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Real Deal

When Should This Retailer Give Up on Trying to Match the Price of an Online Diamond?

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A retailer goes to great lengths to match an
online diamond price, but at what cost?

Jeff Lee was barely out of medical school when he and Anna got married, and she had just started her first job as an accountant. An engagement ring had been totally out of the question back then, with rent, groceries and student loan payments consuming their entire budget. Fortunately for Jeff, Anna was perfectly happy with her plain gold band. Jeff didn’t know how he’d gotten so lucky — or what he ever did to deserve such an amazing partner.

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 kate@performanceconcepts.net.

He did know though, exactly what he wanted in an anniversary diamond for his wife. Anna had waited over 20 years for a ring to go with her wedding band, and Jeff had done his homework. Nothing but the very best would do. After a great deal of research, Jeff decided that he wanted a D, Flawless, round diamond with a GIA report, triple excellent cut and no fluorescence. He thought anything bigger than 1.5 carats would look too ostentatious on Anna’s tiny hand, so his target was something in the 1.3-1.4-carat range.

After carefully comparing grading reports and prices, Jeff had already determined that he would buy the diamond from a well-known online seller, but decided that he would have the ring that would hold it made by Forrest Jewelers. A colleague referred him to Nick Forrest when he wanted to buy a watch for Anna’s birthday shortly after they moved to town more than ten years ago, and the store had been his regular “gift go-to” place ever since. Though Nick’s daughter Laura had been taking great care of him since Nick’s retirement, Jeff was certain that with the overhead of running the store, there was no way Laura would be able to match the prices he’d been able to find online. Since the diamonds he was considering all came with verifiable GIA reports (and since he realized that all of the sites he was shopping had the same diamonds because the GIA report numbers matched), he felt safe and confident in his purchase decision.

Jeff contacted Laura to discuss custom design and setting options for the ring. When Laura asked about the diamond, Jeff was up front in telling her about his planned purchase. Laura said that while she couldn’t make any promises, she would certainly do her best to match any online price and asked Jeff to give her an opportunity to try. Jeff agreed — but when Laura began contacting her regular suppliers in search of diamonds that matched the specs from the list Jeff sent her, she quickly learned that Jeff was right. He could buy the diamond for less from a major online retailer than she could from any of her vendors.

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Determined to make sense of the whole situation (and to make the sale!), Laura began digging deeper into the diamonds that were available through the online seller. In addition to the ones Jeff had selected, she found another diamond in a different cut category on the site (interesting since both were GIA XXX), and noticed to her amazement that while it appeared virtually identical on paper, it was priced 68 percent higher than the one Jeff was leaning toward. Raising the question about the discrepancy seemed to shake Jeff’s confidence in the online shopping experience just enough.

Ultimately, Laura’s full commitment to service and willingness to match the price convinced Jeff to buy his diamond at Forrest rather than from the online seller. Once he’d settled on the diamond he wanted, Laura was able to work through an industry trading site and using the GIA report number to find the supplier who owned that exact diamond. The diamond was shipped to Forrest from India, but not before Laura agreed to pay the vendor in advance. She was able to negotiate the price of the diamond down to a cost that was several thousand dollars less than the least expensive one she was able to find in the US, and after matching the online price, was able to net about $1,300 in profit. Fortunately, she was able to do a lot better on the setting.

Reflecting on the experience, Laura couldn’t help but feel sickened. Owning a well-established store with a superior credit rating, she had never before had to pay for a diamond before shipping — nor had she ever gone to such great lengths to take care of a client while making a sale for so little profit. It saddened her to realize that she was willing to settle for something rather than nothing, and she wondered if her hope that Jeff would at least become an advocate for Forrest was even sensible. Worse, the whole experience made her wonder how much longer Forrest — or any other full service jeweler — would be able to survive in today’s consumer market. 

The Big Questions

  • Was Laura right to go to extraordinary lengths to make the diamond sale, or should she have just settled for her profit on the setting?
  • What is the impact on the industry when wholesalers make the same diamonds that are available to retailers available to the consumer through online sellers as well?
  • Looking at two virtually identical diamonds on the same website, what could make one 68 percent more expensive than the other? Is there any validity to the discussion of a fifth quality characteristic (transparency) that’s been mentioned in the industry recently?

 

Expanded Retailer Responses

Dominick R.
Bridgeton, MO

She did what needed to be done. I don’t like it either, but you’ve got to compete. I like to keep my customers confident that they have no need to go anywhere else.

