and hard-won strategies only to become a host for a parasitic brand? Who’s to say in a decade this company won’t turn its back on her relationship for something more lucrative? She has only the guarantee of her own primary focus, pragmatic diligence and her unwavering passion to fulfill her destiny. An obvious conclusion: Continue branding her personal line, increasing her retail footprint and investing in her empire!

Tom N.
Spencer, IA

I would most likely pass. I’m doing great without it is the main thing. I have branded myself, which in the long run, my name is going to take me further than a branded line will. My biggest issue is the company seems to be lying to her about what they told Village. Why do they all of a sudden want to be in my store so badly? It just doesn’t pass the smell test for me. Bottom line is I say no, but thanks for the offer.

Laura S.
Indianapolis, IN

Addressing what Jenny should do first, I think she should listen to her instincts and pass on this supplier. Although the large memo and first-year restocking is alluring, it will cannibalize her own stock. “Slimy” is a good term for this supplier and her situation. Hopefully, the other line rep will mention to Ryan what is happening regarding Jenny. In his current situation, he needs to start working his way out of his dependence on the diamond brand supplier. Sounds like it would be crippling if he just dropped the line. This is a classic problem when dealing with brands. Damned if you do, damned it you don’t.

Ira K.
Tallahassee, FL

No, no, a thousand times no. Jenny is doing fine without a vendor who is willing to screw another local jeweler. If they would give the line to her with an eventual plan of pulling of the line from Ryan, don’t you think they would do it to Jenny too? And after that decision is made, I would let Ryan know of the company’s offer to her; so he can start to protect his exposure and reliance on the line.

Brian H.
Springfield, TN

How will you respond when they treat you the same way years later? Be happy with how your business has grown. Hours worked will increase, and time to enjoy life will decrease. Only discuss it with Ryan were he to bring up the situation with you.

What’s the Brain Squad?

If you’re the owner or top manager of a U.S. jewelry store, you’re invited to join the INSTORE Brain Squad. By taking one five-minute quiz a month, you can get a free t-shirt, be featured prominently in this magazine, and make your voice heard on key issues affecting the jewelry industry. Good deal, right? Sign up here.

Kate Peterson is president and CEO of Performance Concepts, a management consultancy for jewelers. Email her at [email protected].

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