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Marcus M.
Midland, TX

I won’t play this game with customers. A $1,300 profit is a joke for a diamond of this caliber and will not help you contain or grow your business. Laura should have kept her integrity and just sold the mounting. As much as I dislike just selling the mounting, if it means me not stooping down to online sellers’ levels, then I’ll do that. Wholesalers that let any and every Joe Schmo list their diamonds without having them in their possession are jack wagons. I refuse to buy from these vendors and any respectable jeweler should, too. This type of situation is what gives consumers distrust in our industry. There’s no transparency and it’s ridiculous. There are several factors that can lead to a price difference between two similar diamonds but 68 percent? Crazy. This is more than likely a trick by the supplier and I think it’s shady.

Shannon M.
Tyler, TX

I totally applaud Laura in going to such extraordinary lengths to do what it took to make $1,300 profit on the GIA-certed diamond. Hopefully, Jeff will keep Forrest Jewelers top-of-mind when in the market for jewelry because of Laura’s efforts. The impact on the industry is to greatly reduce “brick-and-mortar” jewelry stores from being able to compete at all when searching for larger diamonds for clients. The only reason I can possibly understand two virtually identical diamonds being 68 percent different in price is if the lesser-priced one was sourced from an estate where an individual was in desperate need for money. I don’t think the idea of a fifth quality characteristic (transparency) would have much weight in swaying a client against trusting online diamond dealers.

Stew B.
Natick, MA

Hmmmmmmmm. I’m very leery of pay in advance.

To answer the second part of the question, as long as the client has been loyal in the past and (she hopes) remains loyal in the future, bending over backwards and making a few points on this sale will kind of balance out. Also, sounds like a great source for referrals.

Cathy G.
Frankfort, IN

$1,300 is better than nothing; she also has the profit on the mounting. I just lost two sales to the Internet because I add 10 percent to the cost of a 1.5-carat and a 2.0-carat. I guess it doesn’t pay to get greedy.

Bernie S.
Ephrata, PA

My customer purchased a certed stone from us and returned to the store the next day in a huff — he had found “the same” stone on a huge online diamond retailer for $1,000 less. I had given him a very good price because of our long-standing relationship, so I was aghast. I asked him to show me the one he saw. We went online and found it, and it was graded the same as ours (VS1) but the stone map showed inclusions suitable for an SI2 stone. When I showed him that, he then thanked me and asked how it was possible for the online store to sell obviously improperly graded stones. I had no good answer. Since then, they have removed the stone maps from their site.

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Kenn K.
Syracuse, NY

I think the discrepancy in price had to do with the difference in the stones. My guess would be in the refractive index. Any of us who has worked regularly with diamonds knows that you can have two identically-rated stones and yet one of them will appear brighter. My theory is that the stone that is brighter has a denser crystal structure.

Sell your experience in choosing stones. The day of beating online prices is gone.

Saro A.
Chevy Chase, MD

After 38 years on bench and 32 years in jewelry retail, I’ve asked this question numerous times and many times in INSTORE’s surveys where they’re asking us “What would you like the magazine to write about in next issue?” THE DIAMOND SELLING DILEMMA!!! How could a retailer sell diamonds to public? When practically all diamond wholesalers sell online at the same price as they sell to retailers. Laura went to great lengths to make this sale. I wouldn’t have done it, so more power to her. Nowadays these sites are even into custom made rings too, so what’s left for a brick & mortar business? Oh, sorry, I forgot, we’re there to assure customers they’ve got what they have ordered — and, of course, for free! Something must be done about this whole mess. BTW, I’m going to tell my daughter’s boyfriend to buy the diamond from Bluenile. It’ll be cheaper!

Lance M
Lubbock, TX

Make what you can make and go down the road. Plus, you have a new customer that trusts you and will probably continue to do business with you. It is much much better than making nothing. A returning customer is worth a great deal and a satisified customer even more!

Allan A.
Dallas, GA

No two diamonds are alike. I would look at what not a small profit that was made but future purchases from that customer as well as referrals. This industry has definitely changed and we as an industry can benefit from these learning experiences. Educating ourselves as well as the customer will benefit all of us in the long run. Success is making the sale and moving on. In the industry it is known as “passion with a purpose”.

William U.
Fayetteville, AR

On the surface, there seems to be no logical answer, other than a much lower profit for the seller. But not necessarily so. While color, clarity and carat weight are pretty well defined, and if graded professionally, there is not much latitude for error. But light performance, a factor primarily of cut, is far less precise, and affects values dramatically. Fortunately, there is a brand new invention that actually measures light return and beauty from a diamond. It is called the Beauty Grade Machine and is a direct measurement of light return and beauty on a scale of 1 to 100.

Dianna H.
Lafayette, LA

Laura was right to go to such lengths to make the sale. Its this type of relationship building that sets us apart from the online sellers. In doing so she created a customer who will come back to her for the wedding bands and tell their friends. And if she offers custom design, she can make a larger profit on the ring.
Selling diamonds to retailers and to the consumer with easily seen report numbers has a negative impact on the retailers. These dealers are not the type that you want to partner with to help you make your store successful and profitable.  

I always tell my customer that I don’t buy my diamonds without seeing them first, and they shouldn’t either. You can go to any large online seller, type in the same specs for a diamond and get a variety of prices. The grading reports don’t tell the whole story. Bottom line, the more expensive ones will be prettier.

Stacey S.
Edson, AB, Canada

Disgusted that wholesalers have become retailers! One day, they will be begging for retailers as they are not going to want to deal with all those customer issues. By then, there will be fewer and fewer retailers around.  

And for the customer who only shops price = online? Hmm. All the donations that are given back to communities from the independent retailers will disappear and then the consumer will wonder why their kids’ local all events cost so much. Our poor world!

Kevin Z.
Manhattan, NY

Yes, she did the right thing. I have settled for the profit on the setting alone because I have dealt with clients who purchased a stone from a third party dealer willing to make as little as $300 on a 10k stone. A dealer can ask what he wants, maybe he paid too much when diamonds were higher and the other dealer recut an old miner he purchased for far less money, recut and is happy with the profit making the price available at a higher % off Rap.

I deal with origin all day long with colored stones and I can’t even use the GIA! On color, I sometimes need multiple certificates sometimes from New York and Switzerland. I think it would just confuse clients to no end. I would be more concerned with the man made/created diamonds.

I am a third-generation jeweler and this business has changed a little every of our 90 years.

Tracy W.
San Gabriel, CA

She bent over backwards for a good customer. It’s ok, we all do i — it just can’t be the norm to make that little. Make sure the customer knows she made 0 on the diamond for his sake. (And I hope she said no credit card!) Diamonds have lost a lot of their romance in favor of commodity. But $1300 and a happy customer are better than 0. He’s likely to trust you now for price and quality. We try to make our profit more on customer service, beautiful color and custom settings.

Wholesalers competing with retailers; a bad side effect of a still nasty economical reality. If wholesalers would give us a price break so we could still sell the stones it would be nice. Paying up front was ridiculous — what’s the point of a great JBT rating?

I’d love to hear why those prices differed so much.


This article originally appeared in the September 2017 edition of INSTORE.

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Real Deal

When Nature Strikes, Should This Owner Take Care of Her Employees or Her Business?

A longstanding tradition of holiday bonuses and raises is threatened.

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ROBIN SAGER OF GULFSHORE Jewelers had worked with her mother and father for more than 10 years before their 2015 retirement, and she helped to build the business from a small repair shop into a regional powerhouse. Her dad had always talked about “taking care of those who take care of you.” He was proud of his longstanding friendships with a number of sales reps and of his loyal and long-tenured staff. Once she bought the business and took over day-to-day operations, however, Robin quickly saw that what she had always considered her father’s admirable loyalty was really just his way of avoiding difficult situations with vendors, customers and employees — all of which would need to be handled if Gulfshore Jewelers was to be restored to sustainable health. With a firm commitment to the future, Robin laid out her priorities and chose to deal with the issues decisively yet slowly to minimize disruption.

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 kate@performanceconcepts.net

Within the first year of her tenure, Robin took on the problem of shrinking margins and obsolete inventory. In some cases, that required severing vendor relationships that her father had maintained for years and building new ones with suppliers of more current lines at more advantageous prices. She also re-evaluated the store’s pricing strategy, re-tagging existing inventory using consistent markups and eliminating large-scale discounting. As expected, several of Gulfshore’s older customers were unhappy when they could no longer claim their usual 30 percent “friend of Joe’s” discount. When the “regular” sales reps stopped visiting and new product started arriving, a number of employees were openly critical of Robin and of what they saw as a betrayal of the friendships that were so important to her father. Much of the grumbling subsided over time as the new product caught the attention of regular customers who recognized the fair pricing.

In 2017, Robin chose to address the issue of the store’s often inconsistent business practices. She worked with an industry consultant to develop an Employee Manual that clearly defined performance expectations and with her (somewhat reluctant) team to implement a mission statement and service standards based on a forward-thinking “extraordinary customer experience” philosophy. By the end of 2017, despite some lingering staff grumbling about missing Robin’s dad and the way things used to be, Gulfshore’s volume had stabilized a bit, and the bottom line was looking healthier.

Robin knew that the last big issue she had to deal with was the store’s payroll. It was clearly high as a percentage of gross profit and was out of line for the store’s volume. She looked at a list of eight employees who had all been with the company for 10 years or more. Each was paid a salary that had been automatically increased by 3 percent per year regardless of store performance to accommodate cost of living increases. They also got a Christmas bonus each year that ranged between $1,000 and $2,000 per person (based loosely on hours worked) because her father had always believed that honesty and loyalty should be rewarded.

There were no sales goals or productivity standards in place and no commissions attached. It was easy to see that some people worked harder than others. Some were really good at their jobs (jewelers and salespeople with solid relationships in the community) and some simply did a good job of being nice to the people who came into the store. Overall, they all got along well, though — and since it seemed that things were picking up a bit, Robin decided to leave the structure as it was for one more year while she worked on designing a new plan that would be fair to everyone, including the business. Everyone got their 2017 Christmas bonus and a 3 percent raise going into 2018.

Much to Robin’s delight, business continued to improve through the first half of the year. Traffic in the store and in the town overall was up, and everyone’s comfort level with the new product, policies and procedures seemed to be increasing steadily. It all hit a major stall in the fall though, when back-to-back hurricanes blasted through the region, creating major issues for local residents and wreaking havoc on the tourism industry in the area.

By the end of the year, sales had dropped nearly 30 percent, and the bottom line Robin had worked so hard to recover was decimated. Looking at the numbers in December, Robin realized that there was no way she could afford to pay out the usual Christmas bonuses. On one hand, she hoped the staff would understand, since they could easily see the circumstances, but on the other hand, she knew that they were all impacted by the storms as well and that they were likely relying on the money for their own families’ Christmas celebrations. She also knew that without a doubt, there would be no salary increases for the coming year, and that the base plus incentive compensation plan she’d worked to develop would be an absolute necessity.

Though she knew she could stand to reduce staff overall, Robin hated the idea of making life any more difficult for her people and was terrified with the prospect of damaging her reputation.

The Big Questions

  • Are there options that Robin is missing with regard to the holiday bonus?
  • Should she find a way to take care of her people and pay it as usual, even if it means borrowing more money from the bank?
  • Is there a way to change a longstanding (and generally unreasonable) compensation plan without losing long-tenured and community-connected employees?

Expanded Real Deal Responses

Jillian Hornik
Jae’s Jewelers, Miami, FL

Are there options? Yes, she can openly address the current financial strain placed on the business due to the inclement weather. Meet with each employee to discuss the impact of receiving a bonus versus receiving a pay increase. From there, the employees should understand the reasons behind a pay change. In my opinion, she has to choose bonus or pay increase; can’t take away both.

Should she find a way? Not as usual, but yes, she should pay. Whether it is a bonus without a pay increase or no bonus with a smaller pay increase, it wouldn’t be too much out of pocket. If all the improvements increased business as stated, the store’s bank account will be healthy again in only a month or two.

Is there a way to change? Possibly. If those same employees were to look for a similar job now, they would see what compensation structures are currently available. If those other available jobs are all commission-based and more demanding, your employees will fuss, but most likely stay.

Carolyn Warnke
Gunderson’s Jewelers, Omaha, NE

Assuming Robin has already cut her own wage, she cannot currently afford the entire bonus payout this year. Recommend to her employees that they receive what she can pay, whether it be 30 percent, 50 percent, or 80 percent, and when the rest of the funds are available, she donate them toward hurricane rehabilitation efforts. This will help build rapport with the community and economic recovery as well, meaning there will be less delay in sales coming back into the store and making Gulfshore Jewelers a household name for consumers.

As far as the 3 percent increase to yearly pay, if Beth had not yet announced the reformatting of her bonus and wage system, now would be the perfect time. While everyone is struggling financially and emotionally due to natural disasters, having this as news would show there’s hope for the future and better times ahead for the town and the company.

Overall, these recommendations should at least pacify her workers, prevent layoffs and greater debt, and in the end, benefit the community to some degree.

Tim Soulis
Golden Classics Jewelers, Harrisonville, MO

A bonus should be contingent upon performance of the employee and the business — not guaranteed. Explain the challenge of a 30 percent drop in business, ask for buy-in to weather the storm.
US Consumer Price Index for Urban Consumers shows inflation was 0.7 percent in 2015, 2.1 percent in 2016, 2.1 percent in 2017 and 1.9 percent in 2018. The historic 3 percent raises paid have outpaced inflation. Eliminate this expectation.

Manage employees according to performance or lack thereof. Employees who are not in alignment with the “team” and “business” may need to find new homes. Keep good faith, be honest. Lead with optimism and fairness. Evaluate performance, conduct difficult conversations, set goals and motivate the team. Convert to base plus incentive pay in lieu of automatic raises and bonuses going forward. Bonuses can be used privately to reward exceptional individual results.

Focus on employees who are generating the most revenue. Keep their buy-in, ask for more. Reward results. The community cannot run the business. Eliminate entitlement mentality. Complacency cannot persist. Take courageous steps now to be stronger when the whole economy sees recession.

Marc Foster
Plaza Jewelers, Houston, TX

When the “expert” was making the policy book, a section on “Emergency Preparedness” should have been included. We have had to respond to several natural disasters. Robin should call each employee and let them know the situation. Set a sales goal, and if they meet that goal, they will be rewarded with a bonus. This way, they will feel like they are getting something for hard work. She should not bring up the automatic pay increase; just address it privately if asked.

Valerie Naifeh
Naifeh Fine Jewelry, Oklahoma City, OK

This is Robin’s opportunity to do three things: inspire her staff, change the automatic bonus structure, and be a local hero. Don’t borrow any money. Share the news of the 30 percent drop in sales with the staff. Explain it‘s not possible to give the bonus; however, a bonus can be paid monthly or quarterly if the following happens: the sales staff calls clients every day about upcoming anniversaries, birthdays, holidays, wish list items and add-on sales, and these result in measurable sales at the expected profit margin. The jewelers need to complete repairs and custom jobs on time so delivery is not delayed. Robin can negotiate new terms for merchandise she can’t pay for. Most vendors will give extended terms with no interest or take product back with a minimal restocking fee. In the end, the staff who prove to be “rainmakers” stay and those who don’t are gone. Now the new bonus system is in place! You produce, you get a bonus! And the company survives.

Jennifer Farnes
Revolution Jewelry Works, Colorado Springs, CO

This may be the year for Robin to pick one versus the other … and to communicate transparently with her team. People understand numbers when It is laid out in black and white. Share a sales report of year-over-year numbers showing a profit and loss history, and give each team member the option of either a cost-of-living increase or a one-time bonus. If she truly can’t afford to do either, then it is time to make the decision to let go of under-performers or abstain from the wage increase/bonus altogether and let team members leave on their own. If they see and truly appreciate how much the business was impacted, she won’t lose anyone and they will band together to recover together. If the recovery is huge, she needs to be fully prepared to pay it forward to them all in the following year.

Robert Cohan
Craig Brady Jewelers, Montclair, NJ

Difficult situation; however, her team has been there for years and should know the facts as to the unavoidable downturn in business. It’s not a change of policy implementation without basis.

Her team needs to be introspective. They’re not being “punished.” Unless she makes some changes, the store’s future could be devastating, and that would affect them all, long term.

Her loss is their loss, inevitably.

The “winners” will stick around and fight to put it back in good shape, day by day. Their livelihood depends on their commitment to success.

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.

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Real Deal

When a New Competitor Enters the Store and Attempts to Poach Employees, the Owner Reacts

But should he retaliate?

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MIKE CALLAHAN WAS PLEASED with the way things were going. Since taking over Commonwealth Jewelers from his dad more than 20 years ago, his business had grown significantly, and he’d built a profitable in-house shop, employing five highly regarded jewelers who handled Commonwealth’s repair, custom and production work as well as a good number of trade accounts. Mike couldn’t help but think about how much of his time was invested these days in hiring, training and managing his current six-person team.

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 kate@performanceconcepts.net

There was no doubt that his next hire would need to be a sales manager.

While out on the sales floor one day, Mike was a bit surprised to see a trio of well-dressed executive types walk into the store. When he greeted them, one of the men introduced himself as the regional VP for a major jewelry chain, the woman with him as the district manager for the area and the other man as the newly appointed manager for the freestanding store they were scheduled to open across town in two weeks. The RVP told Mike they were having lunch at the restaurant next door and decided to stop in to say hello to Julie McManus, one of Commonwealth’s top salespeople. Julie had been hired eight months ago by Commonwealth after taking a year off of work to care for her newborn daughter. Prior to her leave, she had worked for the chain for five years.

Mike welcomed the trio to his store and after explaining that Julie was at lunch, offered to show them around. He was polite and informative, telling them about his family’s history in town and about the capabilities of the Commonwealth shop. He let them know that he worked hard to maintain good relationships with his competitors, and he offered his trade shop services should they ever have need.

A short time later, after Julie had returned and joined the conversation, Mike went back into his office to take a phone call. He wasn’t concerned about Julie being vulnerable to their poorly disguised poaching effort, as she had made it very clear when she was hired that she had no interest in returning to the company and had commented on many occasions that she was beyond grateful for the opportunity at Commonwealth. She was making more money while working fewer hours with no nights or Sundays.

Mike expected the trio to be gone by the time he finished his call. Instead, he came back out onto the floor to see Julie with a customer, the RVP and store manager near the front door deep in conversation, and the DM handing her business cards to two of the store’s jewelers who had stepped out of the shop to go to lunch. He promptly interrupted the DM and asked her to leave — but not before letting all three of the chain managers know that he was disappointed and disgusted with their abuse of his hospitality and their blatantly unethical behavior. As soon they were gone, Mike talked with his jewelers and confirmed his suspicion that the DM had waited for them to come out of the shop and then approached them about coming to work at the new store. They assured her that they were not interested and that they were firmly committed to Commonwealth.

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The next morning, Mike drafted a scathing email to the CEO of the chain describing the incident in detail and asking what action the CEO would take to ensure that his company representatives would behave in a more respectful and professional manner. A week later, he had not yet received a reply.

The Big Questions

  • Was it appropriate for Mike to throw the competitors out of his store?
  • Was there a better way to handle the situation?
  • How can an employer ensure that associates are not vulnerable to poaching without bankrupting the business?
  • Should Mike make an effort to fill his new sales manager position by recruiting from the chain’s new store?
  • What (if anything) should the chain’s senior management do about the behavior of their field managers?

Expanded Real Deal Responses

Jennifer F.
Colorado Springs, CO

Honestly, if an employee is unhappy and wants to leave, there is no way to keep them. But if they love everything about the business they work for, then “poaching” is a non-issue. Was it inappropriate? Absolutely. Did he have the right to throw them out? You bet! The best thing they can do as a team is have a meeting and get it out there … have the salesperson who once worked for them talk about why she is so happy now! Joke about it collectively and come to an agreement about how to handle it as a team next time.

Gabi M.
Tewksbury, MA

I’m assuming that the chain’s senior management advised the field managers to do exactly what they did. If not, Mike probably would have received a reply by now. He definitely should’ve thrown them out; they were rude and on his property! I think he should leave it alone and just focus his energy on growing his business and loyalty with his staff.

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Kevin P.
Newak, OH

I would do exactly the same thing. There is never a guarantee your employees will continue to work for you. Employees are on a path, side by side with you as long as that path leads in the same direction and is beneficial to both parties. When that is no longer true, you part company. If an employee is unhappy, they will look elsewhere and find another position. For a competitor to come into your store and solicit them is plain wrong and completely unethical. I had a goldsmith leave a month before Christmas. The competitor would only hire him if he left immediately. They let him go in February. Of course, he wanted a referral from me. All I would say is that I would not rehire him under any circumstances. Treat your employees as you would want to be treated, and employees, treat your employer as you would like to be treated. That is the best you can do.

Joel W.
Tulsa, OK

We had the same thing happen in our store several times over the years. After 15 years of this happening, they have taken two from me and both times it was a blessing. Richard Branson says train an employee so they can leave and treat them so they never will. I believe we have the best place to work in the country, and not everybody is cut out for that kind of environment, or sometimes they don’t deserve it. I am very protective of my staff, but I don’t own them, and when my competition is always after my employees, it lets me know that I am doing something right. You will always have a target on you when you are working to be the best!

Tom N.
Spencer, IA

I would most likely have done the same thing. What they did is unacceptable to do in his store, in my opinion. That being said, it does not surprise me that a) they acted in this way, as I’m sure their “corporate training” was a huge part of it, and b) the CEO never responded. That to me says quite a bit about that chain and that CEO.

It sounds as though he has loyal and pleased employees, though, so he should feel very good about that. I’m sure his employees would be very disappointed if they did leave for a corporate chain job.

Jim G.
Champaign, IL

I think asking people to leave the store was in line, as well as writing the letter to the corporate office. I would also advise my employees that a company that uses such tactics will continue to poach and will likely replace anyone they feel is not up to their expectations. A job with them is not secure and solid. I realize this method of finding employees is common, but it is not ethical, at least not the way I was brought up in the business world.

Marcus M.
Midland, TX

It was not only appropriate but necessary for Mike to throw them out. And he was way more cordial about it than I would have been. I would have told them to leave the moment they walked in. He should have known what they were up to. I don’t know how you actually stop other companies from poaching employees because I feel like that happens a lot. Just build a culture within your store where your employees are happy and satisfied and hopefully won’t leave. Also, if I was Mike, I would not seek out hiring a manager from the chain store. You’re only asking to start a war when it’s not necessary. There are a lot of good businesses to draw a sales manager from that won’t result in a counterattack. As far as the chain’s senior management, I don’t think they would do anything, but if they had any respect and class, then they would condemn the actions of their management and apologize to Mike.

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William C.
Paterson, NJ

A photo of the individuals from the chain store while inside the jeweler’s store should be posted in the jeweler’s store with the caption: “Even our competition shops here while trying to steal our employees.”

Andrea H.
Chicago, IL

I think Mike’s behavior was professional and appropriate. When it became clear that the chain-gang was abusing his hospitality, he was right to ask them to leave.

The only way to reduce employee vulnerability to poaching is to create an exceptional work culture and environment. Pay fairly, offer ample opportunities to learn new things, be direct, professional, and kind to your employees, and praise liberally and often.

Also — run a good business. Employees know when they are working for someone who is running a good business and when they are working for someone who’s just phoning it in — and they like working for winners.

Jim A.
Salt Lake City, UT

You cannot prevent poaching. Businesses are free to recruit and employees are free to shop their services elsewhere. But you are certainly under no obligation to make the job of the poachers easier. I agree that the behavior of the chain execs was unprofessional and unethical. Throw the bums out! Sounds like Mike did it as well as it could be done.

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Real Deal

When an Employee’s Social Media Reveal an Enthusiasm for Marijuana, How Should This Retailer React?

Here’s how Brain Squad members responded.

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JANELLE AND TIM O’NEILL LOVED their hometown and took great pride in knowing that O’Neill’s Diamonds was one of few independent jewelers still operating in the area. In his role as marketing manager, the challenge of keeping up with strategies to attract the town’s millennial bridal customers while continuing to appeal to their long-established older customer base fell to Tim. After much conversation with industry colleagues and experts, he and Janelle decided to hire someone to handle the development and growth of O’Neill’s social media presence. Growth in the business had already created the need for additional help on the sales floor, so they chose to look for someone who could handle both jobs.

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 kate@performanceconcepts.net

They were fortunate enough to attract several qualified applicants for the position, including Grace Matthews, the 21 year-old recent college graduate daughter of a family friend. She was articulate, bright and eager to learn, and most importantly, she was totally familiar with building a presence with Instagram, Facebook and Pinterest. Grace’s references checked out and she was brought on board.

Grace started strong. She was pleasant and personable on the sales floor, and she seemed to be learning quickly about the store’s products and services. She was also creative and enthusiastic working with the store’s social media. Her posts were generating interest within the first few weeks.

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About six weeks into Grace’s employment, Janelle held a store training meeting on the importance of demonstrating O’Neill’s core values — honesty, integrity, responsibility, professionalism and dedication to service — both inside and outside of the store.

She knew they had been fortunate in that they’d never had an issue with an employee creating image problems in town, but she also believed that regular discussion of the topic was part of the reason for that.

The day after the meeting, Linda Weiss, one of the store’s more senior employees, asked to speak to Janelle in private. She said that her son knew Grace casually through friends, and that he’d come to her several weeks ago with concerns about Grace working in the store. He was concerned that her public presence reflected badly on the store, since everyone in town knew she worked there. Linda showed Janelle an Instagram post her son had brought to her attention — Grace’s personal page. From every indication, in her personal social media world, Grace was a stoner, posting regularly about all things marijuana-related, including notes about paraphernalia, varieties, qualities and suggestions for where and how to buy the product. Janelle thanked

Linda for bringing the matter to her attention.

Later that day, Janelle discussed the matter with Tim, and they agreed that neither had noticed any indication that Grace was ever high while at the store. They also looked through her personal pages carefully and were sure that she did not mention being an O’Neill’s employee anywhere. They agreed that despite the fact that times were changing, in their state, marijuana possession and use was still a criminal offense (misdemeanor or felony, depending on quantity), and that they really needed to take some kind of action.

The Big Questions

  • Since Grace’s discussions about marijuana were limited to her personal social media accounts (to which, technically, Janelle and Tim should not have had access), can the O’Neills take action based on the content of those pages?
  • In the bigger picture, does an employer have the right to monitor and/or regulate what an employee posts online if the content has nothing to do with the store and does not violate client or business confidentiality in any way?
  • In a small town where everyone knows everyone else, does the employee have an obligation to restrict public behavior on personal time to conform with the conduct policy of the business?

Expanded Real Deal Responses

Sue F.
New York

From a legal standpoint, this is a tricky situation. State laws vary on employee rights outside of work time, so one answer may not be valid in every state.
Situations like this underscore the need for Employment Practices Liability Insurance (EPLI). A good EPLI insurer provides access to free consultative services with attorneys who can provide practical information about topics such as this. Your insurer also should provide access to a Workplace Risk Solutions Website where you can research your state’s legal requirements, find model workplace policies and forms, tap into a library of workplace-related articles, and access web-based training on topics such as preventing discrimination and harassment, as well as other employment issues.

Deric M.
Oceanside, CA

Janelle and Tim are not in a difficult situation here. What constitutes a PR problem is how it is received and Grace isn’t attaching herself to the store with her pro-marijuana posts. Janelle and Tim never appeared to have even asked themselves if the marijuana consumption is recreational or medicinal — an important distinction — and more information is needed.
Since cannabis appears to be illegal in their state for recreational use, however, Janelle and Tim should have a chat with Grace to tone it down because of how it could become a PR problem. If Grace is otherwise a positive influence on the store’s traffic and bottom line, this is an easy matter to resolve.

Joe K.
Lantzville, BC

First let me say that I am in Canada, and we have just legalized recreational use of marijuana for the entire country. I am also in British Columbia, where it has been said that pot is our largest cash crop. There is a right place and time to use pot and a wrong place and time; the same goes with alcohol consumption. I think monitoring your employee’s recreational behavior and online presence away from the workplace is a breach of her privacy. If she doesn’t come to work high or use pot at work, I don’t think there should be a problem, especially if she’s a competent asset and representative for the business. Having said that, we might be a little more lenient here, and attitudes toward marijuana will be quite different in the US Midwest.

Brenda R.
Honolulu

I would not want to be in that situation. There are risks involved with any kind of drugs, legal or otherwise. Does the company have a formal drug policy? One needs to know the local, state and federal laws and work policy to comply with. Was there a stated probation period to see if the employee “fits” with the requirements of dress, being on time, and client interaction? If there are red flags, the person may have to be let go.
What they do at home is their business and should never impact the requirements and expectations of the job they were hired for. Proceed with caution.

Stuart S.
Egg Harbor City, NJ

The employee needs to be taught how to transition from the fantasy fun land of college to the real world. As long as she is responsible and doing a great job, her personal life is not the store’s concern, but when her actions can potentially alienate any customers, it is. Any controversial posts need to be avoided and eliminated. The posts were obviously on her pages before being hired, so the potential repercussions were never considered. Teaching her about why they are no longer appropriate is more important than just having them eliminated. This is all about grooming her to be a valuable asset to the store, and just as importantly, teaching her to grow as a person!

Gabi M.
Tewksbury, MA

My family and I work in a small town, and I know we all watch what we put on our personal social media accounts (mostly political discussions) because we know that we represent our business 24/7. I think they simply just need to talk to Grace and tell her that her posts aren’t acceptable for someone who works for their business. It should be an easy solution, such as just making her accounts private to the public — and if she has a problem with it, then that’s a whole other underlying problem with having her as an employee.

Marcus M.
Midland, TX

This is a tricky one. Really, an employer should not be able to judge an employee about what they personally post, as long as it doesn’t mention the store, her profession or have violent content. But at the end of the day, she does reflect the store no matter what, and they do live in a small town, so people know where she works. They’ll judge your store as they judge a person’s social media. Maybe have a chat with her and just ask that she consider how her post will look on her career and see if that helps. She’s obviously not very conscious of how her post about pot looks, or maybe she really just doesn’t care, so either way, it’s a bit of a red flag for me. I don’t know … maybe she’s just still young and immature and needs a little guidance, and I think that’s acceptable to give out.

Jane H.
Highland Park, IL

It does reflect upon the credibility and integrity of the business. Unfortunately, it appears that anyone can do anything and it’s their right, blah blah blah. Since Grace was already hired and during the interview there was no discussion of “life outside the store,” it may become a situation they will need to accept until something happens. There are plenty of employers that check out a potential employee’s social media posts (when possible) for any red flags, and in my opinion, this would influence the decision to hire or not. The jewelry business is based on trust and honesty, especially an independent brick and mortar store. One incident would be tough to overcome for the store’s reputation.

Also, unless you know the personality of someone when they’re “high” or not, the only way you might find out is from someone’s observation. If Grace is “selling,” you are giving her a ready-made customer base. Sorry if I sound extreme and tough, but it’s hard work and devotion to stay in the jewelry business. Grace should go.

Jim D.
Kingston, NH

Obviously an employee who engages in criminal activity would quickly become a former employee. While I know there are those who condone drug use, excuse it and work to decriminalize it, it is still illegal. A jeweler’s reputation is a precious thing and needs to be protected. How many repair clients would want to hand over their treasures to a known criminal? If followers of her social media start hanging around, it could lower the tone of the store, possibly bringing in undesirable elements. Worst case would be a front-page newspaper picture of an employee being taken away in handcuffs and your store-front in the background, after she sells some pot to an undercover police officer.

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.

